1. BVI BUSINESS COMPANIES
The BVI Business Companies Act (BC Act) makes it possible to establish several different types of business companies (BCs) in the BVI. The most common type of company is that which is has limited liability and is authorised to issue shares. However, one can also establish a company limited by guarantee or an unlimited liability company (either being authorised or not authorised to issue shares).
BC Companies are regularly used as investment fund structures, insurance companies, investment business companies and the like, but are most commonly used as group holding companies. BVI BCs can be incorporated as restricted purposes companies, meaning that their limited objects are set out in the memorandum of association, or as segregated portfolio companies. These specialities are beyond the scope of this Guide and we invite the reader to consult any member of the Appleby corporate team for more information.
A foreign company, that is to say a company incorporated outside the BVI, may look to establish its principal place of business or, more usually, a branch office in the BVI. However, a foreign company which seeks to "carry on business" in the BVI may only do so with the permission of the Registrar of Companies. A full discussion of foreign companies operating in the BVI is beyond the scope of this Guide. However, any member of the Appleby team in the BVI would be pleased to advise on such matters.
Only a licensed BVI registered agent, such as Appleby Corporate Services (BVI) Limited, can apply for the incorporation of a BVI company. Incorporation is accomplished by the registration of the company's memorandum and articles of association, together with the registered agent's consent to act for the company. Filing is done electronically via the Registrar of Corporate Affairs' VIRRGIN website. Incorporation takes as little as a day to complete. Once the incorporation is completed, the Registrar of Corporate Affairs will allot the company a unique number and issue a Certificate of Incorporation. Incorporation is deemed to have taken place on the date shown on the certificate.
3. "KNOW YOUR CLIENT" REQUIREMENTS
All BVI registered agents are required to undertake the necessary reviews to ensure that stringent "Know Your Client" (KYC) obligations are met.
This will involve the gathering of information on those persons who will be the registered members of the company, as well as those who will hold an ultimate beneficial interest in those shares. In some circumstances, KYC procedures will be applied to those who control the entity, even though they may not be members or beneficial owners. Certified identification is typically required of each verification subject. The precise KYC obligations vary depending on the nature of the company in question (e.g. funds, regulated entities, companies whose shares will be listed on certain stock exchanges) and a complete discussion of the BVI's robust anti-money laundering and anti-terrorist financing regime is beyond the scope of this Guide. The important point to take away, however, is that registered agents in the BVI take these obligations seriously and the incorporation process can only take place once these obligations have been fully met.
A BVI BC is able to issue bearer shares in certain limited circumstances. To ensure that compliance with the KYC regime is maintained, a strict custodian regime has been established for the holding of bearer shares. In practice, the use of bearer shares is rare.
4. CONSTITUTIONAL DOCUMENTS
The memorandum of association of a company must state:
(a) the name of the company;
(b) whether the company is limited by shares, of unlimited liability, or limited by guarantee (and in the latter two cases, whether it is or is not authorised to issue shares);
(c) the address of the first registered office of the company; and
(d) the name of the first registered agent of the company.
(e) In addition, where a company is limited by shares or is otherwise authorised to issue shares, the memorandum of association must state:
(i) the maximum number of shares that the company is authorised to issue (or that the company is authorised to issue an unlimited number of shares);
(ii) the classes of shares that the company is authorised to issue and, if the company is authorised to issue two or more classes of shares, the rights, privileges, restrictions and conditions attaching to each class of shares; and
(iii) whether the company is or is not authorised to issue bearer shares (or to convert or exchange registered shares to bearer shares).
Furthermore, in the case of a company limited by guarantee, the memorandum of association must state:
- whether or not it is authorised to issue shares; and
- the amount which each member of the company is liable to contribute in the event of liquidation.
The articles of association of a BC govern its internal organisation, management and administration. The rights and duties of the members as against the company, and as between the members themselves, are set out in the articles, which constitute a contract between these parties. The articles are a private document, subject neither to governmental review nor to public inspection. The Act is silent as to the content of a company's articles. Accordingly, a company's articles can be tailor-made to suit a company's needs; the reader should therefore pay special attention to a company's articles as they may well differ from company to company. In addition, there is considerable scope for overlap between the procedures set out in the Act and those that may also be contained in the company's articles, e.g. a company can always provide in its articles to adopt a procedure that is more onerous than that contained in the BC Act. Appleby can advise on all aspects of a company's articles.
