The enactment of the BVI Business Companies (Amendment) Act 2005 ("the Act") provides both minority shareholders and joint venture partners with important remedies under BVI law. The provisions apply to all companies incorporated under the Act, and all previous companies are deemed to be automatically re-registered under the Act from 1 January 2007. This effectively means all BVI companies.
The new provisions are both a welcome clarification of common law rights, and in one case an important new remedy for minority shareholders, although, as set out below, this additional remedy might afford companies, and its creditors, increased comfort.
The provisions are as follows:
- Unfair prejudice remedy . This is a wholly new provision. In summary, a shareholder who considers that the affairs of the company have been, are being, or are likely to be conducted in a manner that is likely to be oppressive, unfairly discriminatory or unfairly prejudicial, may apply to the court for a wide range of potential orders, including a purchase of shares at fair value. On its face the section provides a wide remedy, but it is important to note that the remedy is likely to curb a shareholder's ability to file a winding up petition on just and equitable grounds, as where the BVI court considers that a shareholder has an alternative remedy, it has a discretion under the BVI Insolvency Act, to strike out a petition. Accordingly, any company incorporated under the old IBC Act that considers a petition a serious possibility, might be wise to consider an immediate re-registration under the Act, to take advantage of this possible defence.
- Compliance Order . A shareholder, or a director, may apply to restrain an act where the company is or proposes to engage in conduct that contravenes the Act or the constitution of the company. This is a welcome clarification of the previous common law rights in this area.
- Derivative Actions . Again, whilst shareholders had common law rights to bring derivative actions, broadly based on English common law, those rights will now be on a proper statutory footing. The procedure and powers of the court are now clearly set out, and in summary, permission can be granted if the court is satisfied that (a) the company does not intend to bring, diligently continue to defend, or discontinue proceedings, or (b) it is in the interests of the company that the conduct of the proceedings should not be left to the directors or to the determination of the shareholders as a whole.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
