Can a party who is only (at best) beneficially interested in
shares in a BVI company maintain an action for unfair
That was one of the central questions posed in TIPP
Investments PCC -v- Chagala Group Limited in proceedings
before the BVI Commercial Court.
In his judgment (delivered on 9 November 2016), Justice
Davis-White (Ag) emphatically answered that question in the
negative. Nothing short of establishing membership of a company,
that is, appearance of one's name on the register of members in
accordance with Section 41 of the BVI Business Companies Act,
2004 would suffice.
In the case, the Claimant acquired an interest in the Defendant
Company's shares (which were listed on the London Stock
Exchange) via the CREST trading system. It held that interest by
way of depositary interest. Claiming to have suffered unfair
prejudice, the Claimant commenced proceedings in the Commercial
Court against both the Company and its Directors.
The Defendants took the point that the Claimant was not a
shareholder in the Company, since its name did not appear on the
register of members. Only the name of the nominee under the
relevant depositary interest arrangements appeared. A strike out
application was launched. The Claimant sought to argue, inter
alia, that its beneficial interest in the shares was
sufficient to maintain the action, on the basis, principally, of an
earlier decision of the BVI High Court, Headstart Class F
Holdings Limited et al -v- Y2K Finance Inc
The Court in Chagala disagreed and considered that
Headstart, to the extent that it lent support to the
notion that a mere beneficial interest in shares was sufficient to
maintain unfair prejudice proceedings, was wrongly decided.
Membership of a company, by way of inclusion in the company's
register of members was a necessary component for bringing such an
action. Accordingly, since the Claimant failed to satisfy this
requirement, the claim failed. Arguments as to estoppel were
similarly dismissed. However, on the basis of a late amendment to
assert a (double) derivative trust claim, based on the depositary
interest saved the claim from being struck out.
The case is a salutary lesson for claimants whose title to BVI
shares is not evidenced on the register of members: they must
either have themselves entered on to the register of members (for
example, collapsing any relevant trust structures) or seek
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There are a number of issues regarding this nascent Tribunal and its procedures on which the Decree is silent and which will need to be answered and clarified for litigators and practitioners in due course.
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