Lenders of BVI contracting parties are most often concerned with whether the Company they are contracting with has the capacity to enter into the transaction. However, there are a number of other questions which a prudent lender needs to ask, and such a lender would also be wise to seek specialist BVI law advice before signing on the dotted line. The following checklist provides an excellent starting point for any lender who intends to enter into contractual arrangements with a BVI Company.

1. Does the Company exist and is it in good standing under BVI law?

The legal status of a BVI Company should be verified by conducting a search of its public records at the BVI Registry of Corporate Affairs (the Registry). It is unlawful for companies that are struck-off to enter into a transaction with a lender and where a Company is not in good standing it should be restored to good standing before entering into the transaction. A Certificate of Good Standing may also be obtained from the Registry once it is restored. Lenders should also conduct a search at the High Court Registry to confirm whether the Company is the subject of liquidation proceedings or is/has been involved in civil proceedings before the BVI courts.

2. What type of Company is it?

BVI law permits the formation of various types of companies, including (i) companies limited by shares; (ii) companies limited by guarantee (with or without shares) and (iii) unlimited companies (with or without shares). The most common type of Company is the Company limited by shares but such companies could potentially be formed as "Restricted Purpose Companies" or as "Segregated Portfolio Companies".

When transacting with "Restricted Purpose Companies", particular care should be taken to ensure the transaction falls within the purposes stated in the Company's constitutional documents (ie its Memorandum and Articles of Association (M&As)); and when transacting with "Segregated Portfolio Companies" or "SPCs" (as they are often called), a lender should be able to clearly identify which of the portfolios it is contracting with. Such companies will be easily identifiable as the name must contain the designation "Segregated Portfolio Company" or "SPC" immediately before the ending.

While the nature of the Company won't likely be an issue in the majority of transactions, lenders should always confirm the type of company they are planning to enter into contractual arrangements with, as this will inform the steps to be taken to ensure the Company's capacity and authorisation to transact.

3. Does the Company have the capacity under its M&As to enter into contractual arrangements with the Lender?

Lenders should request a certified copy of the Company's M&As (including any amendments thereto). The M&As of most companies (with the notable exception of Restricted Purpose Companies) will usually contain a widely worded objects clause which empowers the Company to engage in essentially any activity which is not unlawful under BVI law but lenders should always verify this by reviewing the Company's M&As.

4. Who are the Company's directors and shareholders?

The Company's registered agent is required to keep either the original or up to date copies of the register of directors and the register of shareholders at the Company's registered office in the BVI. Lenders should therefore request a `Registered Agent's Certificate' issued by the Company's registered agent that verifies the identities of its directors and shareholders.

5. Has the Company been properly authorised to enter into the transaction and does the individual purporting to act for and bind the Company have the power to do so?

There are essentially two key steps involved in the verification of authority:

  1. A review of the M&As. Board approval to authorise entry by a BVI Company into the transaction will suffice for most transactions. However, the board of directors may be limited or restricted by BVI law generally or more specifically by the Company's M&As from entering into the relevant transaction. The M&As of most companies will not contain such provisions and in those cases, board resolutions alone will generally be sufficient. However, if BVI law or the M&As indicate that shareholder approval is required in certain instances, lenders should take care to verify whether both board and shareholder resolutions are necessary to authorise the Company's entry into the relevant transaction.
  2. Resolutions should be passed. Resolutions (whether board resolutions alone or both board and shareholder resolutions) should be passed in accordance with the Company's M&As to expressly authorise the Company's entry into the transaction and an authorised representative to execute the transaction documents on the Company's behalf.