BVI Company Law Series - Continuations Out - Shareholders

The BVI Business Companies Act, 2004 (as amended) (the "Act") and its predecessor statute have long recognised that companies which incorporate in one jurisdiction may benefit from the flexibility of being able to migrate to another jurisdiction.

The Act provides a straightforward corporate registry based system for companies to continue into the BVI and, if the BVI is no longer the jurisdiction of choice, for companies to leave the BVI and move to a new jurisdiction , in each case without any break in its corporate existence and provided that the relevant other jurisdiction also permits the same.

In this second of two notes relating to continuations (sometimes referred to as migrations or redomiciliations), we look at the requirements and processes for companies which want to continue from the BVI to another jurisdiction.

As a matter of BVI law (and subject to the position under the laws of the new jurisdiction), upon completion of a continuation the company continues in existence as the same corporate entity, although does so as a company registered in and subject to the laws of the new jurisdiction.

From a process point of view, it is necessary to first register the company in the new jurisdiction before the company is de-registered in the BVI to ensure that a situation does not inadvertently arise where a company is not registered anywhere at a given point in time (which, if such a situation occurred, could threaten the company's continuing existence).

Why move?

There are many reasons why companies may choose to change jurisdiction, but international regulatory developments and policies are a contributing factor. Equally, a jurisdictional regime which suited one stage of a company's life may not be as suitable at a later stage (for example, when new regulations are introduced which reduce the economic benefits of a jurisdiction). Some of the reasons we have seen companies move out of the BVI include:

consolidation of groups or management with corresponding reduction of number of jurisdictions;
developments in law or regulation onshore or offshore; and
the original reason for using the BVI no longer applies.

Restrictions on continuing out

There are few restrictions on a company discontinuing from the BVI to another jurisdiction (provided the other jurisdiction allows it to do so). To ensure that the company may discontinue from the BVI, it should be confirmed that:

the company's memorandum and articles of association (the "M&A") do not prohibit it from doing so, and consent requirements specified under the M&A should also be confirmed;
the company is a company which the Registrar of Corporate Affairs in the BVI (the "BVI Registrar") would issue a certificate of good standing for (in practice this means that it must be up to date on its annual fees and have made required filings under the Act, including of its register of directors);
the registered agent is up-to-date on fees and KYC; and
the laws of the intended new jurisdiction permit companies to continue to such jurisdiction.

It should also be checked whether any security filings have been made against the company with the BVI Registrar in respect of which a notice of satisfaction or cessation of charge has not been filed (this is relevant for additional requirements - noted below).

Requirements for continuation

The company must comply with any requirements of the law of the foreign jurisdiction to enable it to continue. These can vary significantly - for example, some jurisdictions require a BVI law legal opinion as to the ability for the company to discontinue from the BVI and its compliance with the necessary requirements, while others require the BVI Registrar to have been notified in advance. As these can affect timing, cost and practicality of the move, they should be identified at the outset.

From a BVI perspective, the following documents are required:

corporate resolutions - the company will need to authorise the discontinuation and related matters, by way of resolution of directors or members (as applicable based on the requirements of the M&A and the foreign jurisdiction). The resolutions should include approval of any matters required to be approved by the foreign jurisdiction, the entry into documents, and the filings with the BVI Registrar and the corporate registrar in the foreign jurisdiction (the "Foreign Registrar"); and
director's declaration - a director of the company will be required to sign an approved form of declaration (the "Director's Declaration") in front of a notary public confirming that the laws of the foreign jurisdiction permit the continuation and that the company has complied with those laws.

Although depending on the foreign jurisdiction, a BVI legal opinion is also often required to be issued by BVI counsel confirming to the Foreign Registrar, among other things, that the laws of the BVI permit the continuation of the company into the foreign jurisdiction. Walkers can prepare and issue such a legal opinion.

Additional requirement where registered security

If security filings have been made with the BVI Registrar which remain outstanding, the company will either need to arrange for such filings to be de-registered (through the filing of a notice of satisfaction or cessation of charge) or the discontinuation filing will need to include a declaration (the "Security Declaration") specifying that the holder of the security has been notified in writing of the intention to continue the company to a foreign jurisdiction.

