As part of our day-to-day work, we are often asked to conduct legal due diligence on a legal entity incorporated in the British Virgin Islands (BVI) or the Cayman Islands (the Offshore Company) or issue an opinion on the capacity of such legal entity to enter into a particular transaction for our clients.
The most common form of legal entity we deal with in each jurisdiction is a BVI business company in the BVI and an exempted company in the Cayman Islands, in each case with liability limited by shares. This note therefore covers the relevant points as they relate to those types of legal entity. If the Offshore Company in question is a different type of legal entity, such as an exempted limited partnership, a company limited by guarantee, a private trust company or is a BVI business company or an exempted company but with additional features, such as a restricted purpose company or a segregated portfolio company, the FAQ responses below may need to be supplemented or amended to reflect that.
There are a number of questions that are frequently raised by our clients and we set out below our answers to those questions in the context of a request for our standard due diligence report or capacity opinion.
1. What constitutional documents of the Offshore Company are required?
We will normally ask for the following documents in respect of the Offshore Company:
- Certificate of Incorporation (and any Certificate of Change of Name (in the BVI) or Certificate of Incorporation on Change of Name (in the Cayman Islands))
- Memorandum and Articles of Association
- Register of Members
- Register of Directors
- Register of Charges (for a BVI company) or Register of Mortgages and Charges (for a Cayman company)
- Recent Certificate of Good Standing issued by the Registrar of Corporate Affairs in the BVI (for a BVI company) or the Registrar of Companies in the Cayman Islands (for a Cayman company)
- Recent Certificate of Incumbency issued by its registered agent in the BVI (for a BVI company) or its registered office provider in the Cayman Islands (for a Cayman company)
The list of documents will need to be tailored for the nature of the Offshore Company and the transaction. For example, we do not always require a Register of Members for a listed company.
2. What information can be obtained publicly?
In the BVI, we can conduct a search at the Registry of Corporate Affairs in the BVI to obtain the constitutional documents and public records of the Offshore Company. We can normally obtain the Certificate of Incorporation, any Certificate of Change of Name, the Memorandum and Articles of Association, any Certificate of Registration of Charge and its stamped particulars and any Certificate of Release of Charge and its stamped particulars. We can also obtain the Register of Members if the Offshore Company has voluntarily filed it and the Register of Directors if the Offshore Company selected to make this a public document at the time it was filed with the Registrar of Corporate Affairs in the BVI. Moreover, we can order a Certificate of Good Standing directly from the Registry of Corporate Affairs in the BVI without requiring any authorisation from the Offshore Company.
We can also conduct a search of the electronic records of the Civil Division and the Commercial Division of the Registry of the High Court and of the Court of Appeal (Virgin Islands) Register, each from 1 January 2000, as maintained on the Judicial Enforcement Management System by the Registry of the High Court of the Virgin Islands, to confirm whether any litigation is pending against the Offshore Company in the High Court of the British Virgin Islands.
In the Cayman Islands, we can conduct a search on the Cayman Online Registry Information System (CORIS) to obtain certain information in respect of the Offshore Company such as the type of company (i.e. ordinary or exempted), its date of incorporation, company number, status (i.e. active or dissolved) and the location of its registered office.
In addition, the names of the current directors of a Cayman company (and their alternates) are available at the Registrar of Companies in the Cayman Islands.
We can also inspect the Register of Writs and Other Originating Process maintained by the office of the Clerk of Courts in the Cayman Islands to confirm whether any litigation is pending in the Cayman Islands against the Offshore Company or whether any petition been presented or order made for the winding up of the Offshore Company.
As you may note, the searches above allow us to access only some of the constitutional documents for a BVI company, and none of the constitutional documents for a Cayman company, in each case as listed in our answer to Question 1 above. Therefore, assistance will be required from the Offshore Company to provide the remainder of the documents.
3. If some of the constitutional documents of the Offshore Company listed in our answer to Question 1 above cannot be obtained, how will this impact on the due diligence or legal opinion?
The answer to this question will depend on what is outstanding and the nature of the transaction in question.
However, generally speaking, for example, we cannot opine on the capacity of the Offshore Company to enter into a guarantee without having received and reviewed a copy of its current Memorandum and Articles of Association, because we would not be able to see if there is any restriction on its powers to enter into a guarantee. We also require a copy of the Register of Directors and (if shareholder approval is required) the Register of Members of the Offshore Company for us to verify that (on its face) the right people or entities have provided the requisite corporate authorisations. On the other hand, where the Offshore Company in question is providing a guarantee only and not providing any security interest, it may be acceptable for the beneficiary of the guarantee to forgo receipt of a copy of the Register of Charges (for a BVI company) or the Register of Mortgages and Charges (for a Cayman company) of the Offshore Company, unless they require it in order to diligence whether the Offshore Company has entered into any existing secured financing arrangements.