Locality Of A Debt

Introduction

For businesses that are family-owned and run in jurisdictions such as Hong Kong, Mainland China and Taiwan, it is common for beneficial ownership and control of the business enterprise to be vested in the shareholders of a company incorporated in the British Virgin Islands ("the BVI"). Due to the benefits associated with the BVI's corporate privacy laws and their particular attractiveness for high-net worth individuals and families, the beneficial ownership of the entire business may even be denominated in the shares issued by the BVI company at the top of the international business structure ("the BVI Holding Company").

From an estate-planning perspective, to ensure the business remains within the control of a family or high-net worth individual, financing for the business is often injected by way of loans made by the shareholders or several key shareholders into the business. Where a business is financed by lending to the BVI Holding Company over