Knowledge

New rules on economic substance came into effect on 1 January 2019 affecting companies and certain types of partnerships incorporated, registered or tax resident in the BVI, Cayman Islands, Guernsey or Jersey. Clients are looking to their corporate service providers for guidance and support and corporate service providers will need to be ready to meet those needs. Our experts have put their heads together and come up with the following top tips for corporate service providers:

• engage early with your clients. Reassure them that the substance rules only apply to certain types of companies and that, in most cases where they do apply, the company is likely to already be broadly in compliance;
• train your frontline staff on the new rules and prepare them for likely questions from your clients. You may wish to provide your staff and/or your clients with a list of FAQs;
• review your corporate services agreements and terms of business. Is responsibility for substance assessment and compliance going to be part of your service? If so, are you adequately protected? Do you have the necessary manpower and premises availability? Do you have systems in place to capture the new information reportable in the annual return? Will you need to increase your annual fee?
• establish a substance strategy and compliance team, sponsored by one or more of your senior management and including representatives from relevant business teams;
• draw on what you have learned from previous compliance projects (FATCA, CRS, GDPR, etc.);
• consider what changes may be needed to your policies and procedures. For example, consider introducing a substance register alongside the other corporate records you maintain and making economic substance compliance a standing agenda item;
• update your business and client risk assessments; and
• if in doubt, seek professional advice from your lawyers and accountants.