The appointment of a liquidator is a significant occurrence in the life of a BVI company. Aside from the obvious implication that the life of the company will ultimately be brought to an end, a significant power shift occurs in the management of the company.
Once appointed, the liquidator assumes control and custody of the assets of the company. The directors, though they remain in office, are divested of their powers and have no powers, functions or duties other than those expressly preserved by the BVI Insolvency Act, 2003 (the 'Act'). Creditors of the company assume primacy in place of the members and members are prohibited from exercising any of the powers granted to them under the company's memorandum and articles of association.
In contrast to the limitations imposed on the directors and
members of the company, the liquidator is granted very broad powers
under schedule 2 of the Act in order to allow him to fulfil the
duties imposed upon
him by the Act to take possession, protect and realise the company's assets, to discharge the company's liabilities and to return any surplus to members.
As would be expected, such a situation is ripe for creating dissatisfaction. In the exercise of his powers a liquidator may find himself at odds with directors, creditors, members and other stakeholders interested in or connected to the company. From time to time, such dissatisfaction reaches a sufficient pitch to cause such aggrieved persons to invoke the assistance of the Court.
A liquidator in the BVI must be the holder of an Insolvency Practitioner's licence. He is invested by statute with wide powers and duties and is credited with broad discretion to perform his functions. That being so, the case law shows that the Courts are loath to interfere with a liquidator's exercise of his powers or to act as a review panel in relation to his acts or omissions and, fraud or misconduct aside, will do so only in exceptional circumstances.
This article first appeared in Volume 16, Issue 1 of International Corporate Rescue and is reprinted with the permission of Chase Cambria Publishing - www.chasecambria.com
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.