RELEVANT ACTIVITIES DEFINED FOR BVI

The term 'Group' is used throughout these definitions and is defined by reference to regulation 2(1) of the BVI Business Companies Regulations, 2012, and means 'a company (the "first company") and any other company that is (a) a parent of the first company; (b) a subsidiary of the first company; (c) a subsidiary of a parent of the first company; or (d) a parent of a subsidiary of the first company.

BANKING BUSINESS

“banking business” means the business of accepting deposits of money which may be withdrawn or repaid on demand or after a fixed period or after notice, by cheque or otherwise and the employment of such deposits, either in whole or in part,

  1. in making or giving loans, advances, overdrafts, guarantees or similar facilities, or

  2. the making of investments,

for the account and at the risk of the person accepting such deposits.

DISTRIBUTION AND SERVICE CENTRE BUSINESS

Means the business of either or both of the following:

(a) purchasing from an affiliated entity in the same Group[i]:

  1. component parts or materials for goods; or

  2. goods ready for sale, and

  3. reselling such component parts, materials or goods outside the BVI;

(b) providing services to an affiliated entity in the same Group in connection with the business outside the BVI,

but does not include any activity included in any other relevant activity except holding business


For the avoidance of doubt, (b) above only falls within the definition in the specific circumstances where the relevant entity is operating as a service centre for entities in the same Group.

FINANCING AND LEASING BUSINESS

Finance and leasing business' in the Economic Substance Act is defined to mean 'the business of providing credit facilities of any kind for consideration'.


The Economic Substance Act further provides (at section 3) that:

(a) the consideration may include consideration by way of interest;

(b) the provision of credit may be by way of installments for which a separate charge is made and disclosed to the customer in connection with:

  1. the supply of goods by hire purchase;

  2. leasing other than any lease granting an exclusive right to occupy land; or

  3. conditional sale or credit sale;

(c) where an advance or credit repayable by a customer to a person is assigned to another person, that other person is deemed to be providing the credit facility;

(d) any activity falling within the definition of 'banking business', 'fund management business' or 'insurance business' is excluded from this definition (please refer to our separate updates on these separate categories of 'relevant activities').


Further Guidance:

  1. An entity which provides credit as an incidental part of a different sort of business will not thereby be treated as carrying on a finance and leasing business. E.g. payment of invoices within 30 days. Only where the provision of credit can be seen to be a business activity in its own right will the entity be treated as if its business, or part of its business, is a finance and leasing business. Entities which carry on a factoring activity, by which they purchase and then collect another business’s book debts, will be treated as carrying on a finance and leasing business.

  2. Entities which hold debt or debt instruments for the purpose of investment will not be regarded as being in the business of providing credit facilities.

  3. Although the activity is described as finance and leasing, the essence of the activity, as the definition makes clear, is the provision of credit facilities. So, the mere fact that an entity leases items does not mean it is carrying on a finance and leasing business. So short term hiring out of vehicles, boats or equipment is not caught.

FUND MANAGEMENT BUSINESS

'Fund management business' as defined in the Economic Substance Act 'means the conduct of an activity that requires the legal entity to hold an investment business license pursuant to section 4 and category 3 of Schedule 3 of the Securities and Investment Business Act, 2010 ("SIBA"). It is noted under the Guidance that Category 3 of Schedule 3 of SIBA reads as follows:

Investment Management

  • (a) Subcategory A: Managing Segregated Portfolios (excluding Mutual Funds);

  • (b) Subcategory B: Managing Mutual Funds;

  • (c) Subcategory C: Managing Pension Schemes;

  • (d) Subcategory D: Managing Insurance Products;

  • (e) Subcategory E: Managing Other Types of Investment.


The Guidance further provides that reference should be made to SIBA and to the BVI Regulatory Code, 2009, issued under section 41(1) of the Financial Services Commission Act, 2001 (the "FSC Code") for a more detailed understanding of these concepts. The Guidance states that it should be noted that management of funds is contrasted with the business of being a custodian of investments, which falls within Category 5 of SIBA. 

HEADQUARTERS BUSINESS

Means the business of providing any of the following services to an entity in the same Group:

  1. the provision of senior management;

  2. the assumption or control of material risk for activities carried out by any of those entities in the same Group; or

  3. the provision of substantive advice in connection with the assumption or control of risk referred to in paragraph (2),

but does not include banking business, financing and leasing business, fund management business, intellectual property business, holding company business or insurance business

HOLDING COMPANY BUSINESS

The business of a pure equity holding company 


[“pure equity holding company” means a company that only holds equity participations in other entities and only earns dividends and capital gains] 


For the avoidance doubt, an investment fund is not regarded as a pure equity holding company.

INSURANCE BUSINESS

'Insurance business' in the Economic Substance Act is defined under section 3(1) of the Insurance Act, 2008 to mean 'the business of undertaking liability under a contract of insurance to indemnify or compensate a person in respect of loss or damage, including the liability to pay damages or compensation contingent upon the happening of a specified event and includes life insurance business and reinsurance business'.

INTELLECTUAL PROPERTY BUSINESS

'Intellectual property business' in the Economic Substance Act is defined to mean 'the business of holding intellectual property assets'. 'Intellectual property assets' means any intellectual property right in intangible assets, including but not limited to copyright, patents, trade marks, brand, and technical know-how, from which identifiable income accrues to the business (such income being separately identifiable from any income generated from any tangible asset in which the right subsists). The term 'income' in respect of an intellectual property asset is defined in the Economic Substance Act to include:

  1. royalties;

  2. capital gains and other income from the sale of an intellectual property asset;

  3. income from a franchise agreement; and

  4. income from licensing the intangible asset.

SHIPPING BUSINESS

Means any of the following activities involving the operation of a ship anywhere in the world other than in the territorial waters of the Islands or between the Islands:

  1. the business of transporting, by sea, passengers or animals, goods or mail for a charge;

  2. the renting or chartering of ships for the purpose described in paragraph (a);

  3. the sale of travel tickets and ancillary ticket related services connected with the operation of a ship;

  4. the use, maintenance or rental of containers, including trailers and other vehicles or equipment for the transport of containers, used for the transport of anything by sea; or

  5. the functioning as a private seafarer recruitment and placement service,

 but does not include a holding company business or the owning, operating or chartering of a pleasure yacht.

 

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