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Unlocking the benefits of VISTA trusts for effective succession planning

Unlocking the benefits of VISTA trusts for effective succession planning

24 October, 2024

In this informative piece, Raven Kelly, Executive/Client Director, and Gareth Thomas, Managing Director, of Ocorian Trust (BVI) Limited, share their expertise on a critical, yet often neglected aspect of BVI company ownership: succession planning. Drawing on their experience, they explore the complexities of transferring BVI shares after a shareholder's passing and offer a streamlined solution to ensure a smooth handover.

 

What happens to BVI shares when a shareholder dies?

Building a successful BVI company often involves a long-term vision. Part of that vision includes ensuring a smooth transition of ownership should the unexpected occur.

When it comes to BVI companies with individual shareholders, there's an important legal step to consider: the BVI Grant. This official document, issued by the BVI Courts, validates the transfer of shares to your designated beneficiaries.

Here's a quick breakdown of the BVI Grant process:

  • With a BVI Will: If you have a valid BVI Will, the process involves obtaining a Grant of Probate. This document confirms the Will's authenticity and authorises the distribution of your BVI company shares according to your wishes.
  • Without a BVI Will: In the absence of a BVI Will, and if a foreign Will cannot be recognised by the BVI Courts, a Grant of Letters of Administration will be required. This Grant appoints an administrator to oversee the distribution of your assets, including your BVI company shares, according to BVI inheritance laws.

 

The importance of the BVI Grant

Obtaining the appropriate BVI Grant is crucial for several reasons. Until a Grant is issued:

  • Voting rights are frozen: The deceased shareholder's voting rights on company matters are suspended.
  • Transfer and sale restrictions: The shares cannot be transferred or sold to new owners.
  • Dividend distribution on hold: Any dividends associated with the deceased shareholder's shares cannot be distributed.

This can be particularly impactful for single-shareholder, single-director companies. Without a designated successor through a BVI Grant, the company's operations may be significantly stalled.

 

What are the common problems when obtaining BVI Grants?

While the BVI Grant process offers a clear path for inheritance, it's essential to be aware of some potential considerations:

  1. Confidentiality: Obtaining a BVI Grant may result information on a shareholder’s estate becoming a matter of public BVI Court records. For those seeking privacy, this can be a concern.
  2. Legal fees: Engaging a BVI lawyer is necessary to secure a Grant. Legal fees can vary, but they may be higher, especially in situations where the estate is contested.
  3. Delays in the process: Obtaining a Grant can take 3 to 6 months. Gathering required documents, translations, and navigating potential delays can extend the process, particularly in contested estates.

 

Exploring VISTA trusts, a streamlined succession option

VISTA trusts, established under the Virgin Islands Special Trusts Act (2003), offer an alternative approach to BVI company share inheritance. By transferring shares to a VISTA trust, the trustee becomes the legal shareholder. This approach presents several advantages:

  • Bypassing probate: Since the trustee holds the shares, they are not considered part of the estate upon the shareholder's (settlor's) death. This eliminates the need for probate, saving time and potentially reducing costs.
  • Maintaining control: The VISTA trust structure ensures the shareholder retains control of the BVI company during their lifetime. The trustee cannot intervene in management unless pre-determined circumstances arise, making it ideal for family businesses.
  • Clear beneficiary designation: A Trust Deed details who inherits the shares upon the shareholder's passing. This provides clarity and avoids potential disputes.
  • Succession planning flexibility: "Office of Director rules" within a VISTA trust allow the shareholder to establish procedures for appointing, removing, and compensating directors after their death. Additionally, a VISTA trustee cannot serve as a director of the company, ensuring a clear separation of duties.

 

How can Ocorian help?

VISTA trusts offer a powerful solution for BVI company shareholders seeking to:

  • Maintain control: Manage your company with minimal interference from the trustee.
  • Simplify inheritance: Streamline the transfer of shares to your beneficiaries.
  • Minimise disruption: Avoid probate delays and ensure business continuity.

At Ocorian Trust (BVI) Limited, we are experienced with VISTA trusts. We can guide you through the process and ensure a smooth transition plan is in place for your BVI company.

Contact our team today to discuss how a VISTA trust can benefit your succession planning.