The British Virgin Islands (BVI) Business Companies Act has introduced amendments that will come into force on 1st of January 2023 to comply with international standards and obligations.
The amendment was passed by the House of Assembly on 21 July, 2022, and gazetted on 12 August, 2022, and seeks to bring the Act up to date following an extensive review and consultation with the financial services industry.
The key changes/amendments:
- A BVI company is required to produce Annual Financial Returns (AFR).
- Non-compliance with the above requirement may result in penalties of up to $5000 and will have an impact on the company’s “good standing” status.
- The approach to the handling of strike-off and dissolution processes has been changed, with a streamlined process being implemented for the dissolution, and a more modern regime for restoration.
- The names of the current directors (without further details) will be available upon search.
- A requirement has been introduced that the person(s) being appointed to act as liquidators on a solvent basis are residents.
- A company that will proceed to re-domiciliation, will require to file a notice of this intention at least 14 days to be published in the official gazette.
- BVI might introduce a public register of persons with significant control over the company, shortly.
Financial Records and Accounts:
Apart from its existing record keeping obligations, BVI companies will also be required to provide certain financial information, in the form of an annual return, to their Registered Agent. The form of return has yet to be finalized, but it is expected to consist of a simple balance sheet and profit and loss. Note this will not need to be audited.
Furthermore the annual return will need to be filed within nine months of the end of an entity's financial year. The Registered Agent will have an obligation to inform the FSC, if it has not received the annual return within 30 days of the due time.
The information filed with the Registered Agent will not be made publicly available, nor will the Registered Agent be obliged to file them with any regulator or BVI government authority.
Striking-off and Dissolution
BVI companies may be struck off the Register in several different situations, but are most often than not struck because they have failed to pay their annual fees.
Once removed under the current law, they enter a state whereby the company (and its directors, members, and any liquidator or receiver) will not be able to take any action. Under the current system, it will remain in that state for seven years, unless it is brought back to good standing. A struck company may generally be restored at any time by paying any accrued fees and penalties, together with rectifying any other defect in its compliance with the law (such as appointing a new registered agent where the old one has resigned). If the company does not get brought back into life prior to the end of the seven years, it will be dissolved by operation of law.
The Amended Act effectively abolishes this period, so that struck-off companies will be dissolved immediately.
Brief transitional arrangements will apply to companies which are currently in a struck-off or dissolved state. Nevertheless, we would strongly urge all clients with struck or dissolved companies with underlying assets or business operations, to take immediate action to bring the company back into good standing.
Restoration of Dissolved Companies
The process of restoration will change considerably for companies that are in a dissolved state.
Under the current law, dissolved companies are only restorable by Court order. The Amended Act introduces a simpler way for companies in this state, to restore by application to the Registrar of Corporate Affairs (the Registrar) within five years of the date of dissolution, subject to meeting certain requirements. Chief among them, is that a licensed person has agreed to take on the role of Registered Agent for the restored company, and has declared that the information they hold is up to date and in compliance with various BVI regulations. There is also a requirement to take steps to notify the Crown if any property has vested in it.
A company may still also be restored by court order, in any of the following situations:
- The company was struck off the Register and dissolved, following the completion of a liquidation;
- On the date of dissolution, the company was not carrying on business or in operation;
- The purpose of restoration is to (I) initiate, continue, or discontinue legal proceedings in the name of or against the company; or (ii) to apply for property that has vested in the Crown bona vacantia to be returned to the company;
- In any other circumstances where the court considers that, having regard to any circumstances, it is just and fair to restore the company to the Register.
- When a company is restored under both approaches, it is deemed never to have been struck off or dissolved.
Re-domiciliation (Continuation out)
Currently Companies may continue out of the BVI on the basis of board consent alone, with notification required only to secured creditors. As from 1st January, BVI Companies wishing to continue out of the jurisdiction must now advertise their intention to do so by giving advance warning of at least 14 days to all members and creditors; this will put relevant stakeholders on notice for a sufficient period to implement protective measures or seek injunctive relief, if required.
Limited Access to Director Names
The names of directors of BVI companies will be accessible for users of VIRRGIN. VIRRGIN is the BVI Financial Services Commission's internet-based information network that provides online electronic access to the services of the Registrar, including electronic filings of documents. Searches on VIRRGIN will not reveal names of former directors or personal information on current directors, e.g. residential address, nationality or date of birth. Whilst further announcements are awaited regarding how the VIRRGIN system search will operate, it is understood that it will not be possible to conduct searches against a director's name.
Publicly Available Directors' Names
The British Virgin Islands Financial Services Commission (FSC) will be making available the names of the directors of BVI companies to registered users of the online VIRRGIN system. There is expected to additional cost to the search. Searches will need to be run against a company name, rather than the name of a director.
Clients should note the full register of directors, which companies have been required to file with the FSC on a private basis since 2016, will not be made public. The information available will not include dates of birth, or addresses. The names of former directors will also not be made available.
It is understood that the FSC will extract this information from the registers they have on file, without the need for new or additional action from clients. Entities which have not kept their register up to date, or which are otherwise not in compliance with their existing obligations should, however, take care to rectify this position as soon as possible.
Requirements for Liquidators in Solvent Liquidations
The Amendment Act introduces new eligibility criteria for persons wishing to act as a liquidator for solvent liquidations of BVI companies as from 1 January 2023. A person must have physically resided in the BVI for at least 180 days prior to the appointment, to be eligible as a liquidator. Under certain circumstances it may still be possible to appoint a joint liquidator where only one liquidator qualifies under the new criteria. The Amendment Regulations create additional experience and expertise requirements for any person wishing to be appointed as a liquidator.
Register of Persons with Significant Control
The Amended Act provides for the framework by which the BVI might in the future introduce a public register of persons with significant control, although it is important to note that no changes are expected to come into force on 1 January. The BVI government had previously committed to introduce such a register by 2023, subject to certain caveats including such registers becoming an international standard.
The Amended Act provides that the Government may by future regulations, specify the requirements for the format of such registers. It also provides that the regulations may contain exemptions or restrict access to a certain person's data.
By the end of 2022, all BVI companies should prepare themselves to comply with the aforementioned legislation.
Note transitional arrangements will apply to companies which are currently in a struck-off state so that, unless the seven years since their strike-off date expires earlier, they will be able to apply to the Registrar until the 1st of July 2023.
Please contact your company manager or email us at firstname.lastname@example.org should you require any further information.
The content of this article is meant to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.