We offer significantly lower taxes, less onerous regulation and greater privacy than most Asian jurisdictions; the identity of shareholders and directors is not public. We impose no auditing or reporting requirements or foreign exchange restrictions. Companies may give financial assistance without a costly and time-consuming whitewash procedure, merge with local or foreign companies (far simpler than the scheme of arrangement route), migrate between jurisdictions, transfer shares free of stamp duty, hold treasury shares , buyback shares without shareholder or court involvement and declare dividends from almost any source of funds (not just profits).
Security may be enforced without court involvement and there is no Chapter 11 or administration equivalent currently in force imposing moratoriums on creditors rights.
BVI and Cayman share a common law foundation, right of final appeal to the Privy Council and a strong rule of law. They are prosperous and stable microstates with small affluent populations isolated to some extent from global economic and political turmoil by not being part of any major political or economic grouping; in particular they are economically and politically remote from Asia. Their dependence on offshore business makes material adverse change in tax and law unthinkable. Stable destinations never necessitate any last minute change of plan.
But which one? If you are looking for a cheaper getaway then BVI has lower government incorporation costs, annual fees and service providers fees for companies than Cayman. This has proved to be a decisive factor in the competitive Asian market particularly. What else?
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The only matters of public record in Cayman are a company name, status and registered office address. In BVI, the incorporation documents and M&A-which contain the rights attaching to shares - are publicly available; this tends to make Cayman the preferred jurisdiction for sensitive shareholder arrangements.
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BVI boasts the advantage of a public regime for the registration of security that confers statutory priority which is attractive to lenders for its simplicity, speed and cost efficiency. In Cayman, the common law still applies to priority of security interests, making it more difficult to establish priorities.
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The requirement to state and maintain and authorized share capital has long been abolished in BVI, rendering absolute the concepts of par value, share premium, discounted shares and alteration of share capital. Cayman still observes the principle.(Hong Kong has now followed the BVI approach, but still requires shareholder approval to issue shares, which BVI does not).
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The solvency test for distributions in BVI requires (i) the value of the company assets to exceed its liabilities and (ii) the company to be able to pay its debts as they fall due. Cayman simply requires that the company must be able to repay its debts as they fall due in the ordinary course of business an easier threshold to meet (and no need to decipher the applicability of the Eurosailcase).
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Both jurisdictions allow a foreign character or foreign name to be adopted, which has obvious appeal in Asia. In BVI, failure to use the foreign name on documentation attracts statutory fines of US$1,000; in Cayman use is optional.
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Subject to certain limitations, amendments to a company M&A may be made by BVI directors, whereas in Cayman only the members can do so. Both jurisdictions require a registry filing, although in Cayman amendments are effective immediately rather than upon the later registration date in BVI.
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The ability to list on the Hong Kong stock exchange used to be a well-touted advantage of Cayman companies, but the exchange has accepted BVI listings since 2009.
Do beware cheap imitations. Both BVI and Cayman have a solid base of local service providers, supplemented in Asia by full-service law firms and corporate service providers providing real-time support. Many newer jurisdictions are not scoring high visitor reviews in this area. BVI and Cayman have also responded proactively to international scrutiny and calls for co-operation to combat crime and terrorism. Both have comprehensive anti-money laundering regimes. Choose an offshore jurisdiction indiscriminately and your business partners may not want to go there with you.
Still can decide? If physical travel appeals (it is never required), we recommend BVI for sailors and hikers, Cayman for divers and foodies.
