Voluntary Liquidation of a Solvent British Virgin Islands Company Incorporated or Re-Registered under the BVI Business Companies Act (as amended) 1 Introduction 1.1 This legal guide applies to companies that have been incorporated, re-registered (whether voluntarily or automatically) or continued under the BVI Business Companies Act (as amended) (the "Act"). It sets out the practical steps necessary to prepare for and implement a voluntary liquidation of such companies and examines the role and duties of the liquidator. 1.2 The issues covered in this guide presuppose that the company in question is solvent, meaning that its assets exceed or equal its liabilities and that it is able to pay its debts as they fall due. Section 197 of the Act provides that a company may be liquidated notwithstanding that there is a charge registered in respect of the company s property under section 163 of the Act and the liquidator shall be bound to give effect to the rights and priority of the claims of the company s secured creditors. If the company does not satisfy this test, or if it is of doubtful solvency, voluntary liquidation may still be an appropriate way forward, but different legal procedures and practical considerations will apply. 2 Preparing for a Solvent Voluntary Liquidation In the vast majority of cases, a voluntary liquidation will be appropriate because the company has come to the end of its natural life. To prepare for this, the company's directors may wish to consider taking practical steps to pay off liabilities and reduce the company's assets to minimise the work required to be done by the liquidator upon appointment. 3 Commencement of the Liquidation A company's voluntary liquidation is deemed to commence at the time at which the notice of the liquidator's appointment is filed with the BVI Registrar of Corporate Affairs (the "Registrar") and continues until the company is dissolved by the Registrar or the liquidation is terminated by the BVI court. 4 The Liquidation Plan 4.1 A Liquidation Plan must be prepared and adopted by the directors of the company and must specify: the reasons for the liquidation of the company; the directors' estimate of the time required to complete the liquidation; 1
whether the liquidator is authorised to carry on the company's business if he determines that to do so would be in the best interests of the company's creditors or members; the names and addresses of each individual to be appointed liquidator and the remuneration proposed to be paid to each. Only individuals (not corporate entities) can be appointed as liquidators, although more than one individual may be appointed on a joint and several basis; and whether the liquidator is required to send all the company's members a statement of account prepared or caused to be prepared by the liquidator in respect of his actions or transactions. 4.2 The Liquidation Plan must be adopted no more than six weeks prior to the date of the resolution appointing the liquidator and a copy of the Liquidation Plan must be filed with the Registrar within 14 days of appointment of the liquidator. 4.3 The Declaration of Solvency The directors must make a Declaration of Solvency stating that in the directors' opinion the company is and will be able to discharge, pay or provide for its debts as they fall due. The Declaration of Solvency must incorporate a statement of the company's assets and liabilities as at the latest practicable date before making the Declaration of Solvency. 4.4 Appointment of the Liquidator The liquidator must consent to act as liquidator of the company prior to his appointment. The directors may, without the need for member approval, appoint a liquidator in certain limited circumstances, including: (ii) (iii) upon the expiration of any period of time or the happening of any event, either of which is prescribed by the company's Memorandum or Articles of Association as a trigger that causes the company's life to cease; if the company is limited by shares, but has never issued any shares; and if the company's Memorandum and Articles of Association permit the directors to appoint a liquidator (in which case, the members must approve the Liquidation Plan). The members of the company also have the power to appoint a liquidator by resolution and to approve the Liquidation Plan. A liquidator may not be appointed by the company's directors or members if: an administrator or liquidator has already been appointed to the company under the BVI Insolvency Act 2003 (as amended); 2