An amendment to the constitutional documents of a BC may only be effected by resolution of the members of the company. However, the documents themselves may provide that certain provisions may not be amended, or that a supermajority of votes is required for amendment, or that certain conditions must be met before an amendment can take place.
5. OBJECTS AND POWERS
Subject to its memorandum and articles of association, a BC has the full capacity of a natural person who is sui juris. Pursuant to the BC Act, a company has, irrespective of corporate benefit, the full capacity to carry on or undertake any business or activity, do any act or enter into any transaction, and the full rights, powers and privileges related thereto. This includes the power to:
(a) issue and cancel shares and hold treasury shares;
(b) grant options over unissued shares in the company and treasury shares;
(c) issue securities that are convertible into shares; and
(d) give financial assistance to any person in connection with the acquisition of its own shares, unless in each instance the company is not authorised to issue shares.
Subject to the rights or interests of any existing or subsequent creditor of the company in any assets of the company, a company will also have the power to:
(e) issue debt obligations of every kind and grant options, warrants and rights to acquire debt obligations;
(f) guarantee a liability or obligation of any person and secure any of its obligations by mortgage, pledge or other charge;
(g) protect the assets of the company for the benefit of the company, its creditors and its members and, at the discretion of the directors, for any person having a direct or indirect interest in the company.
6. RESTRICTED PURPOSE COMPANIES
A company may restrict its purposes in the memorandum of association and register as a restricted purposes company (RPC). RPCs are typically used in securitization and structured finance transactions and are used for the sole purpose of holding certain assets. Notably, an RPC must be registered as such at the time of incorporation; a BC will not be permitted to register as an RPC post-incorporation. The Certificate of Incorporation of an RPC will state on its face that the company is registered with restricted purposes.
7. SEGREGATED PORTFOLIO COMPANIES
A segregated portfolio company is a company limited by shares that separates the assets and liabilities of each individual portfolio the others and from those of the company itself. In the BVI, only a BC that is an insurance company or a mutual fund can be incorporated as a segregated portfolio company.
The Registrar of Corporate Affairs may, at the request of any person, reserve a name for a set period of time for future adoption by a company. The word "Limited", "Corporation", "Incorporated", "Societe Anonyme" or "Sociedad Anonima" or the abbreviation "Ltd", "Corp", "Inc" or "S.A." must be a part of the name of every company, and an unlimited company's name must end with "Unlimited" or "Unltd". If the company is an RPC, the name of the company must end with the words "(SPV) Limited" or "(SPV) Ltd". If the company is a segregated portfolio company, the name of the company must include the designation "Segregated Portfolio Company" or "SPC".
The name of a BC can merely comprise the expression "BVI Company Number" followed by the company's number in figures, along with one of the above mentioned endings. The company may also have an additional name in foreign characters.
Names will not be approved that are indecent or objectionable, and names may not suggest royal patronage. The use of names that suggest that the entity is regulated (e.g. "Trust Company" or "Bank") is restricted.
Given the vast number of companies incorporated in the BVI, the need to re-use company names or similar names is increasingly evident. The Registrar of Corporate Affairs now has the capacity to permit, in certain cases and subject to important restrictions in relation to insolvent companies, the reuse of names where the original company has been dissolved.
Every BVI company must ensure that its full name and, if it has one, its foreign character name, is clearly stated in every written communication sent by, or on behalf of the company; and, on every document issued or signed by, or on behalf of the company, that evidences or creates a legal obligation of the company.
A company incorporated outside the BVI (a foreign company) may apply to the Registrar of Corporate Affairs to be continued in the BVI as if it were incorporated under the Act, provided the laws of the foreign jurisdiction in which it is registered permit it. However, a foreign company may not continue to the BVI if, for example, the company is subject to insolvency proceedings; a receiver or manager has been appointed in relation to any of its assets; it has entered into an arrangement with creditors that has not been concluded; or an application has been made to the relevant jurisdiction's Court to liquidate the company. Continuance is accomplished through a straightforward procedure involving the filing of constitutional and support documents and the payment of a fee. Upon completion of the process, the Registrar of Corporate Affairs will issue a Certificate of Continuance.
