British Virgin Islands

Author: | Published: 1 Feb 2005
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Harney Westwood & Riegels

Address

Tortola

Telephone

+1 284 494 2233

Fax

+1 284 494 3547

The BVI Business Companies Act (the Act) came into force on January 1 2005. Unlike the International Business Companies Act (the IBC Act), this single statute allows for the incorporation of international offshore companies as well as locally owned companies doing business in the BVI. For a two-year transition period, both the IBC Act and the new Act will be in force. After the two years, the new Act will be the sole corporate statue for the BVI and will regulate all BVI companies.

Seven different types of companies can be incorporated, including guarantee and unlimited companies, segregated portfolio companies and restricted purpose vehicles.

Objects clauses

There is nothing to prevent a company from stating its objects or purposes, but it is not required to do so in its memorandum or articles. The only exception is a restricted purposes company, which must state the purposes for which it is incorporated.

Members, their rights and liabilities

The new Act specifies the rights that a shareholder has: the right to one vote, the right to an equal share of any dividend, and the right to an equal share in the distribution of surplus assets. The memorandum can vary these rights.

The new Act does not contain provisions for members' remedies along the lines of s 459 of the UK Companies Act 1985 for unfair prejudice (which is consistent with the IBC Act).

Directors

A company must have at least one director and it must keep a register of directors.

The new Act also allows a director of a subsidiary to act in the best interests of its holding company even if it is not in the best interests of the subsidiary, provided they are expressly permitted to do so by the memorandum or articles, and have the prior agreement of all shareholders if the company is not a wholly owned subsidiary.

Shares, capital and distributions

The new Act abolishes the concept of authorized share capital, or indeed of share capital. The concept of surplus (the IBC equivalent of share premium) is not retained. Distributions (including dividends) can only be made if the directors are satisfied that the company will, immediately after the distribution, pass a statutory solvency test. A company may purchase, redeem or otherwise acquire its own shares in accordance with two distinct regimes: under provisions in the new Act or in accordance with its own memorandum or articles.

Registering charges and priorities of charges

Under the new Act, a company must keep a register of charges at its registered office or at the office of its registered agent. However, the particulars of the charge can now be registered in a new public Register of Registered Charges maintained by the Registrar for each company. Either the company or the chargee can apply to the Registrar for registration, and there is no time limit for making an application. Registration is not mandatory, and failure to register does not affect the charge's validity or enforceability, even against a liquidator or other creditors, including secured creditors.

However, registration will affect priority for charges. The statutory priority rules can be varied by agreement. Registered floating charges rank after a subsequently registered fixed charge unless the fixed charge breaches a negative pledge in the floating charge.

Merger, consolidation, sale of assets, forced redemptions, arrangements and dissenters

The provisions relating to these matters in the new Act are similar to the equivalent provisions in the IBC Act, although some of the provisions have been clarified.

Continuation

The new Act allows a foreign company to continue as a company incorporated under the new Act but only if the laws under which it is registered authorize it to continue in another jurisdiction

Voluntary liquidation

A company can only go into voluntary liquidation if it either has no liabilities or it is able to pay its debts as they fall due; if it is insolvent, it must go into insolvent liquidation under the Insolvency Act 2003.

If the voluntary liquidator believes that the company is insolvent, they must notify the Official Receiver and call a meeting of creditors within 21 days. This is treated as a first meeting of creditors under the Insolvency Act and the liquidation continues as under the Insolvency Act.