The BVI Commercial Court (Justice Gerard Farara QC (Ag.)) has
confirmed that the Register of Members of a BVI company may be
corrected only by the Court, and not by the Directors or the
company itself.
One of the questions which fell to be considered by the BVI Court
in the recent case of Sempacher Foundation –V- Lark
Service Inc. & Others1
("Sempacher") was the validity of
certain alterations which had been made to the Register of Members
of the BVI company the subject of the dispute by its Directors. The
Court held that the amendments so made were invalid.
Section 41(1) of the BVI Business Companies Act 2004 (the
"BCA") requires that a BVI company keep
a Register of Members, whether in paper, magnetic, electronic or
other data storage form2, containing certain specified
information, including the name of members and their shareholding
in the company and the total number of each class and series of
shares held. By section 42 of the BCA, the entry of the name of a
person in the Register of Members as a holder of a share in a
company is prima facie evidence that legal title in the share vests
in that person. The Register of Members is therefore a critical
document so far as a BVI company and its members are
concerned.
Consequently, the BCA provides for recourse to the Court on the
part of "a member of the company, or any person who is
aggrieved" by an omission or inaccuracy in the
company's register of members, or by any delay in entering
information on the Register of Members. Section 43 of the BCA
allows for an application to be made to the Court in such event for
an order that the register be rectified.
In relation to the power to make changes to the register of
members, section 41(4) of the BCA enables regulations to be made
under section 240 of the Act which "may provide for the
circumstances in which information relating to persons who are no
longer members of a company, and to bearer shares that have been
cancelled, may be deleted from the register of members."
No such regulations have been promulgated.
There is no express power conferred by the BCA upon a BVI company
or its directors which would permit them unilaterally to
'correct' any entry in the register of members.
The Court held, decisively, that the legislative scheme prescribed
by the BCA contemplates that a company's register of members
may be validly altered only (i) to reflect a change in the
company's shareholding, by allotment, transfer, transmission or
redemption; or (ii) pursuant to an order of the Court directing
rectification of the Register pursuant to section 43 of the
BCA3.
Accordingly, save in the ordinary course of allotments, transfers,
redemptions, any alterations to the Register of Members can only be
made by the Court, upon an application for rectification made by a
member or person legitimately aggrieved. This is particularly so
where, as it did in Sempacher, the "correction" involves
deleting the name of a person whose name has been entered in the
register as a member of the company. Farara J considered that this
would be tantamount to taking away a person's proprietary
interest or depriving them of their property without due process,
something which he held cannot be done other than by way of the
statutory power of the court to order rectification, and with all
the safeguards provided by that process.
Footnotes
1. BVIHC (COM) 2018/00272. BCA s. 41(2)
3. English caselaw, which is persuasive in the BVI, suggests that the register may also be amended by mutual agreement between the member and the company on the grounds of mistake or fraud: Reese River Silver Mining Co v Smith (1869) LR 4 HL 64 at 74, 39 LJ Ch 849, 17 WR 1042 ; Re Poole Firebrick and Blue Clay Co, Hartley's Case (1875) 10 Ch App 157, 44 LJ Ch 240, 23 WR 203. Farara J suggested in Sempacher (obiter) that it might be possible generally to amend the register by agreement between the company and all of its members sed quaere.
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