Updates On Key Legislative Changes In BVI

The British Virgin Islands (BVI) is a prime jurisdiction for business charters. A leading force in the offshore circle, the country is committed to setting an example by aligning with global regulations and adopting a reflective approach to reforming its legislative framework.

The first half of 2015 marks the start of the jurisdiction’s long-running effort in creating a legally sound corporate environment. A fundamental provisional change was introduced by the BVI Business Companies (Amendment) Act, which mandated filing the Register of Directors with the Registry of Corporate Affairs.

From 2019 onward, regulatory changes were more geared toward refining BVI’s investment funds and estate planning regulatory frameworks.

In its latest legal development, the BVI introduced the BVI Business Companies (Amendment) Act, 2022 which seeks to address existing issues in company dissolution, bear shares abolition, and record-keeping measures.

Striking-off and dissolution

“Striking off” is an administrative relief measure only the Registrar can take to delist any BVI company that’s no longer operating in any substantial way.

The legal status is maintained but the entity is subject to a variety of limitations such as not being able to engage in trading activities with its current assets. In this respect, there are six chartered criteria when a company may be struck off or dissolved:

• The company fails to designate/ maintain a registered agent;
• The company fails to deliver any required documents as dictated in the Act;
• The company is confirmed by the Registrar to be inactive or operating without relevant licensing
• The company defaults or is late on its annual payments.

As simply not paying the annual fee would get a company to be struck off, many have resorted to this method to effectively put an entity out of operation. For struck-off entities, there’s a waiting period of 7 years during which remedial action can be taken to bring them back in good standing. Either by taking care of any unfinished payments or ending any previously imposed legal proceedings pre-struck off.

However, the suspended state of a delisted entity is still susceptible to certain problems such as racking up additional late payment penalties or being on a line of costly lawsuits. Stakeholders are also exposed to this liability as they are effectively responsible for any remaining encumbrances that befell the company before it was struck off.

BVI’s latest Amendment Act presents a solution by eliminating the 7-year hiatus period altogether for entities being struck off starting from 1st Jan 2023. This would mean an almost immediate dissolution of an entity that received the strike-off notice in the Registrar’s Gazette.

Struck-off companies are provided with a brief transitional period to settle their remaining affairs promptly.

Restoration of dissolved companies

With the hiatus period now removed from the dissolution process, restoring a corporate entity becomes a much more straightforward matter. A simple application to the Registrar is all it takes to restore a company to full operation. The key conditions are as follows:

• The application is made within 5 years starting from the date of the notice published in the Gazette; and
• A registered agent has agreed to act upon the application and holds up-to-date information on the directors and owners in accordance with AML laws and other provisional statutes.

For struck-off companies with unsolidified assets vested in the Crown bona vacantia, the restoration process involves an additional step of informing the BVI Financial Secretary.

Note that the BVI High Court is the main arbitrary body that will oversee each application with discretion as to whether or not the restoration is in the interest of justice. And would mostly allow cases that involve a company with undistributed assets or ongoing litigations.

Regardless of the restoration circumstance, a company is given a fresh start with its previous struck-off designation being completely wiped from the record.

Publication of director names

The previous enactment of the BVI Amendment Act 2015 mandates the filing of director’s information to the registry of Corporate Affairs but excluded the need for it to be made available publicly. This obviously played a part in promoting BVI’s appeal to business owners that prefer to keep their anonymity high.

However, the Financial Services Commission (FSC) seeks to further enhance this legislation by requiring companies to submit this information on VIRRGIN – an online searchable database – for all registered users to see.

We’d also like to inform you that information such as the director’s address, nationality, date of birth, and others under Sections 118A and 118B will remain as is. Former directors are exempted from this requirement.

New financial reporting rules

The latest BCA amendment adds another layer of financial transparency. Effective from 1st Jan 2023, companies will need to provide annual returns on top of other record-keeping obligations to their registered agent. Although it’s still unclear how exactly the form will be structured, we can infer it to be a simple balance sheet that denotes profits and losses.

The annual return is expected to be filed within 9 months following the end of the company’s financial year without any auditing required and is to be kept private. The registered agent has 30 days after the return was due to inform the Registrar in the event that it has not received the return.

Note that certain entities are exempted from this requirement such as publicly traded companies, companies that pay tax in BVI, and other regulated BVI entities.

Liquidation

Previous provisional requirements of an appointed liquidator typically only require the individual to not be bankrupt, a minor, a disqualified director, or majorly involved in financial management for the previous 2 years.

The BCA amendment act seeks to narrow the scope of qualifications via the introduction of a residency requirement. Specifically, the designated person to perform the liquidation must have lived in the BVI for at least 180 days consecutively or aggregated from short periods before the appointment.

Joint liquidators are also allowed for cases where the company in question maintains its operation far away from BVI on the condition that at least one of them passes the residency test.
Register of Persons with Significant Control.

The BCA Amendment Act introduces a framework for the creation of a public register of “Persons with Significant Control” which is essentially an expanded definition of beneficial owners. While there has already been news of an online database built for the collection of ownership information by 2023, it wasn’t until this amendment that the plan was put in motion.

In other words, this serves as an official announcement that BVI will, by future regulations, chart out specific details regarding the format of such registers: format, management, data handling protocol, and exemption cases.

Closing Words

The above legislative additions will undoubtedly introduce some new administrative queries among the involved stakeholders, but we don’t expect them to be disruptive by any means. BVI is still a great offshore jurisdiction for keeping its staples intact in every critical development that has taken place in the global setting.

In the meantime, BBCIncorp is committed to helping you stay updated and compliant with the latest changes brought about by BCA Amendment Act and BCA Regulations Amendment. With the newly proposed company strike-off regime coming into effect, staying in good standing plays an essential role in future compliance.

In that regard, if you’d like further consultation on proper company dissolution then feel free to contact us at service@bbcincorp.com.