(ii) (iii) (iv) (v) an application has been made to the BVI court to appoint an administrator or a liquidator of the company under the Insolvency Act, and the application has not been dismissed; the person to be appointed as liquidator has not consented in writing to his appointment; the directors have not made a Declaration of Solvency; or the directors have not approved a Liquidation Plan in the prescribed manner. 5 Identity of the Liquidator 5.1 The following individuals are disqualified from being appointed or acting as a liquidator: (f) (g) a disqualified person or an individual subject to an equivalent disqualification under the laws of a country outside the BVI; a restricted person or an individual subject to an equivalent restriction under the laws of a country outside the BVI; a minor; an undischarged bankrupt; an individual who is, or at any time in the previous two years has been, a director of the company or an affiliated company; an individual who acts, or at any time in the previous two years has acted, in a senior management position in relation to the company or an affiliated company and whose functions or responsibilities have included functions or responsibilities in relation to the financial management of the company or an affiliated company; and an individual who is a close family member (which includes a spouse, child, parent, brother or sister) of an individual specified in paragraph or (f). 5.2 A BVI licensed insolvency practitioner will need to be appointed as the liquidator if the company holds, or has at any time held any of the following licences: a banking licence issued under the BVI Banks and Trust Companies Act, 1990; a Class I, Class II or Class III trust licence (not being a restricted trust licence), issued under the BVI Banks and Trust Companies Act, 1990; a company management licence issued under the BVI Company Management Act, 1990; a category A or a category C insurer's licence issued under the BVI Insurance Act, 2008; an insurance intermediary's licence issued under the BVI Insurance Act, 2008; 3
(f) an insurance manager's licence issued under the BVI Insurance Act, 2008; or (g) a money services licence issued under the BVI Financing and Money Services Act, 2009. 5.3 In addition, the Financial Services Commission must approve the identity of any individual proposed to act as liquidator of a regulated entity, which includes all recognised and registered funds. 6 Duties of the Liquidator 6.1 The liquidator's principal duties will be to: take possession of, protect and realise the company's assets; identify all creditors of and claimants against the company; pay or provide for the payment of, or discharge, all claims, debts, liabilities and obligations of the company; distribute the surplus assets of the company in accordance with its Memorandum and Articles of Association; and prepare a statement of account in respect of the liquidator's actions and transactions, and, if the Liquidation Plan so requires, provide a copy of that statement to the company's members. 6.2 In order to perform these duties, the liquidator will have all the powers of the company that are not reserved for the members under the Act or under the company's Memorandum and Articles of Association. These include powers to: (f) (g) take custody of the company's assets and, if necessary, register any of the company's property in the name of the liquidator or his nominee; sell the company's assets at public auction or by private sale without notice; collect the debts and assets due or belonging to the company; borrow money from any person for any purpose that will facilitate the liquidation of the company, and to pledge or mortgage any property of the company as security for any such borrowing; negotiate, compromise or settle any claim, debt, liability or obligation of the company; prosecute and defend, in the name of the company or in the name of the liquidator or otherwise, any action or other legal proceedings; retain solicitors, accountants and other advisers, and appoint agents; 4
(h) (j) carry on the company's business if so authorised by the Liquidation Plan and if the liquidator determines that to do so would be in the best interests of the company's creditors or members. It should be noted, however, that in the absence of the Court's approval, the liquidator is not permitted to carry on the company's business for more than two years; execute any contract, agreement or other instrument in the name of the company or in the name of the liquidator; and make any distribution in money or in other property, or partly in each, and if in other property, to allot the property, or an undivided interest in it, in equal or unequal proportions. 6.3 If at any time the liquidator is of the opinion that the company is or has become insolvent, he is required immediately to send written notice of this to the BVI Official Receiver (the "Official Receiver"). In addition, he must call a meeting of the company's creditors to be held within 21 days of the date of the notice to the Official Receiver. 7 Dissolution As soon as the affairs of the company have been fully wound up, i.e. when the liquidator is in a position to seek the dissolution of the company, the liquidator must file a statement with the Registrar that the liquidation has been completed. On receipt of a Certificate of Dissolution from the Registrar, the final step for the liquidator is the publication in the BVI Official Gazette of a notice that the company has been struck off the register of companies in the BVI and has been dissolved. August 2016 Maples and Calder This legal guide is intended to provide only general information for the clients and professional contacts of Maples and Calder. It does not purport to be comprehensive or to render legal advice. 5