With over 450,000 active companies, the British Virgin Islands is the world's most popular offshore corporate domicile. The Business Companies Act has now been amended to introduce a number of measures aimed at keeping the British Virgin Islands' keystone corporate legislation up to date and attractive. The amendments take effect on a date to be proclaimed, which is likely to be in the third quarter of 2012.
Passed into law on July 16 2012 and published in the Official Gazette, the Business Companies Amendment Act represents the culmination of a process of industry consultation which began in June 2011 and which also involved approval by Cabinet on April 26 2012 of the Business Companies Regulations 2012. The amending act and the regulations represent the first major review of the Business Companies Act since 2006.
As would be expected from a review of this nature and scope, the soon to be enacted amendments 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 as a whole, they enhance its attractiveness and that of the British Virgin Islands as a favoured corporate domicile.
The key changes introduced 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 with regard 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 which have given notice of intention to resign can now rescind such notice.
- 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 its power to appoint the first directors, but the director(s) die or resign before shares have been issued. The amending act also corrects a longstanding typographical error in the original Business Companies 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 Business Companies Act or the company's constitution.
- Segregated portfolio companies – new provisions will enable special purpose companies to terminate inactive portfolios. 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 British Virgin Islands 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 liquidator. In addition, in order 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 seven years, reduced from the former period of 10. Transitional arrangements will apply to companies which have been struck off for six 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 the company formation system have been introduced. Although it is unlikely that these will affect end users, they should help to facilitate smoother operation of the system. These include:
- making provisions for adoption of company names;
- the mechanics of registering security documents and changes of registered agent;
- clarifying the role of the registrar in relation to IP rights in names;
- the registration of foreign companies; and
- expediting 'bulk' changes of register office addresses when a registered agent changes its address.
For further information on this topic please contact Colin Riegels, Ross Munro or Leonard A Birmingham at Harneys by telephone (+44 20 7332 5620), fax (+44 20 7489 0950) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org).
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