The British Virgin Islands is the world’s most popular offshore corporate domicile with over 450,000 companies established and active in the jurisdiction. On October 15, 2012, a wide ranging amendment to the BVI Business Companies Act (the “BC Act”) went into effect. The BC Act implements a number of regulatory changes meant streamline registration and approval process and ensure that the BVI’s maintains its attractiveness as an offshore domicile for years to come.
Some of the most notable changes to the Act are highlighted here:
With respect to company names, the amendments confirm that a company name must consist of less than 100 permitted characters, and that a company can reuse another company’s abandoned name. The amendments also formalize foreign character names. Notably, the Registrar has been accorded substantial authority in approving company names, allowing for rejection of a name on the basis of public policy or public interest, and notwithstanding any intellectual property rights held by the company.
The amendments also streamline regulations dealing with registered agents. Companies may now designate new registered agents, and registered agents may make bulk changes on a single filing when serving as agents for several companies. Registered agents must submit notices of resignation no sooner than 14 days prior to the date of the resignation notice period.
Alternate directors have been given the ability to sign resolutions and vote at director meetings, and in the event of the resignation or death of a first director, registered agents may appoint replacements. Default requirements for the passage of board resolutions have been set at a majority of the votes cast for resolutions at meetings, and unanimity among the directors entitled to vote with respect to written resolutions. Finally, a drafting error has been corrected, so that director removal may now be effected by a vote of 75% of the voting shares, rather than 75% of shareholders.
The amendments clarify the law surrounding “automatic conversion” of shares from one class to another, where that conversion is provided for expressly within the class of shares in question. With respect to bearer shares, the amendments make it clear that authorized custodians entitled to vote shares do not qualify as shareholders, and registered agents are required to maintain a register of bearer share ownership for bearer share companies. The amendments also give courts the power to set aside acts or decisions of the company on behalf of minority rights.
Under the amendments, segregated portfolio companies can now terminate segregated portfolios with no assets or liabilities. In connection with this aspect of the amendments, provision has been made for situations where liabilities subsequently arise in connection with the dissolved segregated portfolio, namely by allowing for the reinstating of segregated portfolios.
The amendments also clarify that security interests in the register of registered charges may only be registered by either a legal practitioner or registered agent, as is now the case with variations and releases of security. Once again, this formalizes what is already in practice, as only registered agents and legal practitioners have access to the VIRRGIN system. Partial releases are also now clearly permitted, which was previously a major cause of concern amongst secured creditors. Finally, remedies relating to mortgages and charges over shares issued by BVI companies and governed by BVI law are now immediately exercisable upon an event of default.
A number of changes have also been made with respect to liquidation and dissolution. Recent or current directors are excluded from acting as voluntary liquidators, as are their close relatives, minors, un-discharged bankrupts, or those disqualified under Part X or Section 409 of the Insolvency Act. In addition, the amendments codify the requirement of filing a declaration of solvency pursuant to voluntary liquidation, and provisions now specify how a voluntary liquidator must advertise the liquidation. Finally, voluntary liquidators filing with the Registry must be either legal practitioners or registered agents, unless a resident in the BVI.
With respect to dissolution, a company struck-off the Register is now deemed dissolved after seven instead of ten years, and transitional arrangements apply the seven year period to any company struck-off less than six years prior to the amendments coming into force.
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