Encouraging Successful Succession: Estate Planning Options For Shareholders Of BVI Companies

O'Neal Webster


Since 1989, O’Neal Webster has provided high-quality legal counsel to domestic and international clients with complex matters in commercial, insolvency, and probate litigation; corporate, banking, finance, and investment fund; trusts and estates; intellectual property; real estate; and admiralty from its offices in the British Virgin Islands, London, and New York.
Shortly after the International Business Companies Act (IBC Act) came into force in 1984, the British Virgin Islands (BVI) became one of the world's most utilised jurisdictions...
British Virgin Islands Corporate/Commercial Law
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By Christopher McKenzie1

Shortly after the International Business Companies Act (IBC Act) came into force in 1984, the British Virgin Islands (BVI) became one of the world's most utilised jurisdictions for the incorporation of international business companies; these companies have been especially popular in Asia, Latin America and the Middle East and many of them have in effect been, and still are, incorporated as personal asset holding vehicles. In 2004, the IBC Act was replaced by a more sophisticated statute, the BVI Business Companies Act (BCA).

Many international practitioners will have encountered structures involving BVI companies – unsurprisingly so because the BVI has over 350,000 active companies on its register and a significant number of these has a sole individual shareholder who also serves as the sole director. Unfortunately in the case of many BVI companies, even those with a sole shareholder/director, too little attention has been given to succession planning. As readers will appreciate, particularly as shareholders age, it is prudent for those advising them to encourage them to focus their minds on their succession planning options at the earliest opportunity. Naturally, as a is the case with any other asset, succession planning needs to be considered by all individual shareholders of BVI companies, no matter how many shareholders or directors they may have, but the main focus of this article is on the many BVI companies which have a sole shareholder/director.

Background – what happens if a shareholder dies holding shares in their sole name

If no succession planning has been undertaken, then following the shareholder's death, an application for a BVI grant of representation will be required. The application will be one for probate if the shareholder leaves a valid will disposing of the shares and appointing executors who are both capable of making and are prepared to make the application. If the shareholder has not left a will disposing of the shares, these will devolve pursuant to the intestacy rules of the jurisdiction in which the shareholder dies 'domiciled' and an application for BVI grant of letters of administration will be needed. Domicile is a technical concept which is not always the same as residence or nationality and laws of the domicile will by-and-large also determine who is entitled to make the application for the BVI grant.

The application for a grant of representation would need to be one for a BVI grant, rather than a grant from the jurisdiction in which the testator dies resident or domiciled, although the resealing of a non-BVI grant in the BVI may be possible.

If no other estate planning steps have been taken, it would usually be prudent for the shareholder to execute a BVI will appointing executors chosen by the shareholder to administer the estate and setting out who is to receive the shares (and on what terms – e.g. on attaining a specified age such as 25). This would generally be essential if the shareholder or their spouse has second family or young or vulnerable relatives or indeed, as will often be the case, if the relevant intestacy laws do not reflect the shareholder's wishes. Such a will's 'essential' and 'formal' validity would be determined in accordance with the law of the domicile; this could impact on such issues as the ability of the testator to dispose of the shares (e.g. if 'forced heirship' provisions are applicable) and the manner in which the will is executed.

On the death of a sole shareholder, who is also its sole director, i.e. unless a 'reserve director' has been appointed, a further court application, involving a short court hearing is also needed after the BVI grant has been obtained. This hearing is required so that the company's shareholder register be updated to reflect the transfer of the shares into the names of the personal representatives or beneficiaries. If, conversely, a 'reserve director' has been appointed pursuant to the provisions of the BCA, this will obviate the need for this post-grant hearing. If none of the three options described below is taken up, the appointment of a reserve direct should be seriously considered in addition to the execution of a will.

Those shareholders who prefer to avoid the cost, delay, inflexibility and potential lack of confidentiality involved in making an application for a grant are advised to take up one of the three probate avoidance options described below. These three options apply both to companies with only one shareholder/director and to companies with multiple shareholders/directors.

First option: the establishment of a lifetime trust

As most practitioners appreciate, the establishment of a lifetime trust is often considered the best available succession planning mechanism. If the terms of the trust are crafted appropriately no grant will be needed and the provisions of the trust can be tailored to meet the short and long-term succession planning needs of the shareholder. The BVI has a much-used alternative trust regime known as the 'VISTA' trust regime which caters specifically for trusts over shares in BVI companies and allows these companies to continue to be run by their directors without inappropriate trustee-involvement. The 'office of director rules' in the trust instrument will serve as a unique succession planning vehicle for directorships.

If a lifetime trust is properly structured the 'firewall' provisions in the BVI's Trustee Act should assist in countering any 'forced heirship' challenges.

Second option: amending the company's memorandum and articles to provide for different classes of shares

If the establishment of a lifetime trust is considered inappropriate, another popular probate avoidance mechanism is to amend the company's memorandum and articles so that the company has two or more classes of shares. The shareholder would continue to own the 'A' shares in the company which would retain all the voting and economic rights during the A shareholder's lifetime. 'B' shares would however be issued to the shareholder's intended beneficiaries. These 'B' shares would have no economic or voting rights until the 'A' shareholder dies, following which the 'B' shares would have such rights; the 'A' shares would then lose their economic and voting rights and, in effect, become valueless.

Such corporate restructuring should avoid the need for a BVI grant of representation, but does not provide the same flexibility as the establishment of a lifetime trust. If circumstances change, the consent of the 'B' shareholders would invariably be needed before relevant changes to the company's shareholdings and/or constitutional documents can be effected. Furthermore such restructuring may be inappropriate if any intended shareholder is a minor or lacks capacity. Potential divorce and creditor claims might furthermore make this probate avoidance option unattractive.

Option three: holding the shares as equitable joint tenants

The third means of avoiding the need to apply for a grant is for the shareholder to transfer the shares into the names of himself or herself and others so that they then hold these as 'beneficial joint tenants'. On the death of the first co-owner the shares would pass, by virtue of the doctrine of survivorship, to the other co-owner(s) without any need for a grant. A potential disadvantage of this option is that any co-owner can 'sever' the joint tenancy without the consent of the other(s), i.e. so that each of them holds undivided interests in the shares and the doctrine of survivorship ceases to apply. Additionally, care must be taken to ensure that everything is properly documented, e.g., to prevent the legal 'presumption of a resulting trust' from applying. This mechanism is, moreover, not considered to be effective as a long-term solution since, at best, it will only postpone the need to obtain a BVI grant until the death of the surviving co-owner.


Practitioners should avoid suggesting various other BVI estate planning mechanisms which some advisers have promulgated in the past. These non-solutions include holding the shares in the name of a nominee: this can in fact sometimes exacerbate existing problems since not only will a BVI grant be needed before the beneficial interest in the shares can be disposed of on the death of the beneficial owner, but a BVI grant would be needed if the nominee dies. Another 'solution' which should be avoided is relying on provisions in a company's memorandum and articles to the effect that non-BVI grants of representation can be relied on; such provisions, which are fraught with potential problems, were commonplace in the past, but are nowadays encountered much more rarely.


1. This article is based on an article which was published in the STEP Journal in April 2024

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.

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