BVI Business Companies Act 2004: do shareholders of foreign companies require leave to bring derivative proceedings in the BVI?

Harneys recently acted for the successful claimant on an application for her costs of a discontinued strike out application which was brought by the defendants as part of an ongoing multi-jurisdictional family dispute. The claimant's substantive action in the BVI involved derivative proceedings which she had brought on behalf of a company that was domiciled in Liberia, for the recovery of funds which she alleged had been wrongfully paid to another entity. In considering that application, the BVI Commercial Court gave clear guidance on whether the provisions of section 184C of the BVI Business Companies Act 2004 (the BCA) will apply in respect of companies incorporated out of the jurisdiction. Section 184C of the BCA requires a member of a "company" to seek the leave of the BVI Court to bring derivative proceedings on the company's behalf (this can be contrasted with the position under Liberian law where no such requirement exists for actions brought in Liberia).

The defendants submitted that, as a matter of private international law, the process for obtaining leave as set out in section 184C was a procedural requirement of the lex fori (as opposed to a matter of substantive law) and that the claimant was therefore bound by the section.

The claimant argued in response that the question was in fact one of statutory interpretation and not of private international law due to the meaning ascribed to "company" under section 3 of the BCA.

In finding for the claimant, the Honourable Sir Bernard Eder QC agreed and held that it was plain that the section 184C requirement to obtain leave relates only to derivative claims on behalf of a company incorporated under the provisions of the BCA, namely a company incorporated in the BVI.

In these proceedings, as the action was brought on behalf of a Liberian company, section 184C did not apply and the claimant was not required to obtain the leave of the BVI Court prior to commencing the action.

This decision is a welcome clarification of the operation of section 184C. It also makes the jurisdiction a more attractive forum in which to bring derivative claims on behalf of foreign companies, since any prospective claimant will be able to commence those proceedings without needing to undergo the additional step of obtaining leave from the BVI Court beforehand.