Recent years have seen a trend towards consolidation in the financial services industry; the BVI is no exception and mergers and acquisitions involving licensed trust companies and corporate service providers have been a consistent theme of the past few years.

Walkers has the leading offshore dedicated regulatory team, providing BVI law expert regulatory advice from our offices in the BVI, the Cayman Islands, London and Hong Kong.

Walkers' BVI regulatory and corporate teams have acted on a number of significant and, in some instances, novel M&A transactions involving regulated entities over the past few years; an area we anticipate continuing to increase with further consolidation of licensed trust companies and regulated businesses within the financial services industry.

Change of control of BVI regulated entity1

The change of control of any BVI regulated entity will require approval from the BVI Financial Services Commission (the "FSC"), and it is important that this, and the timing of obtaining such approval, is factored into any acquisition (however structured).

Approval and/or notification requirements apply to other changes in ownership or management of licensed business; importantly these can apply on any change of share structure if certain thresholds are met. As such, it is important to ensure expert BVI regulatory guidance is obtained at an early stage in relation to any corporate transaction involving the investment in, acquisition, or disposal of a BVI regulated business.

It is also important to note that the regulatory framework and requirement for approval does not only come into play in a corporate context – regulatory considerations can also apply to financing of or acquisition financing of regulated BVI entities, especially where security is taken over shares of a BVI regulated entity, or holding companies in the corporate structure.

While any transaction involving a change of control of a BVI regulated entity will require an application to the FSC for approval, there are a few particular nuances to bear in mind where the acquisition structure is by way of statutory merger. In this note, we highlight a number of key practical points relevant to such mergers based on our experience in this area.

Finally, as is the case in many jurisdictions, there can be divergences between the 'black letter' law and the practice of that law and interaction with the regulator, meaning seeking assistance from advisors with in-depth experience of managing applications and dealing with the regulator is invaluable.

Effect of merger

The key attractions of merging one or more regulated entities are no different from merging unregulated entities. Considerations relating to mergers of BVI entities are set out in our recent publication on mergers as part of our BVI company law series, which may be found here. However, in both cases, on the effective date of the merger and by operation of law:

  • assets, including choses in action, and the business of the merging companies immediately vest in the surviving company; and
  • the surviving company is liable for all claims, debts, liabilities and obligations of the merged companies.

As such, a merger may be seen as an attractive option as it eliminates certain steps a share acquisition would otherwise entail and results in a streamlined structure on completion.

Practical considerations in the context of a merger

In the context of a transaction involving a BVI licensed entity, the same preliminary steps should be taken as for any other change of control of a BVI licensed entity. For example:

  1. the FSC's website should be checked, which will enable verification of the registration of the licensee, the class or classes of licence under which the licensee is operating, and the specific statutes under which it has been licensed;
  2. typically, it is helpful to request and hold a preliminary meeting with the FSC to discuss the proposed transaction and requirements. This helps smooth the process generally and enables the FSC to give an indication of their expectations;
  3. various documents and information will need to be obtained in order to submit an application for approval. These can be extensive, and should be as detailed as possible (including clear structure charts showing both the pre and post transaction ownership structure) to help facilitate the application process; and
  4. the terms of the transaction documents should be reviewed and, importantly, completion of the merger with the BVI licensee or acquisition of the shares of the BVI licensee (and the requirement to grant security over the same in connection with any related financing) should be conditional upon approval from the FSC being obtained.

Once the application is ready to be submitted (together with the relevant documents and information), there are certain procedural differences and requirements in the case of a merger involving a BVI licensee:

  • the application to merge must be submitted by not only the surviving company but also by each of the merging companies. In contrast, for a regular change of control application, the licensee makes the application alone;
  • the plan of merger and articles of merger must also be filed; and
  • where the merging entity is also approved as a registered agent, the plan of merger and articles of merger to be filed with the Registrar of Corporate Affairs (to effect the merger) must contain appropriate wording in relation to the change in registered agent and registered office of the companies for which each of the merging companies acts as registered agent and registered office.

One final point to highlight is that the FSC will want to ensure that the surviving entity of the merger will assume all claims, debts, liabilities and obligations of each of the merging entities. Although this is the case as a matter of BVI law, the FSC will in our experience require an undertaking from the surviving entity confirming it is responsible for the liabilities of each of the merged entities.

Anyone familiar with any change in control application by a BVI regulated entity to the FSC will know that it is a thorough process and one in respect of which specific legal advice should be sought as early as possible in the transaction. The key takeaway from this note is that mergers involving a BVI regulated entity are possible but differ in subtle respects from regular change in control applications. A trusted advisor familiar with both processes will make the experience much more straightforward and avoid frustrating delays through applications not meeting the necessary requirements on first submission.


1 Given the small number of licensed banks in the BVI (7 as at 7 April 2021), this note does not cover matters relating to banks, in respect of which specific advice should be sought.

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.