One of the great attractions of the British Virgin Islands (“BVI”) as a jurisdiction for structuring finance transactions is the simple yet thorough security registration regime applicable to BVI companies. For the most part, where a lender advances money against security provided by a BVI company, registering the security and thereby protecting its priority and giving public notice of the secured party’s rights is a straightforward and effective system. However, the legal position becomes less clear when the company is acting not for its own account, but in its capacity as trustee of a trust.
The question of how to deal with trust property is not new. The statutory system for registration of company charges was first introduced in the BVI in 1991, and since that time practitioners in the jurisdiction have had to consider how best to address the problem of a company creating a charge over assets which it does not beneficially own. However, the last two to three years has seen a surge in the popularity of so called “private-trust companies”, which are essentially companies which operate as trustees within certain restrictions and are thereby exempt from the normal requirements of a BVI company to obtain a trust licence. Whereas in years gone by lending against trust assets was a comparatively uncommon event, it is now something that occurs with increasing frequency.
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