British Virgin Islands: BVI Court Clarifies The Meaning Of Member Under The BVI Company Law

In the recent case of Comodo Holdings Ltd v (1) Renaissance Ventures Ltd; and (2) Joseph Katz (executor for the estate of Eric D Emanuel Dec'd) Harneys successfully argued that the Applicant defendants' ((R) and (J)) application for a stay in favour of arbitration in New York must be refused because R. and J. were not members of the respondent claimant company (C.) for the purposes of the Articles and/or the BVI Business Companies Act 2004. Harneys argued that the corollary of their inability to demonstrate membership was an absence of locus standi to invoke an arbitration clause in the Articles of Association of C.

R. and J. sought to rely on the evidence of share certificates issued in 2000 and 2001 in their names that stated they were registered shareholders, to support the contention that they were existing members of C. However, they were neither able to demonstrate that they were on the Share Register nor that they had paid for the Share Certificates. Furthermore, Harneys correctly argued that to assert that title to Shares constituted membership of a company, either under the old International Business Companies Act 1984 or the BVI Business Companies Act 2004, was to fundamentally misapprehend the policy of BVI companies legislation that is premised on the English company law framework.

Bannister J. upheld Harneys' proposition that prima facie evidence of title is not the same as membership of a company; and that corporate membership can only be evidenced by entry on the Share Register. His Lordship's finding followed the recent English Supreme Court ruling in Enviroco Lt v Farstad Supply A/S [2011] 2 BCLC 165 relied on by Harneys. Bannister J. followed Lord Collins' clear judgment in Enviroco, where the Supreme Court found that ever since the Companies Clause Consolidation Act 1845, membership has been determined by entry in the register of members. Bannister J. went further and found that as in England & Wales, the BVI companies legislation proceeds on that basis; the legislation would otherwise be unworkable and business efficacy requires it.

per incuriam Harneys also successfully argued and the Court agreed that in any event, an arbitration was not an apt forum to decide the question of whether a party had locus to arbitrate as was erroneously argued by counsel for R and J. BVI Court.

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