Snapshot: explaining ostensible authority in BVI law

Looking for a quick refresher on some key issues of BVI corporate law? In the latest of our series of snapshots, we explain the concept of ostensible authority in the BVI and why it matters in practice. 

Why ostensible authority matters  

Firstly, what is 'ostensible authority'? In its simplest form, it's the appearance of someone having authority to act on behalf of a company, even if, for example, that person hasn't been given that authority.

The doctrine of ostensible authority plays an important role in BVI company law. It gives counterparties confidence that they can rely on the apparent authority of individuals who act for a BVI company. 

Statutory protection for third parties 

Sections 29, 31 and 32 of the BVI Business Companies Act, 2004 (as amended) (the BCA) state that no act of a BVI company is invalid just because the company did not have the capacity, right or power to perform the act.  

In addition, a BVI company may not assert that the BCA or its constitutional documents have not been complied with, or deny the authority of a person it has held out as a director, provided that person is exercising powers that directors of similar companies customarily have. 

An important exception applies when that person has, or ought to have, knowledge of the relevant limitations of authority by virtue of their relationship with the company. 

No deemed notice of public documents 

It should be noted that a person is not deemed to have notice or knowledge of any document relating to a BVI company, including its constitutional documents simply because they are: 

• available from the Registrar of Corporate Affairs in the BVI (the Registrar) 
• available for inspection at the registered office of the BVI company. 

Codification of common law principles 

The BCA effectively codifies key common law doctrines, including in the English case of Freeman & Lockyer v. Buckhurst Park Properties, and the “internal management rule” as applied in the English case of Royal British Bank v. Turquand. Furthermore, the concept of ultra vires has almost entirely been abolished in the BVI.  

Capacity and powers of BVI companies 

Section 28(1) of the BCA has been drafted so that every BVI company has full capacity to carry on or undertake any business or activity, do any act or enter into any transaction and has full rights, powers and privileges.  

Section 29(1) further confirms that no act of a BVI company and no transfer of an asset by or to a BVI company is invalid because the company did not have the capacity, right or power to perform such act. In practice, a BVI company has the power and capacity to do almost anything on the assumption that such activity undertaken is not illegal, a regulated activity or specifically prohibited by law or its constitutional documents. The BCA specifically permits a BVI company to undertake actions irrespective of corporate benefit. 

What are the limitations? 

If a person dealing with a BVI company has knowledge, or ought to have knowledge by virtue of their relationship with the company, of a constitutional limitation, it is possible for the BVI company to "assert" that against such person. Such an assertion could, potentially, go to the validity of the relevant act, but no further statutory guidance is given and the outcome would be fact sensitive.  

In addition, it is possible for the BVI company to "assert" actual knowledge against a person dealing with it and such an assertion could, potentially, go to the validity of the relevant act. Again, no further statutory guidance is given and the outcome would be fact sensitive. 

How Ogier can help 

For more information, please contact our BVI‑qualified corporate lawyers. Our team advises on corporate, governance and transactional matters across our global network of 13 locations with on‑the‑ground expertise in the Caribbean, Hong Kong, London and the Channel Islands. 

About Ogier

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Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

Regulatory information can be found under Legal Notice