The latest addition to our Legal Frontiers series explores the British Virgin Islands, one of the great success stories among the collection of offshore investment destinations

Getting ready for the crypto spring

With flexible and commercially minded legislation, an innovative approach to anti-money laundering (AML) compliance, political stability and an internationally recognised securities regulatory regime, the British Virgin Islands (BVI) has established itself as the jurisdiction of choice for a number of initial coin offerings (ICOs).

The ongoing “crypto Winter” has seen a shift of investor focus away from crowd-funded platforms offering utility tokens towards security tokens that seek to provide greater value stability and more predictable investment returns. The BVI was well suited for the first wave of digital assets, and remains well placed to take advantage of the shift to securitising and digitalising common assets when the “Crypto Spring” arrives.

Token regulation

Utility tokens, in their purest form, provide a means of access to a technology platform or service, and derive their value from the demand for that access, rather than from the value of any underlying asset or share in the profits of the venture.

Alison Thomson appleby law business legal
Alison Thomson
Appleby in Hong Kong
Tel: +852 2905 5738

In contrast, the value of security tokens is derived from the underlying asset. The nature of that asset is limited only to its ability to be tied to a token, but could include equity, fractional entitlements to a pool of investments, profit shares, bonds and other debts, real estate, commodities, and even collectible assets such as art or fine wines. By attributing a digital token to an otherwise illiquid asset, the token can give the asset a tradable quality, an irrefutable record of transfer, the possibility of rapid and 24-hour transaction settlement, and the removal of costly middlemen.

Unlike other offshore jurisdictions, the BVI has not yet expressed an interest in implementing an overarching framework to govern digital assets. Instead, the primary legislation governing securities in the BVI is the Securities and Investment Business Act 2010 (SIBA). In this fast-moving sector, where the technology is always running ahead of the law, this watch-and-wait approach helps the BVI adapt quickly.

The SIBA sets out an exhaustive list of financial instruments that constitute investments (similar to securities under comparable legislation), and requires that those who carry on, or hold themselves out as carrying on, an investment business obtain a licence from the BVI Financial Services Commission (FSC), subject to certain safe harbours.

Investments include: (1) shares and partnership or fund interests; (2) debentures and other instruments creating or acknowledging indebtedness; (3) instruments giving entitlements to any of the above-mentioned; (4) certificates representing investments held by others; (5) options to acquire or dispose of certain assets; (6) futures; (7) contracts for difference; (8) long-term insurance contracts; and (9) rights to and interests in any of the above-mentioned.

Investment business includes: (1) dealing or arranging deals in investments; (2) managing investments; (3) providing investment advice; (4) providing custodial or administration services with respect to investments; and (5) operating an investment exchange. Among other safe harbours, an entity issuing its own shares, partnership interests, debt instruments or instruments giving entitlements to any of the above-mentioned will not be deemed to be carrying out an investment business and will not require a licence. While every token is different and requires a full regulatory review, pure utility tokens would not generally be deemed to be investments and therefore would not trigger licensing requirements under the SIBA. Consequently, issuers, dealers, custodians and exchanges of pure utility tokens do not generally require licensing in the BVI.

Conversely, most security tokens would be expected to fall within the SIBA. However, as a result of the act’s more prescriptive approach to defining investments (in particular when compared to more generalised tests such as the US Howey Test), certain tokens deemed generally as security tokens may, in fact, not fall within the SIBA’s ambit.

Where licensing is required under the act, the BVI provides a clear framework for obtaining such a licence, and a commercial list of post-licensing obligations. At the start of 2019, the BVI had more than 600 licensed investment businesses. Applications can usually be handled within four weeks of submission to the FSC, although additional time may be required for more complex projects.

Tokenised equity and debt

As the bear market for ICOs continues, many digital asset businesses have reverted to traditional debt and equity raising. In Asia, the authors have noticed increasing interest in tokenising such debt and equity.

Rebecca Jack Associate Appleby in the British Virgin Islands
Rebecca Jack
Senior Associate
Appleby in the
British Virgin Islands
Tel: +1 284 393 5346

BVI’s principal company legislation, the BVI Business Companies Act 2004 (BCA), allows for commercial flexibility, and lends itself well to tokenised equity. Where issuers are looking to attract a wide range of investors through debt or equity, we anticipate the tokenisation of depository receipts, rather than securities. In such cases, the issuer would issue securities to a licensed custodian to hold the assets on trust for token holders.

For smaller enterprises looking to attract fewer investors, direct tokenisation of equity interests may remain feasible. The BCA allows flexibility for BVI companies to determine the manner of passing shareholder resolutions and hosting shareholder meetings, both of which can be conducted electronically, and instruments of transfer can be completed digitally by virtue of the BVI Electronic Transactions Act 2001.

