BVI Company Law Update
In June last year the Financial Services Commission issued draft amendments to the BVI Business Companies Act 2004 with the aim of reviewing and updating the legislation. The BVI Business Companies (Amendment) Act 2012 has now been passed and will come into force on 15th October this year. In addition, revisions have been made to company regulations and the BVI Business Companies Regulations 2012 and will enter into force in conjunction with the Amendment Act.
The changes made are quite wide ranging, without changing the fundamental elements of a BVI company. The amendments seek to clarify and modernising existing law and practise and to improve the administrative efficiency of the jurisdiction.
The key elements are, in summary:
The Amendment acknowledges the increase in the number of BVI companies being listed on international stock exchanges and introduces Listed Company Regulations. The regulations are intended to allow for the Amended Act to be sufficiently adaptable to integrate with international exchanges regulations and trading systems, so enhancing the attractiveness of BVI companies.
Regulations will be introduced for record keeping by listed companies and funds at a future date, though that date has yet to be fixed.
Shareholders’ Rights and Company Shares
Shareholders rights. BVI Courts will now have the power to set aside actions by a company that is in breach of the Business Companies Act or the company’s memorandum and articles of association. The purpose of the change is to enhance shareholder protection.
The legislation also provides for electronic service of notices on shareholders.
Convertible shares. New provisions now permit the conversion of shares from an existing type or class to another with the issue of convertible shares. The procedure to be followed on conversion is required to be described in the memorandum and articles of the company.
Bearer shares. Further restrictions will be introduced to the operation of bearer shares concerning the documentation relating to the beneficial ownership and clarification that the BVI custodian of bearer shares is not considered to be the shareholder.
Alternate directors. Will be able to sign written resolutions in the place of the appointor and not solely attend meetings, as was the case. Other changes will be introduced to clarify the procedure on the appointment of an alternate director and the rights and powers of such directors.
Directors’ written resolutions. The new legislation permits for the company’s memorandum and articles to provide for directors’ written resolutions to be passed by a majority and no longer will unanimity be required.
Removal of directors. An anomaly in the earlier law has been corrected; the requirement under the shareholders’ written resolution procedure to remove a director must be approved by 75% of the votes of members. This replaces the present requirement of approval by 75% of the members.
Registration. Public registration in the BVI of a security document will be sufficient to constitute constructive notice to third parties.
Persons able to file charges are now limited to qualified BVI legal practitioners and registered agents acting on behalf of the chargor or chargee, with the aim of reducing inaccuracies and improving the efficiency of the registration system.
Share charges. Remedies and enforcement of share charges on default will now be exercisable immediately on default, if permitted under the terms of the charge document. The present statutory moratorium period can now be excluded.
Liquidation and Dissolution
Liquidators. The former directors and other individuals with a close connection with the company, can no longer be appointed as the company’s liquidator in a voluntary solvent liquidation.
Solvent liquidation. A solvent liquidation will only be permitted if the company is both cash-flow and balance sheet solvent; not solely cash-flow solvent as at present.
Dissolution. The period for the automatic dissolution of companies that have been struck off for default or inactivity, will be reduced from 10 years to 7 years following their striking off. It will continue to be the position that a company can be restored during this period on application to the Registrar. Transitional provision will apply to companies that have already been struck off.
Foreign character names. The use of foreign character names is already permitted and new provisions provide a framework to facilitate their use. This will be of interest to individuals wishing to incorporate using Eastern European, Asian and Arabic characters in company names.
Re-use of names. The regulations have been relaxed to permit the re-use of former company names in certain circumstances.
We consider that the amendments continue maintain the attractiveness of the BVI as a well-developed modern and flexible jurisdiction in which to incorporate and operate business companies providing an efficient and modern environment with a legal framework protecting the interests of investors and shareholders. We welcome the changes and look forward to their implementation later this year.
The revisions to the law are wide ranging and in the summary we have sought to highlight the principle elements that we consider are of general interest. Please contact us if there is any further information that would be of interest to you.