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This briefing note focuses on the solvent liquidation of non-regulated BVI companies.
Voluntary liquidation of a solvent BVI company is governed by the BVI Commercial Companies Act, as amended (BCA). The BCA applies to all companies that have been incorporated, re-registered (voluntarily or automatically) or continued as BVI companies under the BCA.
Solvent liquidation is a method by which the directors/shareholders are able to close the affairs of a BVI company in an orderly manner and, at the end of the process, the BVI company is permanently dissolved and can no longer be revived or continued. in justice. Name.
If the BVI company is, or was at any time, a BVI regulated person (e.g. a mutual fund, bank, trust company or insurer), a liquidator can only be appointed if the BVI Financial Services Commission gave:
- his prior written consent to the voluntary liquidation of this BVI company; and
- its prior written approval of the appointment of the person(s) proposed to be appointed as liquidator.
ELIGIBILITY FOR SOLVENT LIQUIDATION
Under the BCA, a BVI company can only be put into solvent liquidation if it:
- has no liabilities; Where
- is able to pay its debts as they come due (cash test); and
- the value of its assets is equal to or greater than its liabilities (balance sheet test).
If a BVI company fails the relevant solvency tests or if its solvency is in doubt, it may be put into insolvent liquidation in accordance with the procedure provided for in the Insolvency Act 2003 (insolvency law).
Although not an obligation, it is generally customary in the market for the directors of a BVI company to discharge all debts, distribute the remaining assets to the shareholders of the company BVI and agree on the liquidator’s fees/expenses before initiating a liquidation in order to streamline the liquidation process and ensure that the liquidation documents do not contain any commercially sensitive information.
Subject to the specific terms of the Memorandum and Articles of Association of a BVI company, a solvent liquidation of a BVI company may be initiated either by a resolution of its directors or by a resolution of its shareholders.
To begin a solvent liquidation, the directors of a BVI company must approve, by resolution:
- a statement of solvency (attaching a statement of the company’s assets and liabilities in an approved form); and
- a liquidation plan (detailing, among other things, the estimated liquidation period and identifying and instructing the proposed liquidators).
While the directors of a BVI company often approve the solvency statement and plan of liquidation and largely direct the process in its initial stages, the memorandum and articles of association of a BVI company may require that the liquidation and the appointment of the liquidator are also approved by the shareholders (whether or not they have already been approved by the directors).
APPOINTMENT OF LIQUIDATOR
A person does not need any special qualifications to act as liquidator in a BVI solvent liquidation, unless the BVI company is a regulated entity, in which case the liquidator will likely need to be a licensed insolvency practitioner.
A liquidator must be a natural person and cannot be a legal person.
However, certain people are restricted from acting as liquidators, including undischarged bankrupts and people (and their next of kin) involved in the management of the company within the previous two years.
The proposed liquidator must accept the appointment in writing and, once received, the BVI company must resolve to formally approve the appointment of the liquidator. This resolution must be passed within four weeks of the declaration of solvency and within six weeks of the approval of the liquidation plan, but in practice the consent of the liquidator is often received in advance and the appointment of the liquidator is included in the resolutions approving the liquidation documents.
Liquidation officially begins when the liquidator files the following documents with the BVI Registrar of Corporate Affairs (Clerk):
- notice of appointment of the liquidator;
- a copy of the solvency statement (with or without the statement of assets and liabilities); and
- a copy of the liquidation plan.
The statement of assets and liabilities is not required to be publicly filed, but may be if the parties so choose.
The liquidator must make the required filings within 14 days of his appointment and the date of filing will be considered the start date of the liquidation.
Within 30 days of filing the required documents with the Registrar, the liquidator must also give public notice of his appointment by publishing an announcement in the BVI Official Gazette and at least one issue of a newspaper in both the BVI and the headquarters of the BVI company. business.
Copies of the solvency statement (with statement of assets and liabilities) and the liquidation plan must also be kept by the registered agent of the BVI company.
MONITORING AND CONTROL
Once liquidation has officially commenced, the liquidator has custody and control of the assets of the BVI company and, subject to specific exceptions, the directors cease to have any powers or duties (although they will remain in office) . The administrators may, however, exercise specific powers conferred on them by written notice from the liquidator.
The role of the liquidator in the liquidation of BVI’s business consists mainly of:
- protect and realize the assets of the BVI company;
- discharge all debts, obligations and claims against BVI; and
- distribute the surplus assets to the shareholders of the BVI company.
It is important to note that the appointment of a liquidator of a BVI company does not affect the rights of a secured creditor to enforce its security interest in the assets of a solvent BVI company in liquidation.
In the exercise of his functions, the liquidator may exercise all the powers of the BVI company which are not reserved to the shareholders by the BCA or the incorporation documents of the BVI company. This may include:
- perform any contract on behalf of the BVI company;
- borrow money on secured or unsecured terms;
- pursue or defend any legal proceedings; and
- seek professional advice.
If authorized by the directors or under the terms of the liquidation plan, the liquidator may also carry on the activities of the BVI company for up to two years after his appointment, if it is determined that it is in the interest creditors. or shareholders of this BVI company.
REMOVAL OF A LIQUIDATOR
The BVI court may, at the request of a director, shareholder or creditor of a BVI company in solvent liquidation, order the dismissal of a liquidator.
A liquidator may be removed if the court finds a defect in his appointment or if he has failed to comply with a court order.
The court also has the discretion to remove a liquidator if it is determined that the liquidator:
- has a conflict of interest;
- falls short of the standards expected of a competent liquidator; Where
- must be withdrawn for another reason determined by the court.
The liquidator must receive at least 14 days’ written notice of the withdrawal request.
If the application is successful and the court orders the removal of the liquidator, the applicant must file a copy of the court order with the Registrar.
CONCLUSION OF A SOLVENT LIQUIDATION
As stated above, in a solvent liquidation, the main functions of a liquidator are to discharge all debts or obligations of the BVI company and to distribute any residual capital to the shareholders of the BVI company.
It is common (but not required) for the liquidator to prepare a statement of account for the shareholders at the end of the liquidation of the BVI company under the plan of liquidation.
Filing of the Statement of Completion with the Registrar
Once the liquidator has concluded the affairs of the BVI company, a statement of completion must be filed with the Registrar. The registrar will then remove the BVI company from the register of companies and issue a certificate of dissolution.
Publication of notice of cancellation and dissolution
Upon receipt of the certificate of dissolution, the last duty of the liquidator is to publish a notice in the Official Journal indicating that the BVI company has been deregistered and dissolved.
The dissolution of the BVI company is effective from the date of issue of the certificate and, from this date, the BVI company can no longer incur debts or sue or be sued in its own name.
The BVI courts have indicated that once a BVI company has been liquidated, then deregistered and dissolved, claims to restore the company will only be accepted in very limited circumstances. These include circumstances where assets have been overlooked or have come to light unexpectedly after the liquidation process has been completed.
Where the court grants restoration of a BVI company after it has been dissolved in this manner, the BVI company will be restored to a state of liquidation so that any deficiencies in the liquidation are corrected and the liquidation is finally concluded.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.