BVI Business Companies (Amendment) Act revisions effective 1 January 2023
In our advisory Summary of Key Changes issued in September 2022, we discussed some of the key changes to the BVI Business Companies Act, 2004 (the "BCA") which will be introduced by the BVI Business Companies (Amendment) Act, 2022 (the "BCA Amendment Act") when it comes into force on 1 January 2023.
In this article, we focus on the changes to be made to the current regime applicable to the striking off, dissolution and restoration of BVI incorporated companies.
The current position
At present, the BCA provides for a BVI incorporated company to be "struck off" (meaning that its name is struck from the BVI Register of Companies (the "Register")) for a variety of reasons, including where the company no longer has a registered agent, where it has failed to file a return required by the BCA to be filed (most often, a Register of Directors), and where it has failed to pay its annual fees.
A company which is struck off but not yet dissolved may be restored by the Registrar of Corporate Affairs (the "Registrar") on filing of an application in the approved form, payment of a restoration fee and of all outstanding fees and penalties and, where the strike off has been effected because the company lacks a registered agent, on a licensed person agreeing to act as the company's registered agent.
If a company remains struck off for a continuous period of seven years, it is automatically dissolved at the end of that period. Upon dissolution, the company essentially ceases to exist, though for a period of 10 years after its dissolution, the court may restore the company to the register on the application of a creditor, former member, director or liquidator or any other person who can establish an interest in having the company restored.
When a company is struck off, neither it, its directors or members or any liquidator or receiver may act in any way with respect to the affairs of the company. However, the fact that a company is struck off does not prevent the company incurring liabilities or any creditor from making a claim against the company and pursuing the claim through to judgment or execution, and does not affect the liability of any of its members, directors, officers or agents.
The property of a dissolved company passes bona vacantia to the Crown.
Key Changes under the BCA Amendment Act
The BCA Amendment Act introduces a number of important changes to the law in this area. Most notably, there will no longer be any lapse of time between strike off and dissolution: the two will happen simultaneously, and, whilst the Registrar's power to restore a company will be extended to cover a dissolved company, albeit in defined circumstances, and the court's power to restore is preserved, the period within which an application for the restoration of a dissolved company (whether to the Registrar or to the BVI Court) is reduced to five years from the date of strike off and dissolution. We deal with each of these in more details below.
Restoration of dissolved companies
Under the current regime, the Registrar may restore a company which is struck off (but not dissolved) on receipt of an application in the approved form, provided the Registrar considers it fair and reasonable that the company should be restored, and provided that:
- the company has filed a copy of its register of directors;
- where the company has been struck off because it does not have a registered agent or it no longer has a registered agent, the Registrar being satisfied that a licensed person has agreed to act as registered agent of the company; and
- on payment of the restoration fee and all outstanding fees and penalties.
Post 1 January 2023, the Registrar's power to restore a company will be extended to include dissolved companies, provided that, in addition to the above criteria, the Registrar is satisfied that:
- the company was carrying on business or in operation at the date of its striking off and dissolution;
- the registered agent has made a declaration in the approved form that the company's records have been updated as required under the BCA; and
- if, following the striking off and dissolution of the company,
any property of the company has vested in the Crown bona vacantia,
the BVI Financial Secretary:
(a) has signified to the Registrar the Crown's consent to the company's restoration to the Register; or
(b) has, within seven days of receiving a request to give the Crown's consent to the company's restoration to the Register, failed to respond to the request giving the Crown's consent or refusing consent.
In circumstances where:
- the company was struck off the Register and dissolved following the completion or termination of its voluntary liquidation under the BCA or liquidation under the Insolvency Act, 2003 (as amended);
- on the date of dissolution, the company was not carrying on business or in operation;
- the purpose of restoration is to:
(a) initiate, continue or discontinue legal proceedings in the name of or against the company; or
(b) make an application for the company's property that has vested in the Crown bona vacantia to be returned to the company; or
(c) in any other case which doesn't fall within (a), (b) or (c) above, or in which an application cannot be made to the Registrar, the court considers that, having regard to any particular circumstances, it is just and fair to restore the company to the Register,
the power to order the restoration of a company will be reserved exclusively to the BVI Court.