While the SIBA does include approval and prospectus requirements for public equity offerings in the BVI, these provisions are not yet in force. Consequently, no prospectus would be required for offers of tokenised securities by BVI entities inside or outside the BVI, provided securities laws of investors’ jurisdictions are complied with. We anticipate that most security token offerings will be carried out by private placement.

AML compliance

Regulatory concerns over anti-money laundering (AML), know your customer (KYC) and jurisdictional restrictions can be alleviated in part through programming checks and restrictions upon a token, or through the exchanges upon which a token is listed. Such restrictions may, for example, prevent onward transfer of a token until the transferee has been whitelisted by a third-party KYC provider. Recent and welcome amendments to the BVI’s AML regulations permitting digital verification of identities, the receipt of electronic copies of documents instead of traditional “wet ink” paper-based processes, and the use of third-party providers offer greater flexibility in satisfying AML compliance obligations.

Tokenised funds

Interest has also increased in the formation of tokenised funds, where fund interests are represented by tokens as opposed to shares, units or other interests offered to investors, as expected from a more traditional fund structure.

There is no separate regulatory framework for tokenised funds in the BVI. Only open-ended funds (those in which investors are entitled to redeem their interests at a sum calculated with reference to the fund’s net asset value) are regulated in the BVI.

The SIBA offers a range of regulated options for open-ended funds, from highly regulated public funds, to professional funds (permitting only professional investors with minimum investment thresholds), and private funds (with no more than 50 investors), to less-regulated approved funds (aimed at private offerings to a small number of investors), and incubator funds (for start-up funds), the latter two of which benefit from a fast-tracked approval process. Close-ended funds are not regulated in the BVI.

Security token exchanges

Notwithstanding their increasing popularity, liquidity remains elusive for security tokens. Few security token exchanges have commenced operations, and those that have remain in their infancy. The BVI is home to a number of utility token and cryptocurrency exchanges. While at the time of writing no security exchanges are licensed in the BVI, the SIBA provides a regulatory regime for obtaining a licence to operate an investment exchange that follows the same, oft-used path as other investment businesses.

Further guidance is expected from the FSC, but no indication has been given that it would look to restrict such applications. Following approval, BVI-based security token exchanges would benefit from the amendments to the BVI’s AML regulations and a pragmatic investment business regulatory regime.

Looking ahead

The tokenisation of assets represents the next shift in the blockchain revolution. To date, the BVI has been a popular jurisdiction for projects raising funds through an ICO. As this fundraising model changes, the BVI’s corporate and regulatory regimes remain well suited and will continue to be at the forefront in assisting businesses looking to launch the next generation of digital assets.

Alison Thomson is an associate at Appleby in Hong Kong and Rebecca Jack is a senior associate at Appleby in the British Virgin Islands. They can be contacted at and

Appleby 毅柏律师事务所

APPLEBY Hong Kong office
2206-19 Jardine House,
1 Connaught Place, Central, Hong Kong
Tel: +852 2523 8123 Fax: +852 2524 5548

Digitalization of AML laws in BVI

There is a saying that “time and tide wait for no man”, and the same is true for the ever-changing ecosystem of the financial services industry – you simply cannot stop the wheels of commerce from turning. And when they turn, the surrounding legal framework must keep pace and embrace the evolving environment as fast as it is practically able to.

Mirza Manraj harneys law business legal
Mirza Manraj
Counsel, Investment Funds and
Harneys in Hong Kong
Tel: +852 5806 7895

Given the speed at which market conditions demand that business must be transacted today, financial technology and e-commerce are paramount in ensuring that clients receive the desired result within the required timeframe. In this regard, British Virgin Islands (BVI) corporate vehicles are very popular due to their flexibility and practical application.

BVI companies have been used for a broad range of purposes in the past 35 years, and the one constant denominator throughout that time is the fact that legislation in the BVI has kept pace with worldwide legal evolution, and still remains at the forefront of modern day transactions.

One area in which the BVI has always sought to take a market leading position is the prevention of anti-money laundering and terrorist financing. Part of this is due to BVI’s status as a British Overseas Territory, and part is a result of the proactive approach of the domestic government to international initiatives.

In an era where the smartphones many of us carry in our pockets are more powerful than the computers of the 1990s, the BVI has correspondingly improved processes in this specific area to ensure they match the advanced capabilities in the digital space. This article explores some of the key ways in which the law has recently evolved to keep pace with technology.

Electronic verification now feasible

Philip Graham Partner and Head of BVI Investment, Funds and Regulatory Harneys in the British Virgin Islands
Philip Graham
Partner and Head of BVI Investment, Funds and Regulatory
Harneys in the British Virgin Islands
Tel: +1 284 852 4325

The BVI’s Anti-Money Laundering and Terrorist Financing Code of Practice 2008 (AML code) was amended in 2018 to allow registered agents (RAs) in the BVI who are licensed to incorporate BVI companies to utilise various forms of digital verification of customers, and to receive electronic documents instead of traditional “wet ink” documents. This amendment has revolutionised the way that traditional client due diligence (CDD) is performed and represents a positive step by the BVI’s Financial Services Commission towards embracing the new wave of e-business and the practicalities of the modern age.

