On 30 March 2015, the Trustee (Amendment) Act, 2015 (the "Amendment") came into force in the British Virgin Islands ("BVI"). This follows similar amendments in respect of partnerships and companies.
The Amendment provides that every trustee must maintain records and underlying documentation for each trust for at least five years. The records do not have to be kept in the BVI but need to be "sufficient to show and explain the trust's transactions" and "enable the financial position of the trust to be determined with reasonable accuracy".
The date on which the five year period commences is not specified. On a natural meaning of the words, it would seem that it should commence on the date they are prepared, although in light of the potentially serious sanctions for non-compliance, a cautious trustee might wish to keep them for five years following the termination of the relationship. Of course, this does not affect any duty the trustee has to keep financial records as a matter of trust law, which the trustee will need to consider separately.
Failure to maintain the necessary records without lawful or reasonable excuse may result in liability to a fine not exceeding US$100,000 or to imprisonment for a term not exceeding five years.
The precise application of the legislation is not clear, in that it does not state whether this is dependent on the governing law of the trust or the residence, incorporation or place of business of the trustee. Given the potentially severe penalties for non-compliance, non-BVI trustees of BVI trusts and BVI trustees of non-BVI trusts would be well advised to ensure that they comply. In most cases, this should not be too onerous. It is of course settled law that a trustee must be ready with its accounts; it is not thought that the statutory duty will normally impose additional obligations in that regard, although it is possible that there may be circumstances in which it might do so.
It is perhaps worth noting that a trustee's duty to be ready with its accounts, and the new statutory duty to maintain records, each applies equally to VISTA trusts. In the past, some trustees may have formed the view that they did not need to obtain detailed information about the business of the underlying company held under the VISTA regime. That has, we believe, always exposed them to a risk of claims from beneficiaries. Now, there is the added risk of criminal sanctions. The silver lining is that, for those trustees wishing to get their house in order, the Amendment does at least give them a good reason to start asking for more information