Receiverships in the BVI


Shining a light on the courts of British Virgin Islands’ approach to granting the appointment of receivers, and the state of the law in respect of this powerful interim remedy.

There have been an increasing number of court applications in the British Virgin Islands (BVI) for the appointment of receivers as an interim remedy to “hold the ring” in respect of assets that are the subject of ongoing litigation, and in aid of the equitable execution of judgments.

The appointment of receivers is more commonly used as a remedy by which a secured creditor can enforce its security against assets of a company that is in financial difficulty, or in breach of a debt obligation.

Jeremy Lightfoot
Tel: +852 3628 9016

The BVI courts have demonstrated a flexible approach to the appointment of receivers and a willingness to appoint receivers in circumstances where there is a need to preserve or recover assets, or in aid of the equitable execution of judgments. As can be seen by the following review of most recent court judgments, the appointment of receivers is a remedy not to be taken lightly. While BVI courts maintain a flexible approach to assisting parties against recalcitrant defendants, they will only make a receivership order in suitably serious cases.

The principles applicable to the appointment of receivers were outlined in the case of Norgulf Holdings Limited v Michael Wilson and Partners:

(1) The applicant must have a good arguable case in respect of the underlying claim. This has since been clarified by the Eastern Caribbean Court of Appeal to mean a case that is “… more than barely capable of serious argument…” and not necessarily a case in which the applicant has more than a 50% chance of success in the underlying claim. The court of appeal noted that the threshold test for the appointment of a receiver is higher than that for a freezing injunction, echoing its findings in the Norgulf case at paragraph 27:

James Noble
Tel:+65 6911 8322

“The appointment of a receiver is more intrusive, more expensive, and less reversible than the grant of an injunction … The appointment of a receiver is more draconian than issuing a freezing order because of the expenses and inconvenience which often arise with the appointment.”

(2) There must be a real risk of dissipation of assets. The court of appeal in the case of Vinogradova [a dispute case surrounding the distribution of assets of a deceased Russian individual’s estate] clarifies that the applicant must demonstrate a “real risk” of dissipation by virtue of “solid evidence” in support of any application to appoint a receiver.

(3) The court of appeal in Vinogradova – applied in the case of Industrial Bank Financial Limited Leasing Co Ltd v Xing Libin, and VTB Bank (Public Joint Stock Company) v Miccros Group Ltd and Taurus Ltd –also underscored that an applicant must show it is “just and convenient” to appoint a receiver. A receiver should not be appointed where a freezing order would provide adequate protection.

Dhanshuklal Vekaria
Senior associate
Tel: +852 3628 9002

In the matter of Mitsuji Konoshita and APF Group Co Ltd v J Trust Asia PTE Ltd, the court of appeal considered a number of issues arising from the first instance decision granting a world-wide freezing order over the funds of the appellants, and a subsequent order appointing two receivers to APF. The court of appeal was asked to find that the first instance court had wrongly exercised its discretion to make a receivership order after the grant of the freezing order.

The Thai authorities filed a criminal complaint against Konoshita for, inter alia, fraud and misappropriation of assets of Group Lease, of which Konoshita was the CEO. J Trust applied for and obtained a worldwide freezing order against the appellants, in support of a claim for knowing receipt and dishonest assistance.

A receivership order appointing two receivers to APF (controlled by Konoshita, and holding a controlling interest in Group Lease) was subsequently made for the purpose of asset protection, pending resolution of the underlying proceedings.

The court of appeal found that a failure to comply with a disclosure obligation (in this case pursuant to the freezing order) was “a significant factor in determining whether it is just and convenient to appoint a receiver. Invariably, where there is a continuous failure to comply with a disclosure obligation, a court would appoint a receiver.”

In spite of the freezing order, the court found there was a real risk of dissipation, and the failure to comply with the disclosure obligation was only part of the evidence on which the judge relied. The court of appeal upheld the receivership order.

