Restructuring and Corporate Recovery Jurisdiction Guide: BVI

 Domestic Procedures

Question Answer
What are the principal insolvency procedures for companies in your jurisdiction?
  • Liquidation: insolvent, voluntary or compulsory
  • Creditors’ Arrangement
  • Scheme of Arrangement
Plans of Arrangement and solvent liquidations are outside the scope of this summary. Receivership is dealt with in the Insolvency Act 2003 (the Act), but is a method of enforcement for secured creditors, not an insolvency  procedure. Part III of the Act, dealing with administration,  is not in force.
Are any of the procedures available on a provisional basis? Yes. A provisional liquidator can be appointed if: (i) an application to appoint a liquidator (with good arguable  grounds) has been made but not yet determined; and (ii)  the company consents or the Court is satisfied that: it is  necessary for the maintenance of assets; or it is in the public interest. Importantly, following the decision in Constellation Overseas Ltd BVIHC COM 2018/206, a “light- touch” or “soft-touch” provisional liquidator can be appointed in aid of restructuring.
What requirements are to be satisfied  for the procedures to be pursued?

Compulsory liquidation

  • Application by: the company; a creditor; a member; the supervisor of an arrangement; the FSC; or the Attorney General
  • Potential grounds are: the company is insolvent; the Court considers it just
  • and equitable; or that it is in the public interest
  • A company is insolvent where:

i) it fails to comply with, or set aside, a statutory demand
ii) execution or process of a judgment, decree or order is returned unsatisfied
iii) the company is unable to pay its debts as they fall due; or
iv) the value of its liabilities exceeds that of its assets

  • The application must be served at least 14 days before the hearing and is typically heard on specified Liquidation Days (usually one or two Mondays per month)
  • It must be advertised (in the BVI and in any jurisdiction appropriate to bring it to the attention of creditors) not less than 7 days after service and not less than 7 days before the hearing
  • The application must be determined within 6 months of issuing unless, before then, an extension is granted

Insolvent voluntary liquidation
Resolution of 75% of the members (unless the M&As require a higher %); the prior written consent of a BVI licenced IP; and no pending application before the Court to appoint a liquidator.

Creditors’ Arrangement
The company must be insolvent and a 75% majority by value of creditors must approve the arrangement.

Scheme of Arrangement
A scheme has to be approved by a majority in number and 75% in value of the creditors.

What is the procedure and how long does it typically take?

The liquidator:

  • Must, within 14 days of appointment: advertise their appointment; file a notice of appointment with the Registrar; and serve notice on the Company
  • Must, within 21 days of appointment, hold a meeting of creditors
  • Take possessions of, protect and realise the Company’s assets; distribute the assets or the proceeds of their  realisation to creditors; and distribute any surplus to the members
  • Provide to all creditors and the Registrar a final report

Depending upon the nature of the assets and the adjudication of claims by creditors, the procedure can take from a few months to many years.

Creditors’ Arrangement
A proposal is made between creditors and the company. An interim supervisor is appointed (with notice to the Registrar). A creditors’ meeting occurs to approve the arrangement. A supervisor is appointed (with notice to the Registrar) in order to implement the arrangement. Any modification of the
initial proposal requires adjournment of the creditors’  meeting.

The time taken depends on the compliance and agreement of the creditors but can be relatively quick.

Scheme of Arrangement
This is a three stage process: a Court hearing convening the creditors’ meeting, followed by the creditors meeting and then a hearing to seek sanction by the Court. The process  can be relatively quick, subject to the notice requirements for the meeting (usually not less than 14 days).

Can any procedures be pursued without the involvement of the Court? Yes: voluntary insolvent liquidation does not necessitate the involvement of the Court. Also, a Creditors’ Arrangement can be pursued without the involvement of the Court.
What is the effect upon control of the company and its assets during those procedures? Liquidation
Upon appointment (by the members or the Court) the liquidator has custody and control of the assets of the company. The powers of the directors and members of the company cease, save for very limited exceptions.

Provisional liquidation in aid of restructuring
The day-to-day management of the company is generally left to the directors and managers of the company, subject to the terms of a Court-approved protocol and the supervision of the provisional liquidator.