Reliance on third parties

The updated legal position under the AML code not only allows entities to use electronic and digital means to verify the identity of their client, but also to engage and rely on the data provided by third parties who carry out formalised verification processes. This has enabled RAs to engage reputable third-party providers to set up electronic applications (e-Apps) that allow for faster collection and processing of CDD. To effectively outsource this function, RAs need to be satisfied that the third party:

  • Is independent from the RA itself, and from the customer to whom the verification relates;
  • Utilises a wide range of sources, including positive information sources, negative information sources and alert data sources;
  • Has transparent processes that can be reviewed and assessed by the RA;
  • Has not been convicted of a criminal offence or sanctioned for breach of data, or providing misleading data; and
  • Obtains and stores information that is sufficiently extensive, accurate and reliable.

As a part of this engagement, RAs will need to record the steps taken when engaging with the third-party provider, including the approval of the third party’s policies and procedures and confirmation that the third party is satisfying all of the legislative conditions necessary for the provision of the service, both in their jurisdiction of domicile as well as pursuant to the AML code. Where the third party is engaged on a long-term basis, the business will need to be reviewed by the RA once every three years.

Even though a third party may be engaged and meet all of the criteria as set out in the AML code, it should be noted that where electronic or digital verification does not make any significant discovery in relation to the underlying client that could have otherwise been accessible by reasonable (and more traditional) efforts, then the responsibility lies with the RA to remedy that breach.

Alternatives to certified documents

Traditionally, the AML code has prescribed that RAs must follow very specific guidelines around reliance on copies of documents, including certain fixed statutory requirements such as particular certification language and detailed information on the certifier (depending on the type of document). Having electronic or digital verification in place has allowed for some flexibility and practicality in this area, which was previously a very time consuming element of CDD.

Now, a long-form certified copy of a document such as a passport or utility bill will no longer be required from a customer using an e-App or an electronic portal, unless of course there is some doubt as to the authenticity of the electronic copy, or if the electronic report returns a particular factor that will mean the RA has to conduct enhanced due diligence upon that particular individual. Where such a concern exists, or where the RA does not have access to such software, the AML code still allows for the traditional method to be used.

Non-face-to-face business relationships

Another recent welcome change to the AML code was the revised position in relation to non-face-to-face business relationships. Where an RA uses electronic methods to verify who the customer is, as opposed to face-to-face verification, there is no need to apply any enhanced checks unless there is some doubt as to who the customer is, or there is a possibility of a high-risk element being involved.

This will be very familiar to those who have crossed international borders of late, whereupon entering countries they are often cleared through an automated computerised system that verifies who the passenger is, and that their documents are valid, as opposed to face-to-face contact with an officer at border security. The system is highly efficient and user friendly, and affords the RA a faster processing and turnaround time so as to deliver results in real time to customers.

Adoption of these amendments

The adoption of these user friendly and highly modernised laws in the BVI represents a firm commitment to acknowledging and embracing the use of technology in the financial services sector, which is in turn supported by a solid and focused regulatory legal framework. Enabling RAs and other firms to offer customers access to such products on devices such as their smartphones is critical to ensuring that the BVI remains the domicile of choice in international business and finance.

The adoption of these new policies and procedures into the AML code has been hugely welcomed and embraced by RAs and the private sector at large in the BVI, who treasure the foresight that its public sector has shown to demonstrate that the BVI is once again a cutting-edge jurisdiction in this area of law and regulation.

Mirza Manraj is a counsel, investment funds and regulatory at Harneys in Hong Kong and Philip Graham is a partner and head of BVI investment, funds and regulatory at Harneys in the British Virgin Islands. They can be contacted at and


Harney Westwood & Riegels
3501 The Centre, 99 Queen’s Road, Central, Hong Kong
Tel: +852 5806 7800

BVI’s place in the corporate/M&A landscape of SE Asia

2018 was a busy year for deal making across Southeast Asia, with clients utilizing both new and existing British Virgin Islands (BVI) companies as part of their deal structures. According to figures released by the BVI Financial Services Commission, the jurisdiction’s regulator, by the end of the third quarter, 2018, a total of 28,499 new BVI companies had been incorporated in 2018 – a significant increase on new incorporation numbers for the first three quarters of the two previous years.

We, in the Singapore office of the Maples Group, were fortunate to act on deals involving BVI entities across the region, and across sectors including fintech, biotech, resources, manufacturing and real estate for both foreign investors coming into the region and existing regional players disposing of, or acquiring, assets.

