Restoration applications are nothing new in the BVI. With hundreds of thousands of active companies and many more struck off due to administrative oversight, BVI legal practitioners frequently find themselves advising clients on applications to restore a company to the Register.
However, recent changes to the BVI Business Companies Act have made restoration even more imperative. Now, companies are not only struck off but are deemed dissolved. This conflation of the striking-off and dissolution mechanisms means that companies no longer enjoy a grace period of corporate purgatory — not quite dead, but certainly not alive. They are dissolved as soon as they are struck.
One of the more serious consequences of this immediate dissolution is that the company's assets fall bona vacantia to the Crown.
Locus Standi and Purpose: A Lower Bar
Historically, the battlegrounds for restoration applications were locus standi and the exercise of judicial discretion. The latest amendments have made these points of dispute less likely to arise.
Under the revised section 218(2) of the Act, a creditor, former director, former member, former liquidator — and now any person with an interest in having the company restored — may apply for restoration. This broad category of potential applicants makes standing a relatively low bar.
The Court is also now expressly empowered to restore a company for the purposes of initiating, continuing, or discontinuing legal proceedings, or where it considers it just and fair to do so. Again, not the highest threshold — with a little effort, an applicant can usually demonstrate one or more of these purposes.
Discretion in Action: A Judicious Approach
As to the Court's discretion, there have been numerous iterations in the BVI courts on how it ought to be exercised. In Dedyson Enterprises Ltd v Registrar of Corporate Affairs (Claim No. BVIHCM 2011/0008), Bannister J observed that the power to restore is to be exercised when it serves “some beneficial purpose consistent with the requirements of justice.”
In Global Diversity Inc v Registrar of Corporate Affairs, the Court reiterated its broad discretion under the Act. This widening of the Court's considerations has allowed for more judicial agility, which, is the correct and commercially sensible approach.
The Real Hurdle: Section 218A and the Registered Agent Problem
While arguments over standing and discretion may be subsiding, recent amendments to the BVI Business Companies Act have quietly shifted the battleground elsewhere.
Just when the legislature opened the front door, it bolted the back. Even where section 218 is satisfied, restoration is now conditional upon satisfying several procedural (but critical) requirements:
- A licensed registered agent must agree to act;
- That agent must provide a declaration or undertaking confirming the company's records are (or will be) up to date;
- Updated registers of members and directors must be filed, or an undertaking to file them within 14 days must be given.
This seemingly innocuous administrative requirement has become a real barrier to restoration — especially where the applicant is an outsider with no access to the company's records.
No Agent, No Restoration? A Shift Toward Insolvency-Based Solutions
Here's the problem: registered agents are often unwilling to act where the applicant is a stranger to the company. Usually, this stems from a highly conservative, risk-averse interpretation of AML compliance — understandable, perhaps, but unhelpful in practice.
The result? No agent, no restoration — unless the company is being restored directly into liquidation.
Restoration into Liquidation: A Judicially Crafted Solution
The only scenario where a company can exist without a registered agent is when it is restored for the sole purpose of entering liquidation. The BVI Court has developed a pragmatic workaround for this increasingly common scenario:
- The company is restored;
- It is immediately placed into liquidation;
- Control passes to an independent liquidator rather than reverting to former directors — a critical safeguard where fraud or misconduct is alleged and directors may be implicated.
Naturally, the usual tests for insolvency must be met and there may be a need to dispense with certain requirements under the Insolvency Act. The Court will not wind up a company casually but it will do so where necessary. The justification? A blend of the Court's broad statutory restoration powers and the equitable need to prevent wrongdoing from escaping scrutiny. Without this approach, a dissolved company could sidestep accountability through a legislative loophole.
The Way Forward: Legislative Reform?
The BVI's updated legislative framework provides broader standing and clearer statutory purpose for restoration. But practical obstacles, especially regarding registered agents, remain.
Restoration into liquidation has emerged as a commercially pragmatic, judicially endorsed workaround. However, there may be genuine practical reasons for a creditor not wanting to explore the nuclear option. While the perceived lack of express statutory authority gives some pause, the courts have rightly prioritised substance over form. In doing so, they reflect the BVI's commercial court's hallmark approach to difficult problems: with one eye on justice and the other on commercial reality.
It may be that disapplying section 218A in cases where the applicant is a genuine outsider—neither a former member, director, nor involved in the company's incorporation—would suffice. However, such an approach would likely have broader implications for the AML regime. For now, we continue to monitor developments in this area.
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.
