This briefing is intended to give a brief guide to the steps involved in the solvent liquidation of a business company incorporated in the British Virgin Islands (“BVI”). The liquidation process described (where a company has no liabilities or is able to pay its debts as they fall due) is carried out in accordance with Part XII of the BVI Business Companies Act, 2004 (the “Act”)
This briefing assumes that the company is not one that conducts any business which would require it to be licensed under BVI financial services legislation (whether as a mutual fund under the Securities and Investment Business Act, 2010 or otherwise), in which case additional steps and approvals would be required.
Immediately prior to the commencement of the liquidation process the company must be clear of any creditor liabilities or able to pay its debts as they fall due. It must also be in good standing at the Registry of Corporate Affairs, having paid all its government fees to date. Government fees continue to be payable on an annual basis until such time as the solvent liquidation process is completed and the company dissolved.
The statutory process and documentation required for a solvent voluntary liquidation is set out below, but may be subject to any specific requirements contained in the company’s constitutional documents.
The directors must approve a plan (the “Liquidation Plan”) containing the following information:
- the reason for the liquidation of the company;
- the estimated time required to complete the liquidation;
- a statement as to whether the liquidator is authorised to carry on the business of the company;
- the name and address of the individual who is to act as liquidator (the “Liquidator”) and any proposed remuneration; and
- a statement as to whether the Liquidator is required to send the members a statement of account in respect of his actions or transactions.
Declaration of solvency
The directors must sign a declaration of solvency, which includes statements to the effect that the company is and will continue to be able to pay all claims, debts, liabilities and obligations as they fall due and that the company has no liabilities. If this declaration is made without the directors having reasonable grounds for the opinion that the company is solvent they will be committing an offence under the Act.
The declaration of solvency must be made no more than four weeks earlier than the date of the resolution to appoint of the Liquidator and must attach to it a statement of the company’s assets and liabilities as at the last practical date before the making of the declaration.
Approval of Liquidation Plan and appointment of Liquidator
The Liquidation Plan and the appointment of the Liquidator must be approved by resolutions of the directors and by a resolution of the members (in both cases accordance with any specific provisions in the company's memorandum and articles of association). All members must be given notice of the meeting where the resolutions will be proposed (if any) and a copy of the Liquidation Plan, whether they are entitled to vote on the resolutions or not. A Liquidation Plan has no effect unless it is approved by the directors no more than six weeks prior to the date of the resolution to appoint the Liquidator.
Filings at the registry
The Liquidation Plan, a notice of appointment of the Liquidator and the declaration of solvency must be filed at the Registry of Corporate Affairs by the company’s registered agent or the Liquidator within 14 days of the appointment of the Liquidator. The statement of assets and liabilities attached to the declaration of solvency is not required to be filed, however it must be kept at the company’s registered office.
Within 30 days of his appointment the Liquidator must advertise notice of his appointment both in the Official Gazette and in a newspaper circulating in the British Virgin Islands, and in the country where he has its principal office.
Effect of appointment
The liquidation will commence from the date the Liquidator is appointed by the Company.
With effect from the commencement of the liquidation, the Liquidator has custody and control of the assets of the company, and while the directors remain in office, they cease to have any powers, functions or duties other than those specifically prescribed by statute in relation to the liquidation.
The Liquidator will use his powers to realise the assets of the company, discharge its debts and distribute any surplus to the members of the company in accordance with the memorandum and articles of association.
Distributions may be made by the Liquidator prior to the final Certificate of Dissolution being issued provided the Liquidator is satisfied that he has a full account of the assets and liabilities of the company.
The provisions of Part XII of the Act do not affect the right of a secured creditor of the company to take possession of and realise or otherwise deal with the assets of the company over which the creditor has a security interest.
Certificate of dissolution
After the Liquidator has completed the liquidation, he must submit a statement to this effect to the Registrar of Corporate Affairs who will then strike off the company for the Register of Companies and issue a Certificate of Dissolution. The dissolution is effective from the date of the certificate.
It is important to note that until such time as the company is formally dissolved (i.e. when the Certificate of Dissolution is issued) the company must continue to pay all its government fees to the Registry of Corporate Affairs.
The Liquidator must then publish a further final notice in the Official Gazette of the BVI to the effect that the company has been dissolved and struck off the Register of Companies.
With regard to how long this process should take, assuming that the liquidation is reasonably straightforward, the key driver for the timetable is the time it takes to place the various statutory adverts (in particular the advert in the Official Gazette as it is only published fortnightly). We generally advise that the entire process for the voluntary solvent liquidation of a BVI business company will take between 60 to 90 days from the date of filing the liquidation documents with the Registry of Corporate Affairs.