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SOS Substance on Substance: Season two - Key points for directors as economic substance reporting deadlines approach

25 Nov 2020

In this episode of Substance on Substance, Philip Graham, our global head of Investment Funds and Regulatory, and Joshua Mangeot, our BVI Economic Substance specialist, give an update on points directors and operators of BVI entities should be aware of regarding the economic substance reporting deadlines.

Key takeaways

  • Directors need to first assess where they are in the compliance reporting cycle - most BVI companies incorporated before 2019 will have to file their first report by early December 2020
  • Obligations depend on the classification and greatly vary in what is required
  • Allowing a company to incur fines or penalties for non-compliance may be a breach of directors’ duties, which can expose the director to personal liability
  • There are also specific offences under the Beneficial Ownership Secure Search System Act 2017 that can occur when a company has failed without “reasonable cause” to:
    • Identify any “relevant activity” it carries on
    • Identify prescribed information regarding any such activities and its beneficial ownership
    • Report the prescribed information to its BVI registered agent within the relevant deadline
  • Penalties include significant criminal fines and penalties (and even personal liability where intent or failure to exercise all reasonable diligence can be shown), subject to a limited defence of “reasonable cause”
  • We can help manage the classification, compliance, and reporting process by:
    • Performing a scoping exercise and working through the initial classifications
    • Establishing whether or not there is relevant activity and advising next steps
    • Advising the directors and the company to show they have discharged their duties
    • Working with directors and companies to establish and carry out the next steps that need to be taken

We are able to offer a suite of online tools to make this process easier.

Harneys’ Economic Substance Classification Solution which provides real-time formal legal advice to any BVI company or limited partnership for a low fixed fee can be found here. This solution offers users access to high-quality legal advice on their entity’s status and obligations within minutes.

More information about Harneys' Economic Substance reporting tools we have developed to assist registered agents and service providers coordinate reporting can be found here.

If you would like to subscribe to our client alerts on economic substance, click here.

If you have any questions please contact your usual Harneys contact, or fill out our enquiry form here.

Click here to subscribe to our SOS Substance on Substance podcast. Choose your preferred platform from the list presented and click subscribe or follow once logged in.

Harneys produces a variety of podcasts, providing on-the-go legal analysis over the airways. Visit our Podcasts page to see them all.