Country report: Anguilla’s financial services and legislation

By John Lawrence, director of the Anguilla financial services commission

Anguilla celebrated the ten-year anniversary of its international financial centre in 2004. It did so by putting in place a new financial services regulatory body and introducing new product legislation.

Anguilla has long been recognised as a desirable place for a variety of corporate structures – not only are the companies law, legal system and zero tax structure competitive, it has also fostered a strong technology-focused approach to developing its offshore financial centre, which makes it dynamic and user-friendly for company principals and service providers alike.

General overview

Anguilla is a British Overseas Territory, with companies legislation regulated by a legal system based on English common law. Anguilla is a zero-tax jurisdiction.

Anguilla has never appeared on a Financial Action Task Force (FATF) blacklist and its proactive efforts to develop strong anti-money laundering legislation have earned it a solid reputation with financial authorities worldwide. This reputation was further improved in February 2004 when the Anguilla Financial Services Department was set up as an independent Financial Services Commission (FSC). This allows the FSC to focus on its core functions of granting licenses and monitoring compliance with anti-money laundering, statutory regulations, international standards and practices.

ACORN

Perhaps the most obvious example of Anguilla’s success in developing an innovative financial centre is the Anguilla Commercial Online Registration Network (ACORN), the world’s first online and instant company registration system. Licensed service providers and their approved intermediary clients can access ACORN directly, which allows them to conduct instant company name searches, register companies and file company articles, annual reports and fees – all over a secure computer link. For clients, this means reducing the time and costs associated with forming companies significantly.

Mutual funds

The Anguilla FSC has recognised that the future growth potential of its financial centre depends more on its ability to develop more sophisticated structuring solutions than the typical international business company (IBC). As a result, in 2004 the government passed a package of legislation creating new and user-friendly products. One of these was The Mutual Funds Act, which provides for the licensing of three categories of mutual funds: public funds, which are those offering shares to
the general public; private funds, which are those with 99 or fewer investors; and professional funds, which are those whose shares are only offered to professional investors, defined by the Act as a person who agrees to be treated as a professional investor.

In February 2005, the Anguilla FSC unveiled a policy to allow fast-tracking of private and professional funds under the Act. The policy grants ‘qualified fund administrator or intermediary’ status to fund administrators, law firms and financial institutions that meet criteria detailed in the policy. The status allows qualified administrators or intermediaries to form private and professional funds within 24 hours, and later submit full application details for review by the FSC.

Captive insurance

Another element of the 2004 package of legislation was a new Anguilla Insurance Act, which was created to attract a broad range of captive insurance business to Anguilla. This Act makes it possible for companies to realise all the normal advantages of forming a captive insurance company – minimising costs, reducing risks and providing access to the re-insurance market – all in Anguilla’s user-friendly, zero-tax environment.

The Act creates a series of licensing regimes for Anguilla-based insurers whose risks and premiums are outside of the jurisdiction. These are called class ‘B’ licenses (class ‘A’ licenses are for companies insuring domestic risks), and the five sub-categories set out different minimum capital requirements, ranging from US$10,000 to US$200,000, based on the nature of the risks insured and the level of ownership concentration.

This new regime has proved to be very successful so far. By December 2006, for instance, the Anguilla FSC had already licensed 85 captives.

Protected cell companies

The third and final element of the 2004 legislative package was the Anguilla Protected Cell Act 2004. A Protected Cell Company (PCC) is a corporate entity that holds assets in one or more segregated or protected cells. The purpose of a PCC is to separate the assets in each of the company’s cells from those in other cells. Cellular assets are only available to satisfy the creditors of that cell, and creditors of other cells have no claim upon them. The assets of each cell must be kept separate and be distinguishable from non-cellular assets. Corporate structuring professionals have found these PCC companies particularly flexible and useful for entities that require complex structured finance arrangements.

Other legislation

Anguilla has recently issued regulations under the recently amended International Business Companies Act to provide for the immobilisation of bearer shares. The proposed regime is simple and cost-effective and will grant the right to become custodians of bearer shares to all holders of company management and general trust licensees, who meet the criteria that are set out in the regulations. Companies that have issued bearer shares prior to the regulations will have until the end of 2010 to immobilise them.

Proposed Anguilla Foundation Act

The aim of the Act is to meet the demand for the estate-planning vehicle known as the ‘private foundation’, by legislating for it under Anguilla law. The private foundation first gained international popularity when Liechtenstein legislated as long ago as the late 1930s, basing its Act on Swiss principles but providing greater adaptability to the needs of international clients. In much more recent times other jurisdictions have produced their own forms of foundation legislation, with the aim of making this vehicle available within common law jurisdictions.

The Anguilla Foundation Act will offer the private foundation (a Civil Law concept) as an alternative to the existing Common Law trust available in Anguilla, thereby broadening the appeal of Anguilla for a whole new category of financial-services clients.

Anguilla has been at the cutting-edge of the offshore world ever since it pioneered the ACORN system in the late 1990s. Though other jurisdictions have introduced online registration systems since, ACORN remains the industry benchmark, and is it continually being improved to maintain Anguilla’s leadership position.