12 minutes | Nov 19, 2020

Key points for directors as economic substance reporting deadlines approach

In the second episode of our Substance on Substance Season two, 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 takeawaysDirectors 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 2020Obligations depend on the classification and greatly vary in what is requiredAllowing a company to incur fines or penalties for non-compliance may be a breach of directors’ duties, which can expose the director to personal liabilityThere 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 onIdentify prescribed information regarding any such activities and its beneficial ownershipReport the prescribed information to its BVI registered agent within the relevant deadlinePenalties 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 classificationsEstablishing whether or not there is relevant activity and advising next stepsAdvising the directors and the company to show they have discharged their dutiesWorking with directors and companies to establish and carry out the next steps that need to be takenWe 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.
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