BVI Finance caught up with Carson Wen, Founder and Chairman of Bank of Asia (BVI), BOA Financial Group and Sancus Group, Kristian Wilson, Partner at Bedell Cristin, and Michael Gagie, Regional Managing Partner – Asia, at The Maples Group to discuss the growth of the Asian economy, benefits to investors of utilizing BVI structures, the evolving regulatory landscape and the opportunities looking forward.
Asia has been a key driver of global growth for many years. How do you see this trend evolving in the next decade, particularly in the context of cross-border investment?
Carson Wen: Asia, with China still targeting a 5% growth in GDP per annum and many Southeast Asian economies reaching middle-income country levels, will continue to be a key driver of global growth. Looking forward, I see the world divided into two main blocs: the West, comprising about 12% of the global population, and the Global South, led by Brazil, Russia, India, China, and South Africa (BRICS), which represent 88%. The role of the US dollar as the global currency of exchange will continue to decline, with the RMB or a BRICS currency, in both physical and digital forms, taking up a larger share of global trade settlements, investments, and reserve currencies. I anticipate that a turning point will come around 2030, perhaps even earlier.
Michael Gagie: To add, there are a number of challenges affecting the growth potential of the global economy at the moment, and Asia is not immune to that. The BVI, along with several other financial centres, typically sees increased business when the global economy is buoyant and crossborder transactional activity is high. At a macro level, across Asia, there continue to be huge opportunities for businesses in multiple sectors of the regional economy to develop and grow. Many of those businesses will require the injection of capital and resource to support that growth and the BVI remains wellplaced in its role as a conduit for investment – whether in a corporate or a fund structure – to continue to form a part of that growth story.
What makes the BVI attractive as a leading international business centre? What benefits does it bring to Asia’s economy?
Carson Wen: The BVI has become a well-established hub for structuring offshore investments, especially in bridging the gap between Chinese or Asian companies and their investee entities abroad. This familiarity with BVI structures is unlikely to fade as long as cross-border investments persist, and the Know Your Customer (KYC) requirements for setting up and maintaining BVI companies don’t become more stringent than those for onshore jurisdictions.
BVI law often governs relationships between shareholders in different countries, with joint ventures structured at the BVI level. This system has stood the test of time, enduring various economic cycles and shifts between Western and Asian economies. The common law, despite some criticisms, particularly over the influence of British judges, remains the legal framework of choice for financial centres around the world, including London, New York, Hong Kong, and Singapore. This legal consistency is one of the reasons the BVI has maintained its attractiveness to international business.
Kristian Wilson: At present, the BVI’s products are best suited to a range of specific context-driven needs. For instance, the permissive corporate legislation makes BVI companies useful as shareholding vehicles, the commercial regulation makes BVI Incubator and Approved funds popular with venture capital and start-up hedge funds, and approved managers are increasingly preferred by the market.
How significant is Asia’s role in the BVI’s financial services sector, and what trends do you observe in terms of inbound and outbound investments through BVI structures?
Carson Wen: Approximately 44% of BVI companies are owned by Chinese ultimate beneficial owners (UBOs), and the rest of Asia likely accounts for another 10-15%. This makes Asia the dominant market for BVI offshore entities.
Michael Gagie: From a law firm standpoint, all of the larger, multi-jurisdictional firms with a BVI offering have a physical presence in Asia. If you couple that with the significant number of registered agents and other intermediaries present in the region and who have clients in Asia with a BVI component to their business, you start to get a sense as to how important Asia is to the continued growth and success of the BVI’s financial services industry.
