British Virgin Islands: Dealing With The Death Of A Sole Director/Shareholder Of A BVI Company In The Context Of Pending Proceedings

 Many BVI companies have only one director/shareholder. When that individual dies, the company can be left in a vulnerable position, especially if the company faces pending or contemplated court proceedings. Conyers' Matthew Brown suggests ways of handling this difficult situation.

Companies incorporated in the British Virgin Islands are generally only required to have one director in place at any given time. In fact, it is fairly common for a BVI company to be incorporated with only one member and one director - often the same individual. This has some obvious benefits, but also a number of risks, not least the risk that the company will be left in an exposed position if or when the individual director/shareholder dies.

That risk only increases where there are pending or contemplated court proceedings against the BVI company (whether in the BVI or elsewhere). In the absence of an individual with the authority to take the necessary steps on its behalf, the company may find itself unable to respond to the claims against it, or indeed participate in claims it may have. Unfortunately, this is not an altogether uncommon scenario. In some cultures, the inherent reluctance to discuss one's mortality inhibits succession planning in the corporate context.

This article sets out the potential solutions that may be available where a company finds itself in this awkward position. It does not address the option of appointing a 'reserve director', which remains a useful, though underused, means of avoiding some of the issues discussed below.

The problem and the usual solution

Under BVI statute, the business and affairs of a company are generally required to be conducted by, or under the supervision of, its directors (unless the articles of the company state differently). Those directors are usually, in turn, appointed by the members or by the existing director(s). Accordingly, where a sole director/shareholder dies, there are often at least two obvious consequences for the company: there is no-one who is able to carry on its business and affairs; and there is no-one who can appoint an alternative individual to carry out that task in his place.

It is usually possible to solve both of those problems once a personal representative has been appointed in relation to the deceased's shareholder's estate. Once that has happened, the duly appointed personal representative should be able to secure his registration as the shareholder of the BVI company, and thereafter use that position to appoint himself or another individual as the director of the BVI company. In short, obtaining his appointment as the deceased shareholder's personal representative is a fundamentally important step in the process of taking control of the BVI company.

Letters of administration and grant of probate

Where the sole director/shareholder has died without leaving a valid Will dealing with his BVI assets, then a BVI grant of letters of administration will be required. This is the case even where the applicant has already obtained a grant of letters of administration (or the equivalent) in the country where the deceased was domiciled at the date of his death.

Where the sole director/shareholder did leave a valid Will, then his executor(s) is still likely to require a BVI grant of probate (even though the executor derives his title from the Will of the deceased, not the grant of probate).

Unfortunately, obtaining a grant of probate or letters of administration (known collectively as a "grant of representation") can be a fairly slow process in many jurisdictions, and that can include the BVI. Where proceedings against the company are pending or contemplated, it may not be possible to simply wait for the usual process to run its course. In those circumstances, we are often asked whether there is any way in which the process of obtaining a BVI grant can be expedited. Fortunately, there is.

Alternative solutions

When a grant of representation is required as a matter of urgency, an application can be made direct to a Judge of the High Court. If proceedings against the BVI company are pending, there are (at least) two alternative grants that can be sought, both of which Conyers has obtained in recent months:

  • a full grant of letters of administration or a grant of probate; or
  • a limited grant, limited for inter alia the purpose of bringing about the applicant's registration as the sole shareholder of the BVI company and thereafter exercising all rights arising from and by reason of that registration (which will cover any right the members have to appoint directors).

The High Court undoubtedly has the jurisdiction to issue and revoke grants of representation (including full or general grants). The basis of that jurisdiction is Section 7 of the Eastern Caribbean Supreme Court (Virgin Islands) Act (Cap 80), which renders applicable Section 20 of the Supreme Court of Judicature (Consolidation) Act, 1925 ("the SCJ 1925"): an old English statute. There are now detailed court rules which provide for how grants of probate and letters of administration should ordinarily be obtained, but it is hard to see how these could alter or diminish the High Court's general probate jurisdiction under Section 20 of the SCJ 1925.

In our experience, judges may be reluctant to make a full grant of representation on an emergency basis. Instead, they prefer limited grants, which enable them to provide the applicant with the minimum powers that he requires in order to take whatever steps are necessary. Limited grants, as the name suggests, are grants other than a general or full grant. They include: (1) a grant "ad colligenda bona"; and (2) a statutory grant under Section 162(1) of the SCJ 1925.

In terms of a grant ad colligenda bona, this is granted in circumstances where the deceased's estate requires protection, but there is some difficulty or delay in obtaining a full grant. This would therefore cover the scenario where a grant is required urgently in order to commence, pursue or defend litigation in another court. The application would need to be supported by an affidavit explaining the reasons why the grant is necessary.

In a very recent case, Conyers successfully obtained a grant ad colligenda bona on behalf of a foreign client who, despite being the personal representative of the deceased shareholder in Singapore, required a BVI grant urgently in order to respond to proceedings that had been issued against a BVI company in the BVI.

We are aware of further cases where a grant ad colligenda bona has been made in recent years, including in Liao Chen Toh -v- Liao Hwang Hsiang BVIPB 93 of 2011 and In the Estate of Alex Dorance George BVIHPB 27 of 2016. In the latter case, the grant was made for the purpose of: "collecting and receiving the estate and doing acts necessary for its preservation including taking all such steps as are necessary (including instituting legal action to preserve any right of action vested in the estate)."

If a limited grant to preserve the estate is insufficient, and further powers of administration are required, then an application for a limited grant can be made under Section162(1) of the SCJ 1925. This jurisdiction is triggered whenever there are "special circumstances" rendering it "necessary or expedient" to appoint a person other than the person who is otherwise entitled to a grant of administration by law. The equivalent provision in England has, in the past, been used so as to constitute a person as the personal representative of an estate for the purpose of pursuing or defending a claim: see Pakistan -v- National Westminster Bank [2015] EWHC 3052 (Ch); In the Goods of Knight [1939] 3 All ER 928. Once more, an application under Section 162 is also made by way of a fixed date claim form, with an affidavit in support.

In summary, when a sole director/sole shareholder of a BVI company dies and there is no reserve director to take over, there are ways in which the absence of authority can be remedied, so that the company can still take whatever urgent steps are required.

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 Mondaq.com.

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

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
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

Mondaq.com (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 www.mondaq.com

To Use Mondaq.com 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.

Disclaimer

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.

General

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