Key changes to BVI company legislation

By Peter Vas, Loeb Smith Attorneys
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The British Virgin Islands (BVI) Business Companies (Amendment) Act, 2022, which was gazetted on 12 August 2022 and amends the BVI Business Companies Act, 2004, will come into force on 1 January 2023. The BVI Business Companies (Amendment) Regulations, 2022 will also amend the BVI Business Companies Regulations, 2020, and will come into effect at the same time as the above-mentioned Amendment Act.

These amendments represent the commitment of the BVI to ensure that its financial services industry is aligned with international best practices and compliant with the standards imposed by the Financial Action Task Force. The changes also embody the policy decisions of the Company Law Review Advisory Committee following public consultation in 2021.

A list of key changes to be implemented are as follows:

Peter-Vas
Peter Vas
Partner
Loeb Smith Attorneys

Directors’ names to become publicly available. Although the register of directors of a BVI company will continue to be a matter of private record, it will become possible to obtain a list of the names of the current directors of a BVI company through the Virtual Integrated Registry Regulatory General Network, which is the online platform maintained by the BVI Financial Services Commission. The personal particulars of the directors will remain confidential and the names of any past directors will not be disclosed.

Bearer shares. Bearer shares will be phased out in the BVI, and from 1 January 2023 it will no longer be permissible to issue bearer shares, or to convert or exchange registered shares into bearer shares. From 1 July 2023, any existing bearer shares will automatically be converted into registered shares to be held by the relevant company on trust for the owner of the shares.

Register of members. Unless such information is already included in a BVI company’s memorandum and articles of association, a company’s register of members will need to include the nature of any voting rights. This may, as an example, include whether such voting rights are conditional or unconditional.

Public register of beneficial ownership. The BVI has previously committed to introducing a public register of beneficial ownership subject to such registers becoming an international standard. In line with this commitment, a framework will be enacted pursuant to which the BVI may introduce a public register of beneficial ownership by way of future regulations.

Annual financial return. Although every BVI company must maintain financial records to adequately show and explain its transactions, there is currently no requirement for an unregulated company to maintain records in any prescribed form, or to have such records audited or filed with any regulatory or supervisory authority. From 1 January 2023, the Amendment Act will impose a general obligation on every unregulated BVI company to file an annual financial return with its registered agent within nine months of the end of the financial year to which it relates.

While the annual financial return will not be a matter of public record, a company’s registered agent will need to maintain a copy for five years from the date it ceases to act. Although a form of annual financial return has not yet been published, the return is widely expected to contain a simple balance sheet and a profit and loss statement. A company that fails to file an annual financial return may be fined and ultimately struck-off.

Striking off and dissolution. A BVI company that is currently struck off the register of companies by the BVI Registrar of Corporate Affairs is dissolved after seven years. During that period, a BVI company may continue to accrue liabilities, and its directors and members may not take any actions, or act in any way, in connection with the company’s assets.

From 1 January 2023, this regime will be overhauled and every BVI company that is struck off from that date will be dissolved on the date that the BVI Registrar of Corporate Affairs publishes a notice of striking-off in the BVI Gazette. A company will be given 90 days’ notice to regularise its status before it becomes liable to be struck off. Subject to meeting certain prescribed conditions, a BVI company may be restored within five years of being struck off and dissolved by making an application to the BVI Registrar of Corporate Affairs or the Court. Importantly, an application to the BVI Registrar of Corporate Affairs will only be permitted if the company was carrying on business or in operation at the date of its striking-off and dissolution.

Voluntary liquidation. For the first time, a voluntary liquidator in the BVI will need to be resident in the BVI. A liquidator will be deemed to be resident if he or she has been living in the BVI for no less than 180 days, whether continually or in aggregate, prior to his or her appointment. The author notes that the appointment of joint liquidators will continue to be permitted so long as one of the liquidators meets the residency test.

Peter Vas is a partner at Loeb Smith Attorneys in Hong Kong

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