The first plan of arrangement was recently completed under the BVI Business Companies Act in accordance with Section 177. The primary purpose of this arrangement was to effect a going-public transaction for BVI Company A by way of a reverse takeover of BVI Company B. BVI Company A is a mineral exploration and development company focused on acquiring, exploring and developing potash and phosphate deposits in Brazil, with operations and investors in Canada and the United States.

Section 177 of the act provides that a plan of arrangement may be used to effect any of the following corporate actions:

  • an amendment to the memorandum or articles of association;
  • a reorganisation or reconstruction of a company;
  • a merger or consolidation of one or more companies that are registered under the act with one or more other companies, provided that the surviving or consolidated company is incorporated under the act;
  • the separation of two or more businesses carried on by a company;
  • any sale, transfer, exchange or other disposition of any part of the assets or business of a company to any person in exchange for that person's shares, debt obligations or other securities, money or other assets, or a combination thereof;
  • the sale, transfer, exchange or other disposition of shares, debt obligations or other securities in a company;
  • the dissolution of a company; and
  • any combination of the above.

Proceedings commenced pursuant to Section 177 of the act. There were a number of hearings before the court, at the end of which the court approved the proposed arrangement. The act provides for an application to be made by the company, and for a subsequent formal hearing or hearings to take place at which the court may make an interim or final order giving directions. The court's directions may require the company to obtain certain approvals (typically shareholder approval) and may also require the company to give certain notices or make advertisements, typically for the benefit of members and other interested parties (eg, creditors). If an interim order is granted, a further and final hearing will take place, at which interested parties may appear and be heard. At the hearing, the court exercises its discretion either to reject or approve the plan of arrangement, with or without amendments.

Once the court grants an order for the approval of the plan of arrangement, the directors – if they wish to execute the plan – must confirm the same and take the necessary steps in accordance with the court's interim or final order.

Provided that the court has approved the plan of arrangement, a final step follows, in which the BVI company must execute articles of arrangement (which attach the plan of arrangement) and submit them to the BVI registrar of corporate affairs. Upon registration of the articles of arrangement, the registrar will issue a certificate of arrangement certifying that the arrangement has been effected.

The overall timeframe for effecting an arrangement varies based on the steps required by the court's directions at the initial hearing. The nature of the given transaction, together with the need to ensure that steps meet the requirements of foreign law, tend to factor into the timeline and, in most instances, to lengthen the process. In any event, it is comforting to bear in mind that given the speed and efficiency of the BVI courts and registries which are involved in the process, court hearings are usually scheduled within a few weeks of filing. In some instances where particular urgency can be demonstrated, it may be possible – subject to the availability of the court – to have a hearing within a few days of filing.

The plan of arrangement becomes effective only when the company files articles of arrangement with the BVI registrar of corporate affairs. The effective date of the arrangement may be either the date of the filing or such later date – not exceeding 30 days after the filing date – as stipulated in the articles of arrangement.

It is critical to obtain a court order approving a plan of arrangement in order for it to be executed. In this particular case, the transaction and proposed arrangement were fairly complex, and there were a number of hearings and steps to be taken based on the court's directions. The entire process, including registration of the articles of arrangement, took a total of four months. However, this was a peculiar case, and it is expected that in a more straightforward matter where fewer court directions are needed, the timeframe should be shorter. As with all matters, this will vary on a case-by-case basis.

As this first plan of arrangement demonstrates, this option can be usefully employed in a number of instances for the benefit and increased profitability of BVI companies and ultimately their shareholders.

For further information on this topic please contact Jacqueline Daley-Aspinall or Keisha Durham at Harney Westwood & Riegels by telephone (+1 284 494 2233), fax (+1 284 494 3547) or email ([email protected] or [email protected]).