The flagship of the British Virgin Islands (BVI) financial services legislation, the BVI Business Companies Act, 2004 (BCA), has been amended to introduce certain key, and welcome, changes and clarifications to the BVI's corporate regime.
The BVI Business Companies (Amendment) Act, 2015 (Amendment Act) was enacted on 21 December 2015, and published on 31 December 2015. Apart from the changes relating to the requirement to file registers of directors with the BVI Registrar of Corporate Affairs, which comes into force on 1 April 2016, the remaining changes become effective on 15 January 2016.
The key changes that have been introduced by the Amendment Act are summarised below.
Register of Directors
A new requirement for companies to file (and keep updated) copies of the register of directors (RoD) with the Registrar, including the particulars to be recorded in the RoD. The filed RoD will not be publicly available.
BVI Listed Companies
Facilitating the operations of BVI companies listed on recognised stock exchanges by dispensing with the requirements:
- for written instruments of transfer to effect transfers of such listed company shares; and
- to keep a register of members (RoM) containing the information previously prescribed under section 41 of the BCA. Such listed companies may now determine the contents of the RoM.
Shareholder Requisitioned Meetings Ordered by the BVI High Court
Introducing an express provision allowing for the BVI High Court to call a meeting of shareholders where the shareholders of a company holding 30% of the voting rights in that company (or less if provided for under the BVI company's articles of association (AoA) or memorandum of association (MoA) have requested the directors that a shareholder meeting be held (pursuant to section 82(2) of the BCA) but the directors of the company have failed to call the meeting.
Resolutions of Directors & Weighted Voting
The Amendment Act has created greater flexibility in structuring weighted voting by directors by clarifying that each director of the company will have one vote at a meeting of directors, unless otherwise provided for under the MoA or AoA of that company. Accordingly, it is permissible to provide (under the MoA or AoA) that certain directors will have additional or weighted voting rights.
- Introducing an express provision confirming that a BVI company may acquire its own shares by means of a surrender of the shares from a shareholder to the company. A voluntary surrender of shares to the company by a shareholder for no consideration is required to be in writing and signed by the shareholder affecting the surrender. Such a surrender of shares to the company will not constitute a distribution for the purposes of section 57 of the BCA.
- Clarifying that bonus shares issued by a company are deemed to be fully paid, unless the MoA or AoA stipulate otherwise.
- Clarifying and simplifying the process of issuing shares for non-monetary (in specie) consideration, in whole or in part. Previously, directors were required to stipulate (in a resolution), a reasonable determination of the monetary value equivalent of the in specie consideration. This requirement has been replaced by the directors now only having to confirm (in the section 48 BCA required resolution) that, in their opinion, the monetary (if any) and non-monetary consideration is greater than the issue price of the relevant shares.
- As noted above, BVI companies listed on recognised stock exchanges are no longer required to obtain written instruments of transfer to effect transfers of such listed company shares.
Bearer Share Custodian
A custodian that is authorised or recognised by the BVI Financial Services Commission (FSC) for the purposes of holding bearer shares under Division 5 of Part III of the BCA, may now have its appointment as authorised or recognised custodian revoked by the FSC. This is in addition to other penalties that may be imposed. Such FSC revocation of authority or recognition may arise where a custodian has acted contrary to its obligations or a prohibition under the BCA or to an agreement with the FSC.
Execution of Deeds & Instruments
The Amendment Act has provided greater certainty in the BVI as to the validity of deeds and instruments (including contracts, agreements and warrants).
- Instruments under seal or deeds executed by foreign (non-BVI) companies or entities will be recognised as valid, for BVI law purposes, if such execution is performed in a manner that complies with the relevant foreign law of domicile of such foreign company or entity.
- Following the uncertainty created as to execution formalities in regard deeds and instruments by the English courts in R (on the application of Mercury Tax Group Ltd and another) v HMRC & Others  EWHC 2721, the Amendment Act now provides clarity and facilitates commercial transactions, in that preexecuted signature pages may be attached (physically or electronically) to the remainder of the execution version of the deed or instrument, provided that the executing party has provided their express or implied authority to such attachment.
Continuations Into & Out Of the BVI
The Amendment Act has simplified the procedure for companies continuing into, and out of, the BVI by introducing practical mechanisms to facilitate the continuation process.
- Foreign companies continuing into the BVI – the Registrar may now rely on a certificate issued by a director of the foreign (non-BVI) company continuing into the BVI. The certificate (to be notarised and annexing a copy of the extract of the foreign law permitting the continuation) streamlines the procedure in that the director will attest, in the certificate, that the section 180 BCA requirements have been met.
