Nominee Directors and Shareholders in BVI: Legality, Transparency and Legal Risks

Since 2 January 2025, the BVI corporate transparency framework has been materially expanded. BVI companies are required to file beneficial ownership information with the Registry of Corporate Affairs through the VIRRGIN system, and the current beneficial ownership threshold under the BVI Business Companies and Limited Partnerships (Beneficial Ownership) Regulations, 2024 is 10%, together with separate control tests. 

An important distinction applies to directors. Official guidance issued by the BVI Financial Services Commission (FSC) states that BVI law does not recognise "nominee directors" as a distinct legal concept. The provision of director services and nominee shareholder services is nevertheless part of regulated company management business and may be carried out by appropriately licensed service providers. 

When Are Nominee Arrangements Permitted in BVI? 

A nominee shareholder arrangement may be used for corporate administration provided that the nominee relationship and the person on whose behalf the shares are held are properly identified and disclosed. A nominee shareholder cannot lawfully be used to conceal the beneficial owner. 

The BVI Business Companies Act requires companies to maintain a Register of Members and file it with the Registrar of Corporate Affairs. Where a member acts as a nominee shareholder, additional information must be filed concerning the nominator, including the nominator's name and address and the prescribed information relating to termination of the nominee relationship. For newly incorporated companies, the Register of Members is generally required to be filed within 30 days of incorporation, and subsequent changes are also subject to a 30-day filing requirement. 

Director services are treated differently. BVI law does not create a separate class of directors whose statutory duties are reduced because they are described commercially as nominees. Where a person licensed by the FSC to provide director services acts as a director, the company must identify that status and file the prescribed information with the Registrar. 

A nominee arrangement may therefore separate formal shareholding or corporate administration from the underlying economic interest, but it cannot remove regulatory traceability of ownership and control. 

How Is Beneficial Ownership Identified in a Nominee Shareholding? 

The current BVI beneficial ownership regime applies a 10% threshold rather than the general 25% threshold commonly encountered in other jurisdictions. A natural person who directly or indirectly owns or controls 10% or more of the shares or voting rights will generally fall within the beneficial ownership definition. Control may also be relevant independently of the percentage of formal ownership. 

Where a person holds 10% or more of the shares in a nominee capacity, the beneficial ownership analysis looks through the nominee to the nominator. If the nominator is itself a legal person, the ownership chain must be traced to the natural person who ultimately owns or controls that legal person. 

Beneficial ownership information has been filed with the Registry of Corporate Affairs through VIRRGIN since 2025. The former BOSSs model should therefore not be described as the current parallel beneficial ownership filing system. 

Beneficial ownership information is not simply available as an unrestricted public register. From 1 April 2026, the FSC introduced procedures allowing requests to inspect the Beneficial Ownership Register on legitimate interest grounds, alongside the statutory access available to competent authorities and other qualifying persons. A nominee arrangement should therefore not be presented as a mechanism for concealing ownership from regulators, obliged entities or persons with a lawful basis for access. 

What Duties Apply to a Director? 

Every director of a BVI company remains subject to the directors' duties imposed by the BVI Business Companies Act regardless of why or by whom that director was appointed. 

A director must act honestly and in good faith and, as a general rule, in what the director believes to be the best interests of the company. Directors must exercise their powers for a proper purpose and exercise the care, diligence and skill that a reasonable director would exercise in the relevant circumstances. The Act contains specific exceptions concerning the interests in which a director of certain subsidiaries or joint venture companies may act where the statutory conditions are satisfied and the company's memorandum or articles expressly permit the relevant approach. 

Appointment at the request of a shareholder, professional service provider or another person does not disapply these duties. Mechanically following external instructions without considering the director's legal powers, the company's interests and the particular transaction may create a risk of breach. 

BVI AML/CFT requirements also address the transparency of such arrangements. Where a person acts as a director and accepts instructions from another person in connection with that service, the identity of the person whose instructions are being followed is subject to disclosure under the applicable AML framework. 

How Do Nominee Arrangements Affect Economic Substance? 

The appointment of a professional director or use of a nominee shareholder does not by itself determine whether a company satisfies the BVI economic substance requirements. The analysis principally depends on the business activity actually carried on by the entity. 

Relevant activities under the BVI Economic Substance regime include banking business, insurance business, fund management business, finance and leasing business, headquarters business, shipping business, holding business, intellectual property business, and distribution and service centre business. Investment fund business as such is excluded from the list of relevant activities, although this does not automatically exclude other relevant activities that the same entity may conduct. 

For relevant activities other than the special regime applying to pure equity holding entities, the analysis considers whether the relevant activity is directed and managed in BVI, whether adequate expenditure, employees and appropriate premises are maintained in BVI, and whether the relevant core income generating activities (CIGA) are carried out in BVI. Not every board meeting must take place in BVI, but the direction and management test requires an adequate number of meetings in BVI with the necessary quorum and expertise, and strategic decisions concerning the relevant activity must be made there. 

Pure equity holding entities are subject to reduced substance requirements. They are not required to satisfy the general directed and managed test or perform CIGA in BVI. They must comply with their applicable corporate obligations and maintain adequate employees and premises in BVI for holding their equity participations and, where they actively manage those participations, for carrying out that management. The level of substance required remains fact-sensitive. 

A local director who merely countersigns externally prepared decisions is therefore not, by itself, determinative of economic substance compliance. The relevant question is how the applicable relevant activity is genuinely managed and whether the factual arrangements meet the statutory requirements. 

