On June 7, The BVI Beacon turned 40. To celebrate, it is re-publishing some of the biggest stories from its archives over the past four decades. Written by James Harris, the article below originally ran March 24, 1988.
The BVI may be reaping the benefit from the political and economic misfortunes being suffered in Panama in recent months.
According to the Ministry of Finance, the number of companies seeking to incorporate in the BVI under the 1984 International Business Companies Ordinance is increasing dramatically.
Panama has been undergoing political and economic upheaval since Gen. Manuel Noriega, chief of the 15,000-member National Defense Forces, wrested control of the country from President Eric Arturo Delvalle after he tried to replace General Noriega as commander of the Defense Forces.
Statistics provided by the ministry show that about 1,800 companies chose to incorporate in the BVI in 1987.
907 to date
So far this year, 208 came in January, 241 in February, and to date in March 458 companies have come to. the BVI seeking a more stable political and economic environment.
Ann Allen, deputy registrar, said the initial onslaught of applications for IBC registration in the BVI posed a challenge for her office, which has since hired new staff to deal with the increase.
“It is keeping us busy,” Ms. Allen said. “Normally, we don’t get this many … but the trust companies are telling us it’s because of the political unrest in Panama.”
Although the influx represents companies from around the world, many are companies that have come to the BVI from Panama, or firms that would have used Panama as a tax haven if not for the upheaval the country is presently experiencing, according to Richard Peters, a partner in the law firm of Harney, Westwood and Riegels.
The law firm has been swamped with applications and enquiries for incorporation in the BVI, said Mr. Peters as he lifted a stack of such applications from a chair in his office.
“We’ve been recently approached by one institution with many companies that wanted us to do 300 in one day,” he said.
Panama has previously provided an attractive tax haven package for international countries, as have such financial centres as Hong Kong, Mr. Peters said.
“Panama will always continue on but a lot of it has started moving here,” he said.
The reasons are apparent, he said.
The BVI’s appeal
Financial counselors in other nations are advising clients looking to either leave Panama or who are looking for tax havens to look at the BVI.
The reasons the territory has proven so attractive include inexpensive filing fees — $300 annually for most companies, although some can pay as much as $1,000 under certain conditions
— and the relative political and economic stability.
He added that the BVI’s laws governing corporations are considered modern and competent.
The companies don’t physically move into the territory. The IBCO prohibits, among other things, the would-be companies from doing business with any BVI resident, owning real estate, accepting banking deposits or making contracts for insurance.
What the territory receives, Mr. Peters said, was a growing source of government revenue.
For example, said one industry source who did not wish to be identified, as the companies filing for incorporation in the territory approach 1,000 for the first three months of the year it would mean approximately $300,000 for government coffers. “That’s quite a kick for the exchequer,” he said.
Low cost shelter
“What Panama has been useful (to the business community) for in part is as a haven for forming low cost companies for investors to hold their assets,” the source said.
“Now that Panama is a bit dicey, there’s concern that the assets of Panama’s companies may be frozen,” the source continued. “There has been a big sweep in the last three weeks to form companies in other places and the BVI is one of the favourites.”
A source in the Finance Department said in addition to the 907 companies formed so far this year, another 4,000 IBC companies have taken advantage of the BVI’s tax haven status. In total, the source said, the Finance Department collects about $2 million annually for the government, a large part of that is due to the influx of IBC companies. “The IBCs form the most vibrant part of our sector,” the source said.