Recently released Financial Services Commission statistics revealed that the last three months of 2017 saw a strong upward tick in the territory’s incorporation numbers despite the September devastation caused by hurricanes Irma and Maria.
The quarterly bulletin seemed to validate the consistent string of government and private sector boasts about the sector’s post-storm “continuity” and resilience.
Excitement about the strong figures, however, has been dampened by questions about that continuity and resilience in the wake of last week’s news that the United Kingdom House of Commons had voted to impose public registers on all the British overseas territories.
How that decision will impact the overall sector remains to be seen, though some industry professionals seem to be decidedly more optimistic than the doom-and-gloom portrait painted by government in the months before the UK decided to establish the registers.
“This is the start of the conversation, not the end of the conversation,” said Gareth Thomas, the managing director of Estera Corporate Services (BVI) Limited.
It would help the Virgin Islands and other overseas territories, Mr. Thomas explained, if the UK government moves to also impose some form of registers on Crown dependencies like the Isle of Man and the Channel Islands, which were excluded from last week’s register amendment due in part to legal questions about Parliament’s ability to legislate for them.
Having public registers in both the OTs and the Crown dependencies could lead to that system becoming the global standard, which would mitigate the registers’ impact on the VI’s industry, according to the managing director.
The same architects of the OT public registers amendment have threatened to do just that: Conservative MP Andrew Mitchell and Labour MP Margaret Hodge have asked that government ministers demand the same transparency levels in the dependencies.
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BVI Finance Limited plans to host a public meeting at 7 p.m. today in The Moorings’ conference room to discuss the possible impact of the new legislation and “brainstorm a way forward” for the territory.
“We expect the government to use its good offices to persuade the Crown dependencies to introduce public ownership registers,” Mr. Mitchell said. “But if they do not, Parliament will return to the charge.”
Though Crown dependencies run their own domestic legislation, the UK does have some legal precedent to override that constitutional arrangement: Parliament applied the 1967 Marine Broadcasting Act to the Isle of Man to shut down an unlicensed “pirate radio” ship, according to The Guardian.
In evidence submitted to the UK Parliament before the current public registers amendment surfaced, the VI government claimed the imposition of registers could cause a funding gap of $1 billion here over the next decade.
A strong final quarter
As the controversy churned, the FSC released recent statistics about VI company incorporations, which are often viewed as a bellwether metric for the overall health of the territory’s financial services industry.
The numbers showed that last year’s fourth quarter outperformed 2016’s Q4: 8,538 companies incorporated as opposed to 7,780.
The strong final three months also brought 2017’s total incorporation number to 32,493, a higher figure than 2016’s 31,769 total incorporations.
Continued gov’t response
Premier Dr. Orlando Smith (R-at large) said at a press conference last week that his government views the UK’s register decision as unacceptable.
The 2007 constitutional agreement between the VI and the UK, he explained, stipulated that there should be a discussion between the two jurisdictions before the UK passes legislation that could impact the territory’s financial services sector.
Dr. Smith noted that leaders plan to seek advice on the matter from a constitutional expert, echoing Cayman Islands Premier Alden McLaughlin, who said last week that his government was mulling a legal challenge to the amendment.
Governor Gus Jaspert also expressed continued concern about the UK’s decision after strongly criticising it in a tweet last week.
|What would the public register look like?
Since June 2016, United Kingdom companies and limited liability partnerships have been required to submit personal information to the UK Companies House about anyone who holds more than 25 percent of their shares or voting rights.
That information, which is made public, includes the person’s name, month and year of birth, and nationality, as well as details of their interest in the company.
However, that data is entirely self-reported and unverified, according to international nongovernmental organisation Global Witness.
This system contrasts sharply with the data collected for the Virgin Islands’ Beneficial Ownership Secure Search System, which is verified by the territory’s corporate service providers.
Although the penalty for misreporting data to the UK register is punishable by fines and up to two years in prison, no sanctions had been issued as of last October, according to Global Witness.
Robert Briant, a partner at Conyers Dill & Pearman’s VI office, said the UK’s 25-percent shareholder reporting requirement isn’t particularly steep and that it is “hard to determine if it’ll have any significant impact” should it be applied here.
“I recognise that this is disappointing,” Mr. Jaspert wrote in a statement on Monday. “As I have made clear previously, I believe that the BVI is a well-regulated jurisdiction with an effective register of beneficial ownership (BOSSS) that is accessible by law enforcement.”
Mr. Thomas expressed hope that the BOSSS could play a role in a potential “halfway house” solution for the territories and dependencies to meet UK demands without a completely public register.
Instead of the current system — where the BOSSS’s information is available only upon specific request from UK law enforcement — the Estera managing director suggested British authorities be given unfettered access to the platform’s data as an alternative to the beneficial ownership information being made fully public.
While that proposition remains hypothetical, the UK’s Foreign and Commonwealth Office did promise to assist the territories in the wake of the decision.
“We have close and long-standing relationships with our OTs and following this amendment our intention is to work together with them to ensure the best possible outcome,” an FCO spokesperson wrote in a message to the Beacon.
The public registers requirement came in the form of an amendment to the UK’s Sanctions and Anti-Money Laundering Bill, which passed in the House of Commons last week.
A version of the bill passed in the House of Lords earlier this year, and the current version will move back to that chamber for consideration of the new amendments.
Though the Lords could object to the bill, the elected House of Commons would still have the ability to pass it in a subsequent session.