Economic Substance is enhancing the reputation of the BVI economy, commented Charlotte Bailey, Managing Director of TMF and President of the Association of Registered Agents.
The implementation success of the new regulatory standard, and resulting benefits was at the core of panel discussions during a November 10 virtual conference session for the Middle East Investment Summit (Dubai) 2020, titled: “Ensuring Compliance with the EU’s Economic Substance Requirements”. BVI Finance was the event’s Gold Sponsor.
Ms. Bailey was joined by panel moderator, Michael Fay, QC; along with Warren Luyt, CEO of Trident in Dubai; James Bernard, Commercial Director – Dubai Multi Commodities Centre; and Josh Mangeot, Counsel – Harneys.
The managing director said that economic substance helps set BVI apart as it relates to its meeting compliance standards and how quickly BVI reacted to requirements, adding, “It’s a really good news story at the end of the day.”
Ms. Bailey explained that the implementation was a success due to the large consultation with the industry, which was largely driven and supported by BVI Finance. The process also involved the formation of working groups to help registered agents, and close communication with the International Tax Authority (ITA) and local law firms to ensure legislation could be implemented in an easy and practical way. The spirit of collaboration has been excellent.
Joshua Mangeot also attributed the success to the ITA, and a “very streamlined, fast, efficient predictable corporate registry.” Mr. Mangeot also affirmed that it has boosted client relationships.
Remarking that the BVI is the world’s leader in incorporations, Mr. Mangeot said that based on scale, economic substance has been a major event for the jurisdiction over the past two years. Mr. Mangeot said it is noteworthy that now, during the end of the first reporting cycle, BVI companies are meeting reporting deadlines, which is “testament to the hard work of the BVI financial services sector and Government.”
The economic substance reporting framework is being managed by BOSSs, the Beneficial Ownership Secure Search System, which allows for information sharing with the appropriate authorities. Registered agents are responsible for the filing of all beneficial ownership information.
The panel highlighted an online tool developed by Harneys to assist with substance regulations., to which Mr. Mangeot commented, “With any regulatory change like this, it’s really important that we continue to give legal services to clients, in addition to the wealth and guidance that the BVI industry and regulator have made available to clients. The more harmonisation that we see on the key concepts and the reporting, it reduces the confusion for clients. It allows us to build efficient systems that minimize the impact on people’s day to day business.”
Mr. Mangeot said the Harneys tool is a “fully automated legal memo”, where companies input their information, to better understand their classification under the new legislation.
“It is really exciting to see how the market accepted that product. It is really helpful for companies to ensure they are not misstepping or taking actions that they don’t need to take.”
He further explained that while every BVI company has to file a report, that reporting varies depending on what relevant activities the company performs. The eight relevant activities include Banking, Insurance, Fund management, Finance and leasing, Headquarters, Shipping, Holding company and Intellectual property.
Has economic substance been good for business? Overall, the panel agreed that the response has been positive. Ms. Bailey remarked that it allows registered agents to charge for value added services, including office space and additional company secretarial work. This means more money coming into and circulating in the BVI economy.
Mr. Luyt commented that economic substance will not impact the usage of BVI business companies, stating the BVI advantages are its access to the privy council, legal certainty, and huge array of professionals.
“The use of BVI companies is not going to go anywhere. All [economic substance] is doing is really classifying the companies.”
Mr. Bernard provided useful information on the UAE experience in complying with Economic Substance requirements.
To watch the discussion, follow this direct link: https://app.swapcard.com/event/middle-east-investment-summit-2020/planning/UGxhbm5pbmdfMjI3ODE4.