In the matter of Koshigi Limited and Svoboda Corporation v Donna Union Foundation, the court of appeal was again asked to consider the exercise of discretion by the first instance court in appointing receivers over Koshigi and Svoboda. A freezing order was granted over the assets of Koshigi and Svoboda in support of a London Court of International Arbitration award.

The court of appeal held that a failure to comply with the terms of a freezing order (being a prohibition against dissipation of assets and a disclosure order) provided cogent evidence to justify the appointment of receivers. The receivership order was conditional in that the receiver had no power to vote the shares of Koshigi and Svoboda without leave of the court, so any interference to Koshigi and Svoboda would be limited.

It was thought that the BVI court had sought to curtail the use of receivers, noting its concern with the increasing number of receivership applications. However, it can be seen from both the Vinogradava and VTB Bank cases that the court was simply applying the existing test for the appointment of receivers, and on the facts of each case it was not just and convenient to make a receivership order.

Vinogradava involved the distribution of assets of a deceased Russian individual’s estate and a dispute arising between the beneficiaries in relation to loans made by a Cypriot company to the deceased, with a BVI company controlling the Cypriot company. A judgment was issued in Moscow against two of the beneficiaries in favour of the Cypriot company. Pending appeal, the two beneficiaries applied for receivers to be appointed over the BVI company, because if the appeal failed there was a risk that the proceeds of the Russian judgment would be dissipated, while related Swiss proceedings remained extant. The court of appeal found that a freezing injunction would provide adequate relief and that the relief should be properly sought in Russia.

In the case of VTB Bank (Public Joint Stock Company) v Miccros Group Ltd and Taurus Ltd, VTB Bank obtained judgment in the BVI in separate proceedings against Skurikhin, a Russian businessman and chairman of SAHO group of companies, in the sum of about US$22 million. VTB Bank, in support of the execution of the judgment, had an interim receiver appointed in respect of the single issued share in Miccros, which was said to have lent €19m (20.8 million) to a company called Pikeville, to purchase multiple Italian properties. Taurus, being beneficially owned by Skurikhin, held the single issued share in Miccros and sought to have the receivership set aside, with VTB Bank applying to extend the interim receivership.

The BVI court said the purpose of an interim receivership order was to obtain interim relief, and nothing indicated that VTB would take substantive steps to enforce the judgment if the receivership was extended. Any concerns as to Miccros interfering in the process of the realisation of the Italian properties by the administrators of Pikeville could be addressed by a limited form of freezing injunction.

Most recently, in Industrial Bank Financial Limited Leasing Co Ltd v Xing Libin, the BVI court reaffirmed its position that equitable receivers would be appointed in appropriate cases where it would be “just and convenient” to do so. In this case, Industrial Bank obtained judgments against Chinese businessman Xing in the PRC, who owned 100% of Firstwealth Holdings, a BVI company that owned assets in Hong Kong. The judgments were recognised in Hong Kong and subsequently recognised in the BVI, with a charging order ultimately made over the shares of Firstwealth.

While Firstwealth was considered to be under the control of Xing, the assets of Firstwealth were not, the BVI court stating that, “it is trite law that the assets of a company are not the assets of even a 100% shareholder”. The BVI court could, however, order the appointment of an equitable receiver over the shares of Firstwealth, who in turn could replace the existing director of Firstwealth and take steps to realise the assets of the company. It was the view of the BVI court that it was unlikely that Hong Kong would refuse to recognise the appointment of an equitable receiver over the shares of a BVI company.

While it may be considered by some commentators that the law in the BVI as to the appointment of equitable receivers is in flux, it is the view of the authors that the BVI courts’ recent decisions have had the effect of underscoring the relevant principles, and that the appointment of receivers continues to be available in appropriate cases.


Carey Olsen Hong Kong LLP
Suites 3610-13 Jardine House
1 Connaught Place
Central, Hong Kong
Tel: +852 3628 9000
Fax: +852 3628 9090