Harneys has recently acted for a client in a successful court approved arrangement under section 82 of the International Business Companies Act (Cap. 291) (the "Act").

Importantly the arrangement offered significant benefits to a client with a complex corporate transaction that it wished to put in place. The primary benefit in this case was the ability to seek exemption of exchanged securities from registration under the US Securities Act of 1933, as amended (the "Securities Act").

Section 82 of the Act provides several definitions for the term "arrangement" which in brief includes reorganisations, mergers, consolidations, separation of businesses, disposition of assets, exchange of securities, amendments to a memorandum and articles of association, dissolutions and importantly, any combination of those matters.

This particular matter involved a merger coupled with an exchange of securities in the form of a reverse takeover of a Canadian corporation. Essentially, as part of the arrangement two BVI companies merged and simultaneously the shareholders of the surviving BVI company exchanged their shares and other securities for shares and other securities in the Canadian corporation. Importantly, some of the shareholders are based in the United States and the use of the court approved arrangement process allowed the client to seek exemption from registration under the Securities Act, which provides for an exemption in respect of court approved transactions.

The process has two primary stages. First, the directors of the BVI company must approve a plan of arrangement and then make an application to the court for approval of the proposed arrangement. At the initial hearing, the court will give directions, for example, it may require that certain approvals be obtained (typically shareholder approval) and it may also require that certain notices be given or advertisements be made, typically for the benefit of creditors. The second stage is the final hearing at which interested parties may appear and be heard. At this final hearing, the court will reject or approve the plan of arrangement with or without amendments. In this instance, the plan of arrangement was approved.

Subsequent to approval of the plan of arrangement by the court, articles of arrangement must be executed by the BVI company and submitted to the Registrar of Corporate Affairs. Upon registration of the articles of arrangement, the Registrar will issue a certificate of arrangement certifying the arrangement has been effected.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.