Where a foreign company is continued under the BC Act, the company continues as a body corporate under the name designated in its memorandum, capable of exercising all of the powers of a company under the Act. The memorandum and articles filed pursuant to the BC Act become the memorandum and articles of the BVI company. All property of the company continues to vest in the company and the continuation of a foreign company to the BVI does not affect the continuity of the company as a legal entity; nor does it affect the assets, rights, obligations or liabilities of the company, including any existing cause of action, claim or liability to prosecution in respect of the foreign company. All shares in the company that were outstanding prior to the issue by the Registrar of Corporate Affairs of a Certificate of Continuation are deemed to have been issued in conformity with the BC Act.
Subject to its memorandum and articles, any BVI company to which the Registrar of Corporate Affairs would issue a Certificate of Good Standing to may, by a resolution of the directors or a resolution of members, continue out of the BVI as a company incorporated under the laws of a foreign jurisdiction, providing the laws of the foreign jurisdiction permit and the company has complied with those laws. A Certificate of Good Standing will be issued on request and on payment of the prescribed fee if the Registrar of Corporate Affairs is satisfied that the company is on the Register of Companies and has paid all fees, annual fees and penalties due and payable.
A continuation out of the BVI will not release or impair any conviction, judgment, ruling, order, claim, debt, liability, obligation or cause existing against a company or any member, director, officer or agent thereof or result in the discontinuation or abatement of any civil or criminal proceedings which are pending at the time of the continuation or discontinuation.
11. REQUIREMENTS FOR REPRESENTATIVES IN THE BVI
Every company must have a registered office in the BVI which must be a "physical address", i.e. it may not be a post office box. The company may change its registered office at any time, but the Registrar must be notified of such a change. The registered office of the company may also be the office of its registered agent. A company must always maintain a registered agent in the BVI and any company that fails to do so is guilty of an offence and is liable to be struck off the Register of Companies.
Subject to the company's articles, the Act provides that "the directors of a company have all the powers necessary for managing, and for directing and supervising, the business and affairs of the company". There is no requirement under the Act for any of the directors to be actual residents of the BVI.
The number of directors may be fixed by the articles. Apart from the time between the incorporation of the company and the appointment of the first directors by the registered agent, a company must have at least one director. If a company does not have a director for any period of time, then the person who manages (or supervises the management of) the company is deemed to be a director for the purposes of the BC Act.
Directors of a BC operate under certain statutory and common law duties. While a full discussion of directors' duties is beyond the scope of this Guide, the main statutory duty of directors is to act honestly, in good faith and in what the director believes to be in the best interests of the company. Other statutory duties of directors include exercising their powers for a proper purpose, which includes not acting or agreeing to act in a manner that contravenes the Act and the memorandum or articles of the company, and a duty to exercise their powers and perform their duties with a level of care, diligence and skill that a reasonable director would exercise in the circumstances, taking into account (amongst other things) the nature of the company, the nature of the decision and the position of the director and the responsibilities undertaken by the director.
13. DIRECTORS' MEETINGS AND WRITTEN RESOLUTIONS
The BC Act provides that, subject to the company's memorandum or articles, the directors of the company may meet at such times and in such manner and places (either within or outside the BVI) as the directors deem necessary or desirable. A director can attend the meeting by way of telephone or other electronic means, provided that all directors participating in the meeting are able to hear each other.
In order for resolutions to be implemented at a board meeting, there must be a quorum. The BC Act provides that the quorum for a board meeting is that fixed by the memorandum or articles; however, if the memorandum or articles does not deal with quorum, a board meeting is considered to be properly constituted if at the commencement of the meeting one half of the total number of directors are present. Unless the articles of association provide otherwise, resolutions at a board meeting will pass upon the affirmative vote of over 50% of the votes cast.
As an alternative to physically meeting in person, any action that may be taken by the directors at a board meeting (or a meeting of a committee of directors), may be taken by a resolution of directors (or committee of directors) consented to in writing (including electronically). A resolution of the directors' in writing must be signed by all of the directors unless the articles of association provide differently.
To view the full report please click here.
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.