BVI company law amendments take effect soon
Passed into law on 16 July 2012 and publicly Gazetted on Wednesday, 12 September, the British Virgin Islands’ Business Companies Amendment Act will come into force on 15 October 2012.
The Amendment Act and the associated BVI Business Companies Regulations, 2012 (which also come into force on 15 October) represent the first significant update to the BVI’s corporate law regime since 2006.
With over 450,000 active companies, the British Virgin Islands is a popular offshore corporate domicile. The BVI Business Companies Act (the BC Act) has been amended to introduce a number of measures aimed at keeping the BVI’s keystone corporate legislation up-to-date and attractive.
The key changes brought in by the Amending Act and the Regulations are:
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.
Further restrictions will be imposed in relation 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 who have given notice of intention to resign can now rescind such notice (formerly they were unable to).
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 their power to appoint the first directors, but the director(s) die or resign prior to shares being issued. The Amending Act also corrects a long standing typographical error in the original BC Act, and now provides that a director may be removed by a shareholder resolution passed by 75 per cent of the votes (not 75 per cent 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 BC Act or the company’s constitution.
Segregated portfolio companies
New provisions will enable SPCs to terminate portfolios which are inactive. 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 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 BVI will constitute constructive notice to third parties. Various other mechanical changes to facilitate security registration are also implemented.
The most important of a number of changes is that former directors and senior managers of a company will now be prohibited from acting as the company’s liquidator, and to enter solvent liquidation the company must now be both cash-flow and balance-sheet solvent (instead of simply cash-flow solvent).
Companies which are struck off will be deemed to be dissolved after 7 years, reduced from the former period of 10. Transitional arrangements will apply to companies which have been struck off for 6 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.
Certain mechanical changes to the company formation system have been introduced. Although it is unlikely these will impact end-users, they should help facilitate smoother operation of the company formation system. These include making provisions for adoption of company names, mechanics of registering security documents and changes of registered agent, clarifying the role of the Registrar in relation to intellectual property rights in names, registration of foreign companies and expediting “bulk” changes of register office addresses when a registered agent changes their address.