- BVI companies continuing out of the BVI into a foreign jurisdiction - in circumstances where a BVI company continuing out of the BVI has a charge (security interest) registered over the property/assets of the company which has not been satisfied or released, and that charge does not contain a negative covenant prohibiting continuation of the company out of the BVI, a written declaration is to be provided to the Registrar stating that:
- a notice of satisfaction or release of the security interest has been filed and registered; or
- if a notice of satisfaction or release of the security interest has not been filed and registered, the relevant chargee who holds the benefit of the security interest has been notified in writing of the intention of the company to continue out of the BVI and the chargee has consented or not objected to the outgoing continuation; or
- if a notice of satisfaction or release of the security interest has not been filed and registered and the relevant chargee has not consented or has objected to the outgoing continuation, that such chargee's security interest shall not be diminished or compromised by the outgoing continuation.
In addition, the Amendment Act now also provides that a BVI company continuing out of the BVI must file a declaration confirming that the foreign jurisdiction's laws permit such a continuation and that the company has complied with all the foreign law requirements. If the foreign jurisdiction requires a certificate of discontinuance from the Registrar before finalising the procedure, the Registrar is entitled to rely on a provisional certificate of continuance issued by the relevant body of the foreign jurisdiction in issuing its certificate of discontinuance.
Register of Charges
The Amendment Act enhances the BVI's security registration and filing regime by providing that BVI companies are now obligated to transmit particulars of any changes in the company's register of charges (RoC) to their registered agents, where the registered agent maintains that company's RoC, within 14 days of the change occurring.
Voluntary Liquidation & Registered Charges
Similarly to the changes introduced under the Amendment Act dealing with a BVI company continuing out of the BVI that has a charge (security interest) registered over the property/assets of the company which has not been satisfied or released (see above), amendments have been introduced permitting a BVI company to be voluntarily liquidated notwithstanding that the company has a charge registered over the property/assets of the company. The liquidator is bound to give effect to the preferential rights and priority afforded to the chargees (secured creditors) under such security interests.
The Amendment Act adds to building the BVI as an arbitration centre by confirming that the AoA of a BVI company may provide that, in the event of a dispute, arbitration proceedings (held under the BVI Arbitration Act 2013 or otherwise) may be elected as the form dispute resolution process to be adopted.
A welcome introduction to the BCA, under the Amendment Act, are the new provisions stipulating that:
- subject to the MoA and AoA, registered agents (RA) are obliged to act on the instructions of the directors of the BVI companies where those instructions are contained in directors' resolutions, a copy of which is made available to the RA; and
- RAs must recognise and accept the members' appointment or removal of a director.
The effects of these amendments are that RAs are no longer required to seek instructions from their respective client-of-record before acting on instructions. Historically, the need for client-of-record instructions had resulted in delays in closing corporate transactions. Accordingly, these amendments should facilitate and streamline such transactions.
The Amendment Act also clarifies, in circumstances where a BVI lawyer undertakes the filings as to change of RA or registered office of a BVI company, that lawyer may also pay the fees (including outstanding fees) that the company may owe. This provision will assist in the practicalities of changing RAs where the respective RA is proving to be uncooperative.
Striking Off & Restoration
- A new ground on which the Registrar may strike off BVI companies has been introduced. This applies in circumstances where the company is licensed by the BVI Financial Services Commission (FSC) under BVI financial services legislation and the company has its license cancelled or revoked by the FSC.
- In circumstances where a BVI company has been struck off and then restored, the Registrar is now mandated to issue a certificate of restoration. In addition, the time period within which an application to restore a company to the register has been reduced from 10 to 7 years from the date of notice of strike off is issued in the Gazette.
Records & Underlying Documentation
The Amendment Act introduces a replacement section 98 of the BCA clarifying the document retention requirements. BVI companies are obligated to keep requisite records and underlying documents at the office of the RA or at such other place within or outside the BVI as the directors may determine. This section details the nature and scope of the records and documents to be maintained and applies a five year retention period. In circumstances where the records are not kept by the RA, the company must provide the RA with the physical address at which the records are kept and the identity of the person who maintains and controls the company's records. In addition, if the RA requests such records, the company must provide the records sought without delay.
The changes introduced to the BCA by the Amendment Act have been welcomed by the BVI corporate and financial services sectors. The changes to the corporate regime reflect a pragmatic business efficacy approach and will greatly assist BVI companies in their operations and transactions going forward.
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.