With just 22,362 new companies formed, 2020 hit a 21-year low for new incorporations, despite a fourth quarter that performed slightly better than the year before, according to numbers recently released by the Financial Services Commission.
With 3,788 fewer new companies formed, 2020 eclipsed the previous low of 26,150, which occurred in 2019.
This continued a downward slide that has seen new incorporations, total active companies and government revenue all falling even as financial services remains the pillar propping up the Virgin Islands economy amid the Covid-19 pandemic.
Q4 2020 was, however, the second-best quarter of the year, and it outperformed, by 9.15 percent, the same quarter in 2019, when just 5,596 new companies formed. That makes Q4 2020 the second worst Q4 since quarterly reporting began in 2003.
With 146 fewer new companies formed in the fourth quarter of 2020, new incorporations fell slightly when compared to Q3 2020, which saw a 32 percent spike after three straight falling quarters.
On other fronts, there was some positive news, with the total number of limited partnerships, which were established under legislation passed
in 2017 as a simpler and more flexible alternative to the territory’s traditional company offerings, continuing to rise steadily.
In Q3, they cracked the 1,000 mark for the first time, and Q4 added 73 more to the total. That represented a 37 percent increase over the same quarter in 2019, which saw 53, and a similar jump from Q3 2020, which saw 55.
Trademarks, however, continued to lag compared to 2019. With 272 total applications for the year, 2020 trademark filings slightly outperformed 2018, when 225 applications were filed, but couldn’t match 2019, which saw 314 filings.
Total active companies also hit at least a 14-year low in 2020. Having lost 14,085 active companies between Q3 and Q4 of 2020, the territory finished out the year with just 366,364 total active companies.
Total active companies are also on a longer-term downward trend. In 2019 the numbers hit the previous low of 387,344 after peaking at 481,002 in 2011.
Furthermore, government revenue from the sector fell to just $190 million for 2020 despite a steep fee hike three years ago that boosted 2018 revenue to an all-time high of nearly $232 million, according to numbers announced in March by Premier Andrew Fahie.
From nearly $160 million in 2007, the revenue rose steadily to almost $185 million in 2013 before trending downward for the next three years to about $170 million in 2016.
Following a $5 million bump the next year, incorporation fees were raised, and industry fees contributed an all-time record of nearly $231 million to government in 2018.
Since then, the revenue has dropped, falling to about $205 million in 2019 and less than $190 million last year. It also made up a smaller percentage of the territory’s overall revenue last year, at less than 53 percent.
However, Mr. Fahie said, thankfully for a territory still struggling through a tourism slump related to the Covid-19 pandemic, 2021 so far has seen only a “modest” decrease in financial services revenue.
From Jan. 1 to March 31, 2020, he said, audited government revenue from financial services was $31,144,292, and for the same period this year it was $31,001,151 — a $143,141 difference. Adding in the time period from April 1 to April 21, the total 2021 revenue was $41,628,819, he said.