The BVI Business Companies Act 2004 (the Companies Act) provides two ways to dissolve a solvent company incorporated in the BVI (the Company), namely:
- to complete a voluntary liquidation process, with dissolution occurring immediately thereafter; or
- to allow the Company to be administratively struck off the register of companies by the BVI registrar of corporate affairs (the Registrar), with dissolution occurring seven years (or ten years in certain limited exceptions) after the date of strike-off.
This guide examines option 1 above, the voluntary liquidation process. For information and guidance on the liquidation of an insolvent Company under the BVI insolvency regime, please see our guide on What a creditor needs to know about liquidating an insolvent BVI company for further details. The Companies Act only allows a Company to enter voluntary liquidation if it:
- has no liabilities; or
- is able to pay its debts as they fall due and the value of its assets equals or exceeds its liabilities.
Preparing for voluntary liquidation
Preliminary actionsTo ensure that the voluntary liquidation procedure is as simple as possible, before a Company enters voluntary liquidation, its directors should (to the extent practicable):
- pay all of its creditors in full;
- distribute any of its remaining assets to its shareholders; and
- agree the amount of the fees and expenses of the voluntary liquidator(s) and provide for them or arrange for another party (eg a parent company or other shareholder) to pay them on behalf of the Company.
Although, in most cases, it will be preferable for any secured debt to be repaid before the Company enters voluntary liquidation, if the particulars of security for a security interest over the Company's property are registered with the Registrar, the voluntary liquidator will be bound to give effect to the rights and priority of the claims of the chargee (being the recipient of the security) under the security interest.
The key documents needed to carry out a voluntary liquidation are the declaration of solvency and the liquidation plan.
Declaration of solvency The declaration of solvency is made by the directors. It must state that, in the opinion of the directors, the:
- Company is, and will continue to be, able to discharge, pay or provide for its debts as they fall due; and
- value of the Company's assets equals or exceeds its liabilities.
A statement of the Company's assets and liabilities (prepared as at the latest practical date before the declaration of solvency is made) must be attached to the declaration of solvency. A copy of the declaration of solvency must be kept at the office of the Company's registered agent.
If a director makes a declaration of solvency without having reasonable grounds for the opinion that the Company is, and will continue to be, able to discharge, pay or provide for its debts as they fall due, the director is guilty of an offence, and, upon conviction, is liable to a fine of up to US$10,000.
The liquidation plan must specify:
- the reasons for liquidating the Company;
- the directors' estimate of the time needed to liquidate the Company;
- whether the voluntary liquidator(s) is authorised to carry on the business of the Company if the voluntary liquidator determines that to do so would be necessary or in the best interests of the Company's creditors or shareholders;
- the name and address of each individual to be appointed voluntary liquidator;
- the fees proposed to be paid to the voluntary liquidator(s);
- the place where the Company's business is located or (if there is more than one place) its principal place of business and
- whether the voluntary liquidator(s) must send to all shareholders a statement of account for the voluntary liquidation.
To view the full article please click here.
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.