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Important updates to the BVI trust legislation ensure that it remains a leading jurisdiction of choice for international high net worth families

23 Mar 2021

The British Virgin Islands (BVI) has often led the way in offshore legislation - The BVI International Business Companies Act 1984 which brought about the “BVI co” used around the world today; the VISTA Trust; the first offshore reserved powers trust legislation; and now the jurisdiction has produced a raft of new legislation to fully modernise the BVI trust regime.

These new features were brought in following a thorough review of the worldwide trust landscape, conducted by the STEP BVI Trust and Succession Law Review Committee, in concert with London counsel and academics from King’s College London. The intention was to make sure that the BVI remains at the cutting edge of the global trust world, with a focus on both innovation and user-friendly trust solutions, suitable for the modern era of international trust planning.

Section and Part numbers refer in each case to the BVI’s Trustee Act Cap. 303.

Court variations to beneficial entitlements

Previously, there was no way for a court to vary a trust’s distributive provisions without the consent of adult beneficiaries. Usually, this is fine: most trusts contain a wide power of amendment or appointment that requires no beneficiary consent. But some trusts, particularly if US-related, do not, and may also treat a beneficiary’s right to consent as a property right, creating a potential tax issue if exercised. The new Section 58B allows the BVI Court to approve variations without such consent where ‘expedient in the circumstances then existing, whether or not the terms of the order may adversely affect any person or purpose’. Although clearly a very wide power, there are strong safeguards, given mostly to the settlor. The power only applies where a trust has opted in (either in the trust instrument or in the deed changing the governing law to BVI, if applicable). Furthermore, the BVI Court must consider the Settlor’s wishes, along with any changes in circumstances after the creation of the trust, and, if the variation will diminish any beneficiary’s interest, the remoteness of that interest.

Reserved powers

Although BVI was the first offshore jurisdiction to introduce reserved powers trust legislation, the time has come for section 86 to be updated to take account of modern trust structuring, which often involves a number of different power-holders and detailed consideration about the appropriate allocation of duties, especially concerning invest decisions, between them. The new Section 86, drafted in conjunction with London counsel, expands the express list of powers which may be reserved to protectors, settlors or other persons without the validity of the trust being in question. These now expressly include such powers as a power of amendment, a power of appointment to make distributions and a power to give binding directions to the trustee in respect of investments. In reality, such powers have been frequently included in BVI trusts for many years in any event because the list of powers capable of reservation in the previous section 86 was non-exhaustive, but it is certainly helpful for all such relevant powers to now be expressly listed in the new section 86, especially as the new legislation will apply to all existing BVI trusts whenever they were established.


“My child is a beneficiary but his marriage is in trouble – could his spouse attack the trust?” As BVI trust practitioners, we are very commonly asked about the jurisdiction’s trust firewall. This has historically defended against attacks over succession and forced heirship, and also from creditors, but increasingly attention has turned to attacks during beneficiaries’ divorce proceedings. The firewall has therefore been greatly strengthened and modernised. Previously (in essence), Section 83A provided that a trust cannot not be set aside, nor could any person under the trust be ‘deprived of any right’, by reason that the trust avoids any right, claim or interest conferred by foreign law upon any person by reason of a ‘personal relationship’ to the settlor. Now, ‘claims and interests’ (including beneficial interests) are protected, and the defeated attacker may have a personal relationship with a beneficiary instead of the settlor. The definition of ‘personal relationship’ itself has been expanded to include step-relationships and children born of surrogacy or artificial fertilisation. As well as that, the questions that should be decided under BVI law (rather than some foreign law more advantageous to the attacker) have been confirmed to be virtually every question applicable to a trust.

Rule in Hastings Bass - aka undoing a mistake

This Rule originally derived from a 1975 English case and has a long and controversial history around the trust world. Fortunately for non-trust lawyers!, this history need not be discussed here. Essentially, the new Section 59A imports the Rule into BVI statute. It allows the BVI Court to wholly or partially set aside an exercise of a fiduciary power, which will often mean in practice a trustee’s distribution to a beneficiary. The requirements are essentially that the power-holder, when exercising the power in question:

  • took into account an irrelevant consideration (whether of fact, law or both) or did not take into account a relevant consideration;
  • when if they had (not) done so, they would not have exercised the power or would have exercised it on a different occasion or in a different manner.

It can be seen that this Rule is very useful in salvaging distributions or transactions which were poorly discussed or investigated beforehand, and which turned out to have disastrous tax or other consequences.

Third parties dealing with trusts

The BVI has always been very conscious of the practical concerns of settlors. Some banks and third parties had historically been uncomfortable with contracting with trustees because of the nature of the trust structure (not being a legal entity). Introduced by amending legislation in 2003, Part X addressed this by giving contracting third parties various rights as against the trust fund so long as they have taken reasonable enquiries to see that the trustee has power to enter into that transaction. It also gives the trustee various protections. The provisions of Part X have resulted in a big growth in BVI commercial trusts, but this legislation was only available to trusts established from March 2004 onwards. Now, however, trusts created before March 2004 can take advantage of these provisions too owing to these current legislative amendments.

Please contact any of the authors listed above or your usual Harneys contact with any questions.


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