Under the BCA Amendment Act, a restoration application to either the Registrar or the BVI Court must be made within five years of the striking off and dissolution of the Company. This represents a significant curtailment of the period allowed under the current legislation: in addition to the period of seven years between strike off and dissolution, a company may be restored by the court up to 10 years after its dissolution.
Under the current regime an application to restore a dissolved company may be made by any of a creditor, former director, former member or former liquidator of the company or any other person who can establish an interest in having the company restored to the Register. Under the
BCA Amendment Act, the class of persons with standing to make a restoration application is expanded to also include:
- the Attorney General or any other competent authority in the BVI;
- a person who, but for the company's dissolution, would have been in a contractual relationship with the company;
- a person with a potential legal claim against the company; or
- a manager or trustee of a pension fund established for the benefit of employees of the company.
It is likely that those falling within 2, 3 and 4 above would nevertheless qualify as a person who can establish an interest in having the company restored to the Register under the current regime, however, the amended provisions put the question beyond doubt.
The BCA Amendment Act incorporates a short transitional period whereby a company which is struck off but not dissolved on 1 January 2023, will remain struck-off until the earlier of 30 June 2023 or the date on which it would have been dissolved applying the current seven year period, at which point it will be dissolved. The same period of five years within which a company may be restored will apply to such companies from the date of their dissolution.
The changes introduced by the BCA Amendment Act give rise to a number of interesting issues.
The Registrar will now have powers to restore certain dissolved companies, whereas currently such powers are exclusively reserved to the court. The widening of these restoration powers to the Registrar has been promoted as providing a simpler, more straightforward route to effect restorations. However, as so often, the proof of the pudding will be in the eating and BVI practitioners await to see whether the new regime lives up to the billing. In particular, in comparison to the current position, where a restoration of a struck off company by the Registrar is, effectively a paper filing, post 1 January 2023 there is a laundry list of matters on which the Registrar must be satisfied before she can grant a restoration. These include the Registrar being satisfied that the company was carrying on business or in operation at the date of its striking off and dissolution. It is currently unclear what evidence the Registrar will require in order to satisfy herself that this requirement is met. In addition, the statute confers a broad discretion on the Registrar. The BCA Amendment Act provides that the Registrar "may" (rather than "shall") grant a restoration upon satisfaction of the relevant certain criteria and at all times the Registrar must be satisfied that it would be fair and reasonable for the dissolved company to be restored to the Register. It is unclear how the Registrar will exercise that discretion.
The BCA provides for the possibility of an appeal against a decision of the Registrar and that provision is carried through without amendment. However, although such powers currently exist with respect to struck off companies, this may well become of greater importance depending on the approach adopted by the Registrar under the new regime. It is unclear on the face of the BCA Amendment Act whether an appeal to the court would be a "true appeal", ie an appeal the purpose of which is to consider whether the Registrar has exercised her jurisdiction properly, or is instead a fresh re-hearing of the application or something akin to a judicial review.
It will also be interesting to see whether applicants met by a refusal by the Registrar to restore a dissolved company will utilise the appeals procedure or whether they will simply make a fresh application to the BVI Court or, indeed, if such a route is available. On one view, it might be said that the BVI Court process is only intended to be engaged where the Registrar process cannot be utilised, rather than where that process has been utilised and has resulted in a refusal.
It is also inevitable that the changes to the BCA will lead to a considerable and rapid increase in the number of dissolved BVI companies and, given the shortened period within which a company is capable of being restored, to companies permanently and irrevocably dissolved. As the assets of dissolved companies automatically vest bona vacantia in the Crown, this may have significant consequences for those with an interest in a company's property (other than the company itself), including banks and other commercial lenders holding security over company assets.
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.