The Security Declaration must confirm that the security holder has either:

consented to the continuation; or
not consented, but not objected to the continuation, in which case the Security Declaration is also required to include a statement that (i) the security interest will not be diminished or in any way compromised by the continuation and (ii) the company will continue to be liable for all of its claims, debts, liabilities and obligations that existed prior to its discontinuation.

We have seen on a number of continuations some uncertainty as to the process and effect from a secured lender's perspective (and also as to whether it would be advisable to re-take or take new security upon the company moving jurisdiction) and are happy to guide secured creditors and companies through the process and recommended steps in this regard.

Documents to be obtained from foreign jurisdiction

Local counsel will advise on and attend to the requisite filings in the foreign jurisdiction.

Once the continuation to the foreign jurisdiction has been approved, the Foreign Registrar will typically issue a certificate of continuation (or equivalent document) (the "Certificate of Continuation").

If the Foreign Registrar will not issue the Certificate of Continuation until they have received the Certificate of Discontinuance (defined below), the BVI Registrar may rely upon a provisional Certificate of Continuation as a basis to issue the Certificate of Discontinuance. In those instances, it is very important to ensure that upon receipt of the Certificate of Discontinuance, the process is completed in the foreign jurisdiction to avoid a situation where the company ceases to be registered in any jurisdiction.

Process and filing requirements - BVI

Following the company's continuation to the foreign jurisdiction, the registered agent of the company will need to file copies of the following documents with the BVI Registrar:

the Director's Declaration; and
a certified copy of the Certificate of Continuation.

If the BVI Registrar is satisfied that the requirements of the Act have been complied with in respect of the continuation, the BVI Registrar will issue a certificate of discontinuance with respect to the company (the "Certificate of Discontinuance"), strike the name of the company off the BVI register of companies with effect from the date of the Certificate of Discontinuance, and publish the striking-off of the company in the BVI Gazette. A Certificate of Discontinuance is prima facie evidence that all the requirements of the Act in respect of the continuation of the company under the laws of the foreign jurisdiction have been complied with and that the company was discontinued on the date specified in the Certificate of Discontinuance.

Effect of continuation

As a matter of BVI law, with effect from completion of the continuation of the company to a foreign jurisdiction:

the company remains liable for all of its claims, debts, liabilities and obligations that existed prior to the continuation;
no conviction, judgment, ruling, order, claim, debt, liability or obligation due or to become due and no cause existing, against the company or against any shareholder, director, officer or agent of the company is released or impaired by the continuation;
no proceedings, whether civil or criminal, pending by or against the company, or against any shareholder, director, officer or agent of the company, is abated or discontinued by the BVI Company's continuation to the foreign jurisdiction, and the proceedings may be enforced, prosecuted, settled or compromised by or against the company or against the shareholder, director, officer or agent of the company (as applicable); and
service of process may continue to be effected on the registered agent of the company in the BVI in respect of any claim, debt, liability or obligation of the company arising during its existence as a company under the Act.

Timing

Timing will depend not just on the BVI requirements, but also the requirements of the jurisdiction the company is to continue to from the BVI. For some jurisdictions, where there is an equally efficient system and requirements, the continuation can be completed from start to finish in a matter of days. For others, there is a more involved process, and matters such as creditor consent may extend the process. It is important for this reason to discuss with legal counsel in both jurisdictions any requirements at the outset.

From a BVI perspective, the discontinuation filing is submitted electronically (no originals are required and all filings can be based on scanned copies) and the continuation is effective in accordance with the laws of the jurisdiction the company continues to (subject to it being approved by the BVI Registrar).

Typically the BVI Registrar will approve the filing within a couple of business days (and often on a same day basis) but for urgent situations it is possible to use a premium filing service which can be expected to secure approval within four hours of filing. An additional Registry fee of $500 applies to the premium service.

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.

British Virgin Islands: BVI Company Law Series - Continuations Out