Article by Clinton Hempel, Claire McConway, Alan Hughes and Elizabeth Killeen
The draft BVI Business Companies (Amendment) Act 2015 (the "Bill") seeks to introduce various changes, both material and clarificatory to the Act. Most of the proposed changes are indeed welcome whilst others are still subject to an on-going period of consultation, given varying concerns from industry.
Proposed amendments to the BVI Business Companies Act (the "Act")
The more significant matters in the draft Bill include:
- Enabling a BVI business company to cancel its own shares for no consideration (in specific circumstances) and clarification regarding the issue of bonus shares for no consideration.
- The introduction of a required filing of a register of directors (with restricted access).
- Allowing the electronic transfer of company shares (for companies listed on a recognised exchange).
- The clarification of requirements for BVI Business Companies to continue out of the BVI.
Enabling a BVI business company to cancel its own shares for no consideration
This is indeed a welcome amendment to the Act, given the commercial nature and general purpose of BVI Business companies in the global corporate environment and clarifies the position of share redemptions/cancelations for no consideration by way of surrender of the relevant shares in question.
The Bill includes a specific provision whereby a BVI company may acquire its own fully paid shares for no consideration by way of surrender of the shares to the company by the shareholder.
Issue of Bonus Shares deemed fully paid
Currently, shares in a BVI Business Company must be issued for no less than their par value. The onus falls on the directors of the Company to confirm that the par value consideration has been received, on the issue of the shares.
The par value requirement raises concerns, particularly in instances of share incentive schemes where bonus shares are required to be issued. The Bill proposes that a new section be included whereby a bonus share issued by the company is deemed to have been fully paid on issue.
The introduction of a required filing of a Register of Directors (restricted access)
One of the more controversial proposals of the Bill relates to the introduction of a mandatory filing system whereby the register of directors of a BVI Company will be required to be filed with the Registrar of Corporate Affairs in the British Virgin Islands (the "Registrar"). The filed register will not be available for general public review with only a specified category of persons being granted access rights to the registers.
The proposed filing system in itself is not the subject of any particular or material concern, however, issues regarding the varying categories of persons who have the right to view/access the filed registers are currently the subject of an on-going consultation process.
Electronic transfer of company shares (for companies listed on a recognised exchange)
In keeping with current international corporate standards, the draft Bill proposes to introduce a welcome clarification regarding the manner in which shares in a BVI company are traded on a recognised foreign exchange.
Currently, shares in a BVI Company are required to be transferred by way of an "instrument of transfer", whereby a shareholder is required to execute/complete a specific form of stock/share transfer document confirming specific aspects of the transfer (i.e. name and address of the transferee/consideration etc). The Bill recognises the impractical nature of such a requirement where shares are traded on exchanges around the world and as such seeks to introduce an appropriate exemption (subject to certain circumstances) to the current mechanical method of share transfers.
Clarification of requirements for BVI Business Companies to continue out of the BVI
The Bill seeks to clarify and expand upon the technical process under which a BVI Company may continue out of the British Virgin Islands.
The current proposals include:
- Specific confirmation from the Registered Agent of the Company that the various laws of the foreign jurisdiction have been complied with regarding continuation into that jurisdiction; and
- The mechanics surrounding the manner in which existing and released charges/security interests are dealt with upon a proposed migration.
The relevant proposals detailed above are still subject to a consultation period and are likely to be amended and clarified from their current form.