Historically, the BVI’s growth in Asia was largely off the back of clients outside of Asia, investing into Asia, via BVI vehicles – what we would term as “inbound” investment. Today, there is as much use of BVI by Asian investors in pursuit of “outbound” investment as there is both foreign and regional investment across the Asia region. The real estate, retail, medical, pharma and tech sectors all continue to feature in the transactions that we support our clients on. In addition, clean energy and digital asset matters along with a myriad of private equity and family office related deals, keep our lawyers – and those of our competitors – busy across the region. One of the key trends we have witnessed, both for inbound and outbound investment activity, is the utilization by investors and entrepreneurs of structures and tax planning in each of Hong Kong and Singapore – what some term as “mid-shore” jurisdictions. In many of those transactions, the BVI component of the structure is complementary to some of the “localized” advantages that the mid-shore jurisdictions provide.
What are the key benefits that Asian investors and companies gain from using BVI structures compared to other international financial centres?
Kristian Wilson: The BVI offers the rule of law, such that there is a stable, understandable, predictable and well-founded basis to making legal and commercial decisions. In some jurisdictions, a lot of financial legislation is new, such that there may be uncertainty in using such products. Furthermore, in Southeast Asia (SEA), there are a variety of different laws, both civil and common law, with many different restrictions, obligations and regulations. The BVI offers a simple and understandable product which provides simplicity in a complex region.
Carson Wen: Familiarity is a major advantage, along with the high-quality regulatory environment in the BVI and a strong reputation. The presence of leading offshore law firms in major global commercial centres makes it convenient for Asian investors to use BVI structures.
Michael Gagie: The longstanding use of, and familiarity with the BVI across Asia can’t be underestimated in terms of the jurisdiction’s continued popularity and standing vis-à-vis its competitors. The flexibility of the BVI Business Companies Act – the way in which the Act allows companies to utilize subscription or investment monies provided to them and the ability to return profits to shareholders; the governance protections afforded to shareholders and other stakeholders under the Act and (ultimately) the recourse they have to the courts; the ability to migrate entities into and out of the jurisdiction – these are just some of the practical, legal advantages that the BVI and its corporate legislation can offer to Asian investors.
How do you view the evolving regulatory landscape in Asia and globally, and how is the BVI positioning itself to remain competitive and relevant in this environment?
Michael Gagie: The BVI has always sought to keep in step with regulatory and supra-national efforts to supervise and to regulate international capital markets and cross-border financial activity and so it is well-placed to remain competitive. Further enhancements in the jurisdiction to the regulation of service providers offering BVI related services to third parties, as well as legislative changes to evolve the framework under which the activities of BVI entities take place, are all leading to increased information flows and transparency, which can only be good for business.
Kristian Wilson: As with most jurisdictions, regulation is becoming increasingly complex. Many Asian jurisdictions have put in place laws relating to anti-money laundering (AML), economic substance and virtual asset legislation. As the BVI put similar laws in place in advance, it has a first mover advantage in that consumers are used to such laws and understand them. However, with ongoing regulatory requirements, it is important that regulations are put in place with market input rather than reactively to ensure there is close commercial analysis before implementation.
What role do organisations like yours play in supporting Asian investors and businesses looking to utilise BVI structures for international growth?
Carson Wen: Asian investors and businesses require access to professional services, including corporate service providers (CSPs), legal support, and banking services. Unfortunately, many banks around the world remain reluctant to deal with offshore companies. Bank of Asia was established specifically to address this need, providing banking services to the BVI and other offshore entities whose UBOs hail from 90 different countries.
...we are effectively the sales force on the ground as our livelihood is tied to the jurisdiction and we have practical, social and personal ties to the jurisdiction from living there and working with the community
Michael Gagie: As BVI Finance is aware, the Maples Group takes its role as a stakeholder in BVI financial services very seriously and we are regular contributors to all industry bodies on-island and overseas that support the development and promotion of the jurisdiction. Across our global network, we have lawyers working on client-facing matters that involve BVI entities and BVI law. This provides us with the opportunity not only to demonstrate to clients our skills and abilities as a leading international law firm but also to showcase the workings of, and advantages to, using BVI entities in their business. The physical presence in Asia of leading players from the BVI financial services industry has been key to the jurisdiction’s success in the region and will continue to play an important part in the ongoing development of the jurisdiction’s offering.
