With over 450,000 active companies, the British Virgin Islands is the world’s most popular offshore corporate domicile. The BVI Business Companies Act (the BC Act)has now been amended to introduce a number of measures aimed at keeping the BVI’s keystone corporate legislation up-to-date and attractive. The amendments take effect on a date to be proclaimed, likely in the third quarter of 2012.
Passed into law on 16 July 2012 and publicly Gazetted today, the BVI Business Companies Amendment Act (the Amending Act) represents the culmination of a process of industry consultation which began last June (see our earlier bulletin here) and which also involved approval by Cabinet on 26 April 2012 of the BVI Business Companies Regulations, 2012 (the Regulations). The Amending Act and the Regulations represent the first major review of the BC Act since 2006.
As would be expected from a review of this nature and scope, the amendments soon to be enacted are wide ranging and various. Some are aimed at tidying up processes while others are substantive improvements. None fundamentally alters the nature of a BVI Business Company but taken on the whole they do enhance its attractiveness and that of the BVI as a favoured corporate domicile.
The key changes brought in by the Amending Act and the Regulations can be summarised as follows:
- Re-use of company names. To help relieve the crush on available names for BVI companies, the Act provides for re-use of old company names in appropriate circumstances.
- Foreign character names. The Regulations now formalise the previous system for allowing BVI companies to be registered with foreign character names.
- Bearer shares. Further restrictions will be imposed in relation to the operation of bearer shares relating to documentation of beneficial ownership, and the changes will clarify that the custodian of a bearer share is not regarded as the shareholder.
- Registered agent resignation. Registered agents who have given notice of intention to resign can now rescind such notice (formerly they were unable to).
- Alternate directors. Alternate directors will now be permitted to sign written resolutions (whereas formerly they could only attend meetings).
- Appointment and removal of directors. Provision is now made for circumstances where the registered agent has exercised their power to appoint the first directors, but the director(s) die or resign prior to shares being issued. The Amending Act also corrects a long standing typographical error in the original BC Act, and now provides that a director may be removed by a shareholder resolution passed by 75% of the votes (not 75% of the shareholders, as before).
- Shares and shareholders. The changes will bring clarity in relation to the law in connection with converting shares of one class into another, and facilitating the service of notice on shareholders electronically. Shareholders’ rights will be bolstered by provisions confirming the courts powers to set aside actions in breach of the BC Act or the company’s constitution.
- Segregated portfolio companies. New provisions will enable SPCs to terminate portfolios which are inactive. Further changes will also follow recent Cayman legislation facilitating attributions of assets or liabilities to a particular portfolio in cases where this is unclear.
- Security interests. Security documents creating security over shares in BVI companies will now be permitted to exclude any statutory moratorium periods, and amendments clarify that any security document publicly registered in the BVI will constitute constructive notice to third parties. Various other mechanical changes to facilitate security registration are also implemented.
- Liquidation. The most important of a number of changes is that former directors and senior mangers of a company will now be prohibited from acting as the company’s liquidation, and to enter solvent liquidation the company must now be both cash-flow and balance-sheet solvent (instead of simply cash-flow solvent).
- Dissolution. Companies which are struck off will be deemed to be dissolved after 7 years, reduced from the former period of 10. Transitional arrangements will apply to companies which have been struck off for 6 or more years when the legislation comes into force.
- Listed companies and funds. Provision is made for future regulations dealing with record keeping requirements for listed companies and funds. No timeline has been indicated yet for introducing such regulations.
- Mechanical changes. Certain mechanical changes to company formation system have been introduced. Although it is unlikely these will impact end-users, they should help facilitate smoother operation of the company formation system. These include making provisions for adoption of company names, mechanics of registering security documents and changes of registered agent, clarifying that the Registrar has now power to determine intellectual property rights in names, registration of foreign companies and expediting “bulk” changes of register office addresses when a registered agent changes their address.