In the recent BVI Court of Appeal decisions of Wembley and Sutton ‘disabled’ bearer shareholders were found to have a constitutional right not to be deprived of their property without compensation.
The passage of the BVI Business Companies Act (the Act) in 2004 produced “a seismic shift” in the treatment of bearer shares in the BVI. The holders of bearer shares were given a deadline of 31 December 2009 (the Transition Date) to deposit those shares with a custodian or to redeem, convert or exchange them for registered shares. After the Transition Date, any un-deposited, unredeemed or unconverted bearer share would be immobilised and the holder of any such share would lose all entitlements which those shares conferred, including the right to vote.
The principals of Wembley, Limited and Sutton, Limited took no steps to regularise their bearer shares by the Transition Date and when the last surviving director of both companies died, the companies were, in effect, paralyzed – no new director could be appointed as the bearer shareholders were ‘disabled’ from voting. Accordingly, the bearer shareholders applied for the appointment of a receiver to both companies to enable them to redeem their disabled bearer shares.
At first instance, it was held that redemption of the bearer shares was no longer possible because the companies were incapacitated by the parties’ own inaction and delay which the trial judge described as a “contumelious failure”; years had passed since the Transition Date and the director’s death.
In allowing the appeal, the Court of Appeal found that:
- under the relevant transitional provisions in the Act, the power of redemption arose after the Transition Date and empowers a bearer share company to redeem existing bearer shares;
- the Court’s power to appoint a receiver pursuant to section 24(1) of the West Indies Associated States Supreme Court (Virgin Islands) Act may be exercised in relation to companies which for one reason or another have become immobilised;
- the appointment of a receiver with power to redeem bearer shares is not inconsistent with the policy of the Act; and
- it was just and convenient in the instant cases, to appoint a receiver to consider exercising each company’s power to redeem the bearer shares in issue.
With these findings, it is now abundantly clear that even where BVI disabled bearer share companies are without functionaries (i.e. directors) to facilitate the traditional redemption of those shares, the court has a flexible jurisdiction to appoint receivers for the purpose of redeeming those disabled shares, thereby ultimately restoring the companies to a functional state.