What Tax Risks Can Arise for Bulgarian Corporate Structures? 

The use of a BVI company may be relevant to the Bulgarian controlled foreign company (CFC) rules, but those rules do not apply automatically merely because the entity is incorporated in BVI or uses a nominee arrangement. 

Under Article 47c of the Bulgarian Corporate Income Tax Act, the CFC regime requires both a control test and a separate taxation test. For a foreign entity, the Bulgarian taxpayer must, alone or together with associated enterprises, directly or indirectly hold more than 50% of the voting rights or capital, or be entitled to more than 50% of the profits, while the statutory condition concerning the corporate tax actually paid must also be satisfied. 

Where the CFC regime applies, Article 47d requires an adjustment to the Bulgarian taxpayer's tax result by reference to the foreign entity's undistributed tax profit determined under the statutory rules. The Bulgarian regime should therefore not be described as applying only to royalties, interest or other predetermined categories of passive income. 

An important exception applies under Article 47d(7). The adjustment does not apply where the controlled foreign company carries on substantive economic activity supported by the personnel, equipment, assets and/or premises required for that activity and the Bulgarian taxpayer establishes the relevant facts and circumstances. 

The CFC provisions form part of the Bulgarian corporate income tax regime and should not be described as automatically applying to every Bulgarian individual who directly or indirectly has an interest in a BVI entity. The relevant taxpayer and the satisfaction of the statutory CFC conditions must first be established. 

Is There a Double Tax Treaty Between Bulgaria and BVI? 

As at the date of this article, the British Virgin Islands are not included among the jurisdictions with which Bulgaria has a bilateral double tax treaty in force. The current treaty network published by the Bulgarian Ministry of Finance does not list BVI as a treaty partner. 

A BVI company directly receiving Bulgarian-source income therefore cannot claim relief under a bilateral Bulgaria-BVI double tax treaty that does not exist. The applicable tax treatment must instead be determined under Bulgarian domestic law. 

The beneficial ownership test under Article 136a of the Bulgarian Tax and Social Security Procedure Code is relevant when establishing the requirements for applying a double tax treaty. It does not itself create treaty relief where no applicable treaty exists between Bulgaria and the jurisdiction of the direct recipient. 

How Do AML/CFT Rules Treat Nominee Arrangements? 

A nominee shareholder is not a substitute for the beneficial owner. The BVI AML framework applies a 10% ownership threshold in the relevant corporate beneficial ownership analysis and requires regulated corporate service providers to identify and verify the natural persons who ultimately own or control their customers. 

The Bulgarian Measures Against Money Laundering Act likewise expressly provides that nominal directors, secretaries, shareholders or owners of capital are not treated as beneficial owners merely by virtue of that nominal status where another beneficial owner has been identified. The analysis must identify the natural person who ultimately owns or controls the relevant legal entity or legal arrangement. 

For an international corporate structure, nominee documentation, the Register of Members, beneficial ownership filings and KYC information provided to corporate and financial service providers should therefore present a consistent picture of ultimate ownership and control. 

What Consequences Can Follow from a Lack of Transparency? 

The current BVI beneficial ownership regime contains a separate administrative penalty system. Depending on the contravention, the four penalty tiers have maximum amounts of USD 10,000, USD 25,000, USD 50,000 or USD 75,000. The particular penalty depends on matters including the nature and duration of the breach, whether it is repeated, its impact on the accuracy of beneficial ownership information and the steps taken to prevent or remedy the non-compliance. 

Where a beneficial owner cannot be identified because the applicable information requirements have not been complied with, the Registrar may, in the circumstances prescribed by the Regulations, issue a restriction notice affecting the relevant interest. While such a notice remains in force, transfers may be void, rights may not be exercisable and certain payments relating to the affected interest may be restricted. 

Separately, failure to satisfy applicable economic substance requirements may result in financial penalties and exchange of information with relevant overseas competent authorities. 

The principal legal risk therefore does not arise from the mere use of a professional shareholder or director service. It arises where the arrangement lacks the transparency, documentation or factual substance required by the applicable corporate, AML/CFT/CPF, tax or economic substance rules. 

When Does a Nominee Structure Remain a Sustainable Corporate Tool? 

Nominee shareholders and professional director services may perform a legitimate corporate function where the relationship is properly documented, nominators and beneficial owners are correctly identified and disclosed, and directors continue to perform their own statutory duties. 

A nominee arrangement should not be used as a substitute for genuine corporate governance or as a mechanism to conceal control. Where a company falls within the economic substance regime, its governance arrangements must also be consistent with the requirements applying to its particular relevant activity. 

Where Bulgarian participants are involved, the structure requires a separate assessment of the CFC rules, the Bulgarian tax treatment of payments to and from the BVI entity and the applicable beneficial ownership identification obligations. A nominee layer does not alter the underlying economic facts on which those regimes operate. 

Legal Assistance with Nominee Corporate Structures 

Vassilev & Chisuse Law Firm provides legal assistance in relation to preliminary legal and tax analysis, structuring and review of international corporate holdings and nominee arrangements. The assistance may include analysis of ownership and control, corporate documentation, applicable beneficial ownership and AML/CFT requirements and tax implications for Bulgarian participants. 

This material is provided for general information purposes only. It does not constitute individual legal, tax, financial or investment advice and does not create a lawyer-client relationship. The applicable requirements depend on the specific structure, activity, tax residence and factual arrangements concerning ownership, control and management.