Creditors’ Arrangement and Scheme of Arrangement
The only effects are those agreed between the company and the creditors.
Is there an automatic moratorium and if so when does it come into effect and what is its effect? Yes. Upon the appointment of a liquidator no one may continue or commence an action against the company or in relation to its assets or enforce or continue to enforce any right against or over its assets. This does not affect the rights of secured creditors.
Can companies be forcibly wound up other than when insolvent?

Yes, if:

  • It does not have a registered agent
  • It fails to file any return, notice or document required to be filed under the Act
  • The Registrar is satisfied the company has ceased to carry on business
  • The Registrar is satisfied it is carrying on a business of the Virgin Islands without having such licence, permit or authority
  • It fails to pay its annual fee or any late payment penalty by the due date; or
  • The Court considers it is just and equitable, or in the public interest, that it should be wound up
To what extent are the procedures designed to facilitate a rescue of a company’s business?

Traditionally the BVI has essentially been a creditor friendly jurisdiction. The purpose of liquidation is to realise the company’s assets and to make distributions according to the priority of creditors. It is not designed to rescue the company and there is no equivalent of Chapter 11 protection from creditors. However, the recent common law development in Constellation Overseas Ltd, permitting provisional liquidation in aid of restructuring, facilitates the restructuring of BVI companies and of multi-jurisdictional groups containing BVI companies.

Additionally, both Creditors’ Arrangements and Schemes of Arrangement can facilitate a permanent or temporary rescue of the business.

Can the procedures be used to facilitate the sale of all or part of the insolvent company’s business?

A liquidator has the power to sell the business and assets of the company.

Either a Creditors’ Arrangement or a Scheme of Arrangement could include a proposal for sale.

Cross Border

Question Answer
To what extent do the courts in your jurisdiction lend assistance to overseas appointees (through recognition) and in what circumstances?

Statutory recognition: the BVI can provide assistance to overseas appointees from designated “relevant” foreign jurisdictions, being: Australia, Canada, Finland, Hong Kong, Japan, Jersey, New Zealand, the UK and the USA. The BVI court will take into account:

  • The just treatment of all persons claiming in the foreign proceedings
  • Protection of persons in the BVI who may have claims in the foreign proceedings
  • Prevention of preferences and fraud
  • The need for ranking for foreign claimants to be in order with BVI claimants
  • Comity

Permissible orders are very wide:

  • Restrain proceedings
  • Delivery of property of the company to a foreign representative
  • Co-ordinating BVI insolvency with foreign insolvency; or
  • Authorising the foreign representative of any person who could be examined in BVI insolvency proceedings

Common law recognition: the current BVI position is that common law assistance can be given to overseas appointees, but only to those from the "relevant" jurisdictions for the purposes of statutory recognition.

Are there any limitations typically imposed in respect of the recognition of an overseas appointee?
  • The BVI Court cannot grant any assistance that adversely affects setoff rights or the rights of  preferential or secured creditors (without their consent)
  • Under common law assistance, relief will only be granted that is available to the overseas appointee in their home jurisdiction and available at common law in the BVI
What kinds of overseas appointees have been recognised in your jurisdiction? A Hong Kong trustee in bankruptcy has been recognised. A US receiver was refused recognition on the basis that the receivership was intended to protect US investors and was not for the purpose of a “reorganisation, liquidation or bankruptcy” as required by s. 273 of the Insolvency Act 2003.
Do the courts in your jurisdiction assist in applications to subject a company incorporated in your jurisdiction becoming subject to an insolvency procedure in another jurisdiction?

No. Although Part XVIII of the Act contains provisions based on the UNCITRAL Model Law on cross-border insolvency, that Part has not been brought into force.

The existence of a foreign insolvency process in respect of a BVI company does not prevent the BVI court appointing a BVI liquidator and, as a matter of common law, the BVI proceedings will be treated as the primary proceedings.


Question Answer
What are the principle forms of security taken in
your jurisdiction in respect of movable and immovable property?

Movable property
Shares in a BVI company are the most commonly secured BVI asset. Typically an equitable charge will be taken over the shares with the title to the shares remaining with the chargor subject to a commercially agreed enforcement scenario.

Immovable property
Land and other immovable property situated in the BVