For over three decades, it has been common practice for high net worth individuals to hold their wealth via shares in British Virgin Islands ("BVI") business companies. After the lifetime of the shareholder, his or her personal representative ("PR") is obliged to ensure the registration of the transmission of the deceased's shares in the BVI company. This requires certain actions to be first taken in the BVI.
Does the beneficiary automatically inherit the BVI shares upon death?
Many heirs mistakenly believe that shares in a BVI business company may be transferred to such heirs either immediately upon death of the shareholder or by relying upon a grant of representation issued by any court. This is not the case.
Under conflicts of laws principles, BVI law looks to the law of the deceased shareholder's domicile at the time of his or her death to determine (i) when necessary, who is entitled to apply for a grant of representation in the BVI; and (ii) who is entitled to inherit the shares in the BVI company.
That is not the whole story, however. Under BVI law, the shares in a BVI company have their lex situs in the BVI and so the right to deal with the shares held in the name of a deceased person or in which a deceased person has a beneficial interest is governed by the laws of the BVI. As a result, a grant of representation issued by a foreign court, such as Brazil or Hong Kong, is not sufficient evidence without more to permit the valid transfer of the BVI shares from the name of the deceased to his or her heirs.
How are BVI shares transferred to the heirs on the death of a shareholder?
In order to approve the registration of the share transmission from the name of a deceased shareholder to either the PR or directly to the beneficiaries and the updating of the register of members, the directors of the BVI company (to the extent there are any) will at a minimum require:
- a copy of the death certificate;
- a grant of representation or a resealed grant of representation issued by the High Court in the BVI (the "BVI Court"); and
- a share transfer form signed by the PR as transferor.
The grant/resealed grant from the BVI Court is the only reliable evidence of the PR's authority to transfer title to BVI shares and it avails the PR of the protection of the BVI Court. Without such evidence, the directors cannot be sure that they are approving the registration of a valid share transmission and, if it transpires that the shares have registered in the name of the wrong person, the directors, the PR and perhaps even the registered agent, may be liable to account to the proper heirs for loss suffered. Whilst a situation may appear straight forward it is not completely unheard of to find that a deceased had more than one spouse or children outside of a marriage which were not known to the PR during the deceased's lifetime.
Always better to be safe, than sorry.
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.