Kristian Wilson: My personal view is that BVI professionals in the financial services industry are essential to ensuring the growth in usage of BVI products. For those professionals truly invested in the jurisdiction, we are effectively the sales force on the ground as our livelihood is tied to the jurisdiction and we have practical, social and personal ties to the jurisdiction from living there and working with the community.
With Asia providing such a substantial client base for the BVI financial services industry, what sectors or industries are currently showing the most interest in BVI structures, and why?
Kristian Wilson: It is always difficult to state which area of the economy is popular, as the Asian economies frequently evolve and change. That stated, we see increased interest from family offices and mid-market funds for BVI solutions in the funds and holding company space. We also see interest in the startup space for BVI companies, particularly with future listings in mind.
Carson Wen: BVI structures are particularly well-suited for outbound investments, and this will remain true in the next wave of globalisation, which will be led by Chinese outbound investment. Initiatives like China’s Belt and Road, along with the need to relocate manufacturing for major Chinese brands like Huawei and Xiaomi, will keep BVI structures in demand.
Michael Gagie: One of the great advantages that the BVI has in terms of its client base in Asia, is its diversity. From a private practice perspective, we see, and advise on, the use of BVI entities across all sectors of the Asian economy. In recent years, as in other parts of the world, there has been increasing interest ...we are effectively the sales force on the ground as our livelihood is tied to the jurisdiction and we have practical, social and personal ties to the jurisdiction from living there and working with the community. www.bvifinance.vg 23 in the tech, pharma and medical sectors, along with clean and renewable energy.
Looking ahead, what emerging trends or opportunities do you foresee in Asia’s financial services sector, and how do you see the BVI’s role evolving as part of these developments?
Kristian Wilson: Asia is increasingly sophisticated and competitive market. Some jurisdictions, such as Singapore, Dubai, and potentially Saudi Arabia, are putting in place permissive legislation designed to capture an array of businesses in growing parts of the economy (including the digital sector). Such jurisdictions have added support in that they are larger economies, with active markets, international connectivity (flights, data) and privy to tax treaties, among other matters.
The BVI became the jurisdiction of choice as a result of its cutting-edge commercial legislation. This legislation (the IBC Act) was drafted in the early 80s with the assistance of US counsel. It was a forward-thinking, novel and market driven statute that ensured the success of the BVI in the corporate and commercial space. In order to compete effectively in the present day, the BVI needs to understand what its competitive advantages are, where market demand is, where the economy is going, and take a commercial look at its legislation.
Michael Gagie: The increasing use of technology to deliver services to individuals is likely to continue to evolve across the region – in very large countries with large populations, the ability of businesses to transact with clients remotely is critical. Across the PRC, Indonesia and Vietnam, we continue to see businesses looking to utilise smartphone-based apps to offer services and goods to end users in those countries. Regional and international investors, whether individually as shareholders of publicly listed companies or collectively via investment vehicles, continue to invest in businesses across the financial services, retail, energy, and healthcare sectors. We expect that utilisation of BVI entities in those investment structures will continue. Digital asset related activity continues to increase, with more institutional players, including banks, being active in that space. The BVI’s VASP regime has been a talking point with many clients, and we anticipate further interest in this sector. Finally, generational wealth transition across the region and the consequences of that in the context of existing BVI ownership structures, should see an increase in family wealth related discussions of the jurisdiction and succession planning advice for professional service firms and intermediaries.
Carson Wen: For me, the most significant opportunity for the BVI is to become a global hub for digital assets. The sector is already worth over US$2 trillion, and many jurisdictions, such as China, have yet to fully support it. The 80 plus applications for the BVI’s VASP licence are evidence of the sector’s interest in the BVI. However, to fully capitalise on this, the BVI needs to adapt its KYC requirements and raise awareness of its potential in the digital assets space, particularly in key Chinese cities like Shenzhen, Beijing, Shanghai, and Hangzhou.