The BVI Business Companies Act, 2004 (as amended) (BVIBC Act) is the flagship corporate legislation regulating BVI companies. In August 2022, the BVI government passed amendments to the BVIBC Act and the BVI Business Companies Regulations (as amended), which will come into force on January 1, 2023.
The amendments represent a continuous improvement of the BVIBC Act, which follows international standards and best practices. However, this particular trove of modifications will have far-reaching effects on users of BVI entities, which number close to 400,000 registered companies. The amendments include:
- abolition of bearer shares;
- more focused regulation of charitable companies;
- new strike off/dissolution and company restoration regime;
- new requirements for voluntary liquidators;
- public availability of a list of director names for companies;
- introduction of a new annual financial return filing;
- a framework for persons with significant control; and
- additional requirements for continuations out of the BVI.
Abolition of Bearer Shares
Currently, a regulated custodian may hold a BVI company's bearer shares, however, that regime will be abolished with the amended legislation. BVI companies will no longer be able to issue bearer shares and any existing bearer shares will automatically be converted into registered shares on July 1, 2023.
Charitable or Non-Commercial Business
The amended BVIBC Act includes provisions for the incorporation of a BVI company to pursue charitable or non-commercial purposes outside of the BVI. Additional details must be provided on incorporation, including how the company will segregate its charitable/non-commercial activities from its other business and the geographic region or regions where those activities will be carried out. Also, such companies must file annual audited financial statements with the Registrar of Corporate Affairs (Registrar) regarding its charitable/non-commercial business.
New Strike Off/Dissolution Regime
Currently, the BVIBC Act provides a seven (7) year period between when a company is struck off the register of companies and when it is deemed dissolved by law. That regime changes with the new amendments. A company that is struck off the register will be dissolved on the date the Registrar publishes notice of the striking-off in the Gazette.
For companies that are struck off and not yet dissolved at the start of 2023 but whose principals wish the company to be restored to the register, transitional arrangements will apply. However, we recommend that any company that is currently struck off but has assets or ongoing operations should consider acting now to be restored to the register before the amendments come into force. As always, all companies are advised to stay up to date with their filings and fees to avoid being struck off and dissolved.
New Restoration Procedure for Dissolved Companies
The amendments create a new procedure for the restoration of dissolved companies to the register of companies. Companies can apply to the Registrar to be restored within five years of being dissolved if:
- the company was carrying on business or in operation at the date of its striking-off and dissolution;
- a licensed person has agreed to act as registered agent of the company and confirmed that the company's records have been updated in compliance with anti-money laundering obligations;
- the company pays a restoration fee and any outstanding fees or penalties; and
- the Registrar is satisfied that it would be fair and reasonable for the company to be restored.
If any of the company's property has vested in the Crown upon dissolution, notice of the application to be restored must be given to the Crown via the Financial Secretary.
Also, the existing court restoration procedure will be available if:
- the company was dissolved following completion of its liquidation;
- on the date of dissolution, the company was not carrying on business or in operation;
- the purpose of the restoration is to initiate, continue, or discontinue legal proceedings in the name of or against the company or to make an application for the company's property to be returned where it was vested in the Crown on the company's dissolution; and
- in any other case where the court considers it just and fair to restore the company to the register of companies.
A court application may be made by various parties, including; a creditor, former director, member, liquidator of the company, a person who but for the company's dissolution would have been in a contractual relationship with the company, a person with a legal claim against the company, or any other person who can establish an interest in having the company restored.
When a company is restored under either process, it is deemed never to have been struck off and dissolved and is restored accordingly to the register of companies.
New Requirements for Voluntary Liquidators
The new amendments require that a voluntary liquidator be a BVI resident, who meets certain qualifications and maintains specific liquidation records.
To qualify as a voluntary liquidator, an individual must have physically lived in the BVI for at least 180 days, either continuously or in aggregate, prior to their appointment. Where joint voluntary liquidators are appointed, only one must be resident in the BVI, allowing a joint liquidator to be appointed, for example, in a country where the company has business operations.
Voluntary liquidators must have at least two years' liquidation experience, professional competence to liquidate the company, and an appropriate professional qualification or hold an insolvency practitioner's licence issued by the BVI Financial Services Commission (the Commission).
Also, voluntary liquidators will be required to collect all records kept and maintained by the company under the BVIBC Act and send copies of those records to the company's former BVI registered agent at the end of the liquidation.
New Annual Financial Returns
Currently, the BVIBC Act requires all BVI companies to maintain financial records and underlying documentation that show and explain their transactions. These records must be sufficient to determine the company's financial position at any time, with reasonable accuracy. The financial records must be kept for a minimum of five (5) years. The new BVIBC Act amendments now specify that unless exempt, companies must file an annual return with their registered agent, setting out certain financial information. The amendments require the annual return filing within nine (9) months of the calendar year end or of the end of the company's financial year, if different. This requirement applies to the 2023 financial year, with filings expected to be made during 2024. Details of the format and content of the annual return are forthcoming.
Exemptions apply for listed companies, companies regulated under BVI financial services legislation that provide financial statements to the Commission, and companies that file annual tax returns (with financial statements) with the BVI Inland Revenue. Also, certain concessions will apply for companies whose accounts or financials are consolidated into group accounts.
The annual financial return will be privately filed with the company's registered agent and is not made public. Registered agents are required to notify the Registrar if a company does not file its annual return.
Available List of Director Names
Currently, the names and other details of persons acting as BVI company directors are not public, although they are filed with the Registry of Corporate Affairs. However, in the amendments to the BVIBC Act, a list of a company's current directors will be available on request for registered users of the BVI's VIRRGIN system. Other details included in a company's register of directors, such as addresses and birth dates, will not be publicly available, nor will the details of former directors. It should also be noted that director names will only be available by way of a search against a particular company. It will not be possible to search against the name of an individual to see if that individual is a director of any company.
Persons with Significant Control
The amendments provide a framework that requires the Registrar to maintain a register of persons with significant control of BVI companies. However, this framework will not apply when the amendments come into force in January, but rather at some point in the future, albeit with no definitive timeframe for implementation. Further details on this provision will be set out in regulations.
Continuations Outside of the BVI
BVI companies generally have the ability to continue out of the jurisdiction subject to the provisions of their memorandum and articles. However, the new amendments to the BVIBC Act add a requirement that at least 14 days before continuing out of the BVI, the company must do the following:
- Advertise notice of its intention to continue out in the Gazette and its own website (if any).
- Notify all of its members and creditors in writing of its intention.
This amendment streamlines the continuation process and provides greater comfort to shareholders and creditors of BVI companies, while maintaining flexibility in the overall process.
The BVIBC Act is one of the most well known and respected corporate regimes, globally. The foregoing amendments, which take effect at the beginning of 2023, continue to build on that legacy, and, without a doubt, demonstrate the BVI's commitment to meeting and surpassing international standards and best practices.
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.