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Amendments and new regulations introduced in British Virgin Islands

The first significant update to the BVI’s corporate law regime since 2006 has come into force on the 15th of October 2012 by introducing the BVI Business Companies (Amendment) Act, 2012, and the associated BVI Business Companies Regulations of 2012.

In general most of the amendments introduced are of technical nature which have as a main purpose the efficient running in the Registry of Companies by reducing or even eliminating issues which required improvement and arisen over the years. Most of the changes are focused on who is permitted to submit certain documentation and in turn to whom the BVI registrar may deliver documents.

The most important changes introduced by the Amending Act and the Regulations are:

Company Names
In order to eliminate the shortage of available names in the BVI, old company names may be accepted to be re-used in appropriate circumstances. In addition, the system which allows BVI Companies to be registered with foreign character names has now been formalized.

Share Class Conversion
Shares in one class or series may provide for conversion into another class or series. Such provision expressly allows for the issue of convertible shares with the mechanism for conversion specified in the M & A.

Bearer Shares
Under the current regime, bearer shares must be held by an authorised custodian. The changes formally confirm that the custodian of a bearer share is not regarded as the shareholder, even though they are vested with voting rights. Registered Agents are now required to maintain a register with respect to bearer share companies, and record information regarding to the Beneficial Owner of such bearer shares.

Security Interest
Security documents governed by BVI Law creating security over shares in BVI Companies can now provide that a charge may exercise their statutory enforcement rights immediately upon the occurrence of a default, as it is now permitted to exclude any statutory moratorium periods. Further, the amendments clarify that any security publicly registered in the BVI will constitute constructive notice to third parties.

Resignation of Registered Agent
Registered Agents may now withdraw a notice of intention to resign (formerly they were unable to). Additionally, where a company finds itself without a registered agent (usually because the former registered agent has resigned), the company (the members, and if authorised by the M & A, the directors) may now have power to appoint one.

Alternate Directors
Alternate Directors may now sign written resolutions in place of their appointing director as well as attend and vote at meetings of directors (previously they could only attend meetings). This amendment will make it much easier for companies to perform business functions faster where directors are unavailable and have appointed an alternate.

Re-Appointment of First Directors
First directors of a BVI Company are appointed by the Registered Agent within 6 months of incorporation. Subsequent directors are appointed by shareholders or where permitted by the M & A, by the Directors. Provision is now made for cases where the Registered Agent has exercised their power to appoint First Directors, but the director(s) die or resign prior to shares being issued. The BC Act is amended to provide that in this case the Registered Agent may appoint one or more persons as further directors.

Liquidation
There are a number of changes to provisions relating to the voluntary liquidation of companies under the BC Act, of which the following are the most relevant:

- Permitted Liquidators
It has now been clarified that an individual who is or at any time in the 2 years prior to the commencement of the liquidation has been a director or acted in a senior management position and whose functions have included financial management of the company or any affiliate is disqualified from acting as liquidator.

- Solvency Declaration
The company must now be both cash-flow as well as balance-sheet solvent (instead of simply cash-flow solvent). Further, the practice of filing the declaration of solvency on commencement of voluntary liquidation without disclosing the names of the directors has been codified.

- Filing and commencement
Filings at the Registry by a voluntary liquidator who is not resident in the BVI may only be made by a registered agent or a legal practitioner. On the other hand, the date that a solvent liquidation commences has been changed to the date of filing of the notice of appointment of a voluntary liquidator rather that the date the resolution appointing the voluntary liquidator is passed.

- Advertising
The new regulations specify how a voluntary liquidator must advertise the commencement of the liquidation in accordance with the BC Act. The provisions prescribe for advertising locally (in at least one issue of a BVI newspaper), and in the company’s principal place of business if the same is outside the BVI (in at least one issue of a newspaper of the place of business, or if it has more than one, of its principal place of business). If the company does not have a place of business, or the voluntary liquidator does not know where the place of business is situated, in such manner as the liquidator considers most likely to come to ten attention of any creditor of the company.

Dissolution
Companies which are struck off will be deemed to be dissolved after seven (7) years rather than ten (10) years.

Listed Companies and Funds
A Provision has been made for future regulations dealing with record keeping requirements for listed companies and funds. These regulations are intended to compliment rules of international stock exchanges and international rules which may be applicable to funds. No timeline has been indicated yet for introducing such regulations.

The above changes are beneficial to the BVI regime, its current and potential users and will increase the BVI’s attractiveness as one of the world’s leading offshore jurisdictions.

Although the amendments to the BVI company regime are fairly wide ranging and varied in scope, they do not fundamentally change the basic model. In this sense, there is nothing in the amendment which represents anything new in terms of BVI products or structure.