With the 4 October deadline approaching to initiate the liquidation of a company in the British Virgin Islands (BVI), you need to act now. Read on for a guide from our expert.
What is liquidation?
Liquidation is the formal closing of a company when it has fulfilled its purpose or is no longer required.
Why should companies be formally liquidated?
Liquidation creates greater certainty for the companies and its directors/members. When a company has been formally liquidated it ceases to exist, and the statutory duties and liabilities of the director/member come to an end.
This process is highly recommended rather than leaving the company to be administratively struck-off - it takes seven years to be dissolved.
Advantages of liquidation
Timing: Assuming the company is not regulated, the voluntary liquidation process usually takes four to six weeks.
Assets: If the company has assets, these may be distributed by:
- directors, before the liquidation commences; or
- the voluntary liquidator, after the liquidation has commenced. If this becomes an issue, then the company should obtain onshore tax advice.
Liabilities: The liquidator will deal with any liabilities the company has before it is dissolved. As soon as the Certificate of Dissolution has been issued by the Registrar, the company no longer exists, and it will cease to be liable for any Registry fees. Also, any statutory liabilities that the company and its directors/members have will come to an end.
Duties and obligations: When the Certificate of Dissolution has been issued by the Registrar, the company no longer exists, and it will have no further duties and obligations under BVI law.
Economic Substance: The company will have no further economic substance reporting obligations under BVI law once the Certificate of Dissolution has been issued. As a result, the company should ensure it has complied with all economic substance reporting requirements before the liquidation is finalized. For more information read our article on Economic substance.
Pre-requisites: A voluntary liquidation is a straightforward and inexpensive process that brings the company to an orderly end. As part of the liquidation process, an advert must be placed in a newspaper circulating in the BVI and the company's principal place of business.
The adverts are required to notify potential creditors of the liquidation.
Once appointed, the liquidator will:
- take possession of any assets the company has;
- discharge the company's obligations/liabilities; and
- distribute any surplus assets to the members.
The directors will remain in office but cease to have any function or power.
When the liquidator has dealt with the assets (if any), the Registrar can issue a Certificate of Dissolution and strike the company off the Register of Corporate Affairs.
Effect: When the Certificate of Dissolution is issued, the company no longer exists and it can no longer incur liabilities, sue, or be sued. During the liquidation, the liquidator can commence and defend legal proceedings in the company's name, realise and deal with its assets and make payments.
Next liquidation steps to avoid license fee
As we approach the licence fee payment due date for second half year companies (30 November 2021), we recommend that if companies incorporated during this period, now wish to be liquidated this process needs to commence on or prior to 4 October 2021 to be finalised by 26 November 2021, to avoid settling the 2021 government licence fee.
How can TMF Group BVI assist?
- We can be appointed as assistant to the liquidator or as liquidator.
- We can prepare the liquidation documents (including local adverts in the newspaper).
- We will file all documents with the Registry, to effect and finalise the liquidation.
Talk to us
TMF Group BVI has the local knowledge to help you identify and face any challenge or opportunity for your business.
Whether you want to set up in BVI, or need help to streamline your existing BVI operations, get in touch to ask us a question.
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.