Using BVI companies in deal structures

As readers will no doubt be aware, typically, BVI companies are used at the top of investment structures, either to act as the ultimate holding vehicle for an institution’s or an individual’s stake in an underlying business or asset, or as the conduit or joint venture for investment monies (for an investor group) to be made available to the underlying business.

The following provisions of the BVI Business Companies Act, the BVI’s corporate law statute, are attractive in this context:

  • The absence of the concept of share “capital” (and use of no par value shares) so that subscription monies and other monies available in the company can be fully utilized for the benefit of the business;iness;
  • In an investor group context, the ability of directors of a BVI company to act in the best interests of the shareholder (of the company) that appointed them (as opposed to the best interests of the BVI company itself);
  • Ability to declare and pay dividends and distributions subject only to a solvency determination from the directors of the company – no concepts of share capital or premium to contend with;
  • Ability to repurchase or redeem shares subject only to the solvency determination referred to above; and
  • Privacy of ownership information – while BVI law requires that director and shareholder information for all BVI companies (including ultimate beneficial ownership information) is maintained in the BVI, this information is not available to the general public.

In addition to the tangible benefits of the act itself, the BVI retains its “brand” appeal and it continues to be internationally recognized as a reliable jurisdiction for the facilitation of cross-border transactions in Southeast Asia and, in addition, both investors and financiers of that investment can take advantage of the local availability of BVI legal advice and related services from providers here in Southeast Asia to incorporate, navigate and advise their companies on all corporate related transactions.

Using mergers

In terms of trends within the market, increased M&A activity has prompted clients to look at all possible options open to them under the act. One route to an acquisition (that we have seen in both a public and a private company context) is the use of a merger of two or more companies to effect an acquisition of the ultimate underlying business. The act provides that a BVI company can merge with another BVI company or a foreign company (where the domicile of the foreign company provides for the merger concept).

Michael Gagie Managing Partner Maples Group in Singapore
Michael Gagie
Managing Partner
Maples Group in Singapore
Tel: +65 6922 8402

Under the act, a merger requires the approval of both the directors of the company and the holders of in excess of 50% of the votes attaching to shares. The act provides shareholders with the opportunity to dissent from a merger vote put to the shareholder body, and the dissenting shareholder to seek a “fair value” payment from the company for their shares while the merger transaction itself (subject to being approved by the requisite number of votes) progresses.

A merger ensures that an acquirer will acquire a 100% interest in the BVI company as it applies to all shareholders, regardless of the size of their shareholding. Shareholders of the BVI company being acquired by way of merger will either vote to accept the merger consideration (which is often, but not always, a cash payment in exchange for their company shares) or will receive “fair value” by way of the dissenting shareholder process.


A change in Singapore company law, introduced in late 2017, led to a number of enquiries over the course of 2018 and into this year. Contingent on certain thresholds being reached (as set out in the relevant Singapore law), it is now possible to redomicile BVI companies from BVI to Singapore. BVI has had the concept of redomiciliation available under the act since its passage into law, and clients in a number of jurisdictions including the Cayman Islands, Delaware, Jersey and Luxembourg have utilized the reciprocity of the redomicile provisions of their own companies law to move companies into, and out of, the BVI.

HNWs & Family Succession Planning

A growing trend that we see is an increase in the number of enquiries relating to probate and succession matters involving BVI companies. Historically, a number of Asian-based clients incorporated their BVI companies as sole shareholder or sole director entities so that the patriarch, matriarch or founder of a family business holds the role both of decision maker and appointor of the decision maker in their personal capacity.

As the underlying businesses held by these BVI companies have, over time, grown and become more complex, thought now needs to be given as to how to structure the holding companies and provide for succession. BVI private trust companies and VISTA trusts offer business owners the ability to plan for succession while enabling them to retain some control over the management of the business.

In addition, the act’s flexibility in terms of its treatment of the holders of different classes of shares has led to increased creativity in the drafting of the rights provided to share classes in BVI companies, so that the founder of a business can look to retain the voting rights (and therefore management) of the company while providing that family members holding a different class of share or shares receive some of the economic benefits accruing to the holding company (via the profits and distributions of the underlying businesses), which are distributed up to the holding company level.

In some instances, we have worked with clients to look at ways to “trigger” a movement of voting and full economic rights from one share class to another upon the occurrence of a specific event – i.e., a sale or transfer of assets, or upon the incapacity of the founder.

With several general elections taking place in Southeast Asia during the course of 2019, and other global economic considerations at play, we fully expect to see clients engage in further deal activity across the region during the course of this year, and welcome the opportunity to promote the advantages of doing so utilising BVI companies.

Michael Gagie is a managing partner of Maples Group in Singapore. He can be contacted at


Maples and Calder (Singapore)
1 Raffles Place #36-01,
One Raffles Place,
Singapore 048616 subscripton ad red 2022