British Virgin Islands: The Offshore Advantage: M&A In The BVI

Last Updated: 2 November 2017
Article by George Weston

Most Popular Article in British Virgin Islands, November 2017

As the largest law firm in the BVI, Harneys has consistently worked on the biggest and most complex mergers and acquisitions (M&A) involving BVI companies. As we head into the last quarter of 2017, M&A both globally and in the BVI in particular continues to be an active and vibrant market despite global geopolitical concerns.

Transactions the firm has been involved with in the last two years alone have included one of the highest value take private transactions in BVI history (UTi Worldwide) by way of statutory merger, the reverse takeover of Knowlton Capital Inc by LeniGas Cuba Limited by scheme of arrangement, and the largest ever domestic M&A transaction (the acquisition by share purchase of a majority stake in Road Town Wholesale Trading Ltd) as well as countless confidential deals.

The BVI's modern and flexible corporate statute, the BVI Business Companies Act 2004 (the Act) is specifically designed to facilitate these types of transaction, and the ease of exit continues to be a key factor driving the use of BVI structures for global investments. This article reflects on some of the reasons why the BVI continues to be at the forefront of global M&A.

Variety of acquisition structures

Perhaps the biggest advantage of the BVI is the range of possible acquisition tools, illustrated by the range of recent transactions Harneys has been involved with.

There are four main methods of acquiring a BVI company: (i) a straightforward share purchase or contractual offer, (ii) a statutory merger, (iii) a scheme of arrangement and (iv) a plan of arrangement. Ultimately, which structure is most appropriate will depend on the facts of a particular case, including the nature of the selling entity, the onshore tax treatment and the preferences of individual clients and their advisers (US based clients, for example, may have a preference for mergers as the mechanism most often used in their home jurisdiction).

Contractual offer/Share purchase

Probably the simplest and still the most common way of conducting an M&A transaction is a contractual share purchase, where the existing shareholder(s) agree to sell and the buyer(s) agree to buy the shares. Although from a BVI legal perspective the only document required for a transfer of shares is a written share transfer instrument (a short, straightforward one page document) in all but the simplest intragroup transaction there will also be a share purchase agreement (SPA) setting out the commercial terms of the sale. The SPA will set out the consideration structure and any adjustment mechanics; buyer protection in the form of representations, warranties and indemnities; seller protections such as limitations on liability and disclosure; deal with any conditionality; and set out the completion arrangements, the last of which will be the only part of the SPA in which BVI law will be a major factor and which is seldom controversial. Provided the basic requirements of BVI law are adhered to, there is no issue with buying or selling BVI shares using an SPA governed by a foreign law.

The only real disadvantage of the contractual offer structure is that in the context of a company with a large shareholder base it only binds shareholders who are willing to sell, although this risk to the buyer can be managed contractually (for example through conditionality in the purchase agreement). If a buyer ultimately acquires more than 90 per cent of the issued shares he can avail himself of mandatory squeeze-out provisions under BVI law.

Statutory merger

When the BVI first introduced its merger code, the drafters looked at Delaware and Canada for guidance and the provisions of the Act will be familiar to anyone with experience of mergers in North America.

The key procedural requirement is that the directors of each constituent company must approve a Plan of Merger setting out the details of the parties and the terms of the merger.1 This must also be approved by the shareholders, unless the merger is between a subsidiary and a parent (unlikely in an M&A deal). Unless a higher threshold has been specified in the Mem & Arts the approval threshold is a simple majority vote.

The parties will also need to execute Articles of Merger and file these with the Registrar of Corporate Affairs in the BVI. The merger is effective when these documents are accepted by the Registry, which recently introduced a premium service for faster turnaround on major deals (on the UTi transaction mentioned above, within 30 minutes of filing).

A merger may be between two BVI companies (often a BVI SPV established by the buyer for that purpose) or between a BVI company and a foreign entity. Regardless of whether the target company or the merger sub is the surviving entity, the obligations and assets of the BVI target will flow to the surviving entity.

Similar to the role of an SPA on a contractual offer, the relatively straightforward BVI documents are likely to be supplemented with a longer Merger Agreement, setting out in more detail and putting on a contractual basis the commercial terms of the merger.

Scheme of arrangement

A scheme of arrangement is a statutory, court sanctioned process, which was initially envisaged as a restructuring tool, but which has become a popular method of acquiring companies in a number of common law jurisdictions (in particular the UK, where it is used for the vast majority of public takeovers). The process involves the applicant (invariably the target company) first seeking a court order to call a meeting of the effected 'creditors' (the shareholders). If the transaction is approved by more than 50 per cent in number and 75 per cent in value of the members of each 'class'2 of creditors, it will proceed to a court hearing for final approval ('sanction'). The key documents are the various court applications and supporting documents and the circular to members.

There may also be an 'implementation deed' or some other form of contractual framework between the buyer and target company setting out the terms on which they will cooperate to pursue the scheme.

Since Harneys acted on the BVI's first takeover by scheme of arrangement in 2010 there have been a number of others, although the cost and relative complexity of involving the court means that it is not suitable for every transaction. Schemes do have the key advantage that court sanction makes it virtually impossible for them to be subsequently challenged or derivative actions brought by aggrieved shareholders.

Another benefit is that the scheme is binding on all shareholders and the right to dissent and claim fair value for shares under section 179 of the BCA is only permitted 'if the court allows' and is not automatic (a right which otherwise applies for various corporate transactions including mergers and mandatory squeeze-outs). Consequently, for reasonably large M&A transactions where a comfortable majority of shareholders are likely to be in favour but a minority will be stringently opposed, a scheme can be the ideal instrument to give both the buyer and the target company management certainty and minimize post-closing legal risk.

Plan of arrangement

A plan of arrangement is a statutory process similar to a scheme which can be used for mergers, consolidations, and sales of shares or assets (and certain other corporate actions). The BVI legislation is closely modeled on the statute in Canada, where plans are a common alternative to statutory mergers.

A plan of arrangement can be initiated by the directors of a BVI company if they have determined it is in the best interests of the company and relevant third parties (eg the shareholders and/or creditors). The directors will apply for the court for an order approving the plan, and it is at the discretion of the court to determine who is required to be given notice of the transaction and what additional approvals, if any, are required. In theory, this opens the possibility that the directors could use a plan to sell the company without getting approval from or even giving notice to the shareholders, although in practice it would be very unlikely that a court would approve such a transaction.

While plans have not yet been widely used for takeovers in the BVI, Harneys acted on the first ever plan of arrangement in the BVI under the Act and it represents a potentially simpler and more cost effective alternative to a scheme in some circumstances.

Flexible corporate law

While it would be a slight exaggeration to say that the answer to any BVI corporate law question is 'yes, if the Mem & Arts allow it', it is certainly true that the BVI corporate regime is extremely flexible. This flexibility means that it is very rare for a purely legal issue to delay closing a BVI deal.

There are a few key differentiators between the BVI and many other jurisdictions which can be helpful in the context of an M&A transaction:

  • Simple solvency test for dividends. Most buyers do not want to pay cash for cash left in the business (beyond a normalised level of working capital). Accordingly, most target companies will return surplus cash to their existing shareholders before closing. In the BVI, the payment of a dividend requires only a simple solvency determination by the directors – there is no need for a complex determination of distributable reserves or for artificial transactions to reduce share capital to create reserves.
  • No prohibition on financial assistance. There is no prohibition on a BVI company giving assistance for the purchase of its own shares (and for this purpose, unlike the UK, the BVI makes no distinction between public and private companies). This is helpful in leveraged transactions where debt and/or security created to help fund the purchase price will sit at the level of the target company.
  • Most decisions can be made by a director's resolution. In most M&A transactions the buyer will want to make certain changes at completion. At a minimum, this will usually involve changes to directors, but it may also include changes to the registered office/registered agent of the company, changes to bank mandates, amendment to the Mem & Arts and changes to accountants/auditors. In the BVI, all these decisions may be made at board level by majority decision, negating the need to have a second set of shareholder resolutions.3
  • Flexible ongoing governance regime. Of course, many M&A transactions do not involve the buyer taking a complete ownership stake in the business, and BVI law gives the parties a high degree of freedom to agree contractually and enshrine in the Mem & Arts the governance and shareholder arrangements they want to have in place going forward. We have worked on several deals in 2017 where a buyer was acquiring a majority of the shares but for tax and or regulatory reasons did not want 'control' and we have developed a range of bespoke solutions to address this while still protecting the buyer's interests.
  • No Takeover Code. BVI corporate law does not distinguish between public and private companies, and there are no additional hurdles or restrictions which apply to public M&A in the BVI (although there may be relevant securities or listing regulations in the jurisdiction(s) in which the company is admitted to trading).
  • Premium Service. As mentioned above, the BVI registry's premium service means that where an urgent approval is required, whether for a merger or simply to amend the Mem & Arts, it can be obtained quickly with a guaranteed four hour time frame during business hours.
  • Quick and easy incorporation. Where the target is BVI based, many buyers opt to use a BVI subsidiary as an acquisition vehicle (either to hold the shares, or to merge into the target). Establishing a BVI company is straightforward, quick and the cost is highly competitive when compared with other offshore jurisdictions.

No need for an extensive tax covenant and no transfer taxes

There is no stamp duty levied in the BVI on a transfer of share in a BVI company unless the company owns a direct or indirect interest in BVI property. As there are no corporate taxes in the BVI (assuming no property, employees or business being conducted in the BVI) there is usually no need for a complicated and heavily negotiated tax covenant apportioning pre-completion taxes and reliefs.

The common law edge

The legal system in the BVI is based on English common law, while its corporate statute has taken provisions and best practices from a range of jurisdictions including the US (principally Delaware), UK, Canada and Australia. As a result, BVI corporate law works harmoniously with the law of contract in other common law countries, and it is not unusual to have the principal transaction documents governed by a different governing law – for example a US law governed merger agreement or an English law governed SPA.

When the parties do decide to use BVI as a governing law, or where the choice of acquisition tool mandates it (such as a scheme of arrangement) they get access to a sophisticated legal system with ultimate appeal to the UK Privy Council. In addition, English case law is persuasive in the BVI, which means that lawyers have the advantage of a huge body of precedent from the world's second largest legal jurisdiction for M&A transactions.


The BVI is one of the easiest countries in the world in which to undertake everything from billion dollar mega-mergers to the sale of non-trading holding companies owning a few acres of real estate. The diversity of acquisition options, allied with a flexible corporate legal system means that a structure can be found that will suit any client's needs. The BVI Government and regulators recognize the importance of keeping the jurisdiction ahead of its peers, and Harneys works closely with these bodies and other industry stakeholders to develop innovative solutions and ensure that it evolves to meet the demands of clients around the world. Harneys continues to be at the forefront of this exciting area of law, and involved with some of the largest and most innovative transactions taking place today.


1The plan must include: (i) the name of each constituent company to the merger; (ii) the name of the surviving company in the merger; (iii) in respect of each constituent company the designation and number of outstanding shares of each class of shares the number of shares of each class of shares in each subsidiary company owned by the parent company; (iv) the terms and conditions of the proposed merger including the manner and basis of converting shares in each company to be merged into shares, debt obligations or other securities in the surviving company, or money or other assets, or a combination thereof; and statement of any amendment to the memorandum or articles of the surviving company to be brought about by the merger.

2Calculating the relevant classes for the purposes of a scheme is not straightforward (it does not follow that because a company only has one class of shares in issue, they can all vote as one class on a scheme). Under case law, "a class must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult with a view to their common interest".

3Fundamental changes to the Mem & Arts may require shareholder approval. In addition the Mem & Arts may set out a higher threshold for certain decisions. Finally, as noted above, the threshold for approval of various different acquisition structures varies.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions