Thursday, 4th June 2009Effective Corporate Governance

Kyria AliHow well do you know your responsibilities?

The year 2009 proves to be a year of regulatory enhancement for the British Virgin Islands (the "BVI"), as the BVI Financial Services Commission (the "Commission") continues to strengthen the laws of the jurisdiction as part of its longstanding commitment to ensure that the BVI be considered a reputable member of the international community.  The Draft Regulatory Code ("Code") was issued in October 2008 for discussion.  Since then, global financial markets have experienced unprecedented problems, resulting in many stakeholders enduring the effects of poor internal controls and weak corporate governance structures. Given the Commission's commitment to implementing international best practice, anyone expecting the requirements in the Code to be materially diluted as a result of industry submissions, is likely to be disappointed.

The extent of the Corporate Governance Framework established and maintained by companies has been at the forefront of the areas highlighted by the Commission for review and inspection.  Regulations 18-24 of the Code address the requirements of a BVI Licensee to establish a corporate governance framework, as well as codify director and senior management responsibilities. 

Poor corporate governance is a significant regulatory risk to both the licensee and the jurisdiction. The Commission is therefore responsible for ensuring that all licensees operate in accordance with sound principles of corporate governance.  In the current regulatory climate, non-compliance is not an option for those wishing to continue to operate. The Commission has already added resources to its Legal and Enforcement Division. Administrative penalties have been imposed during the last 18 months and non-compliant licensees have been sanctioned by the Commission issuing cease and desist orders and appointing administrators.  We strongly recommend that all licensees review their corporate governance structure and amend as necessary. 

Baker Tilly (BVI) Limited will be conducting a Corporate Governance Seminar in July.  For further information regarding the Corporate Governance Seminar and establishment or assessment of a corporate governance framework, please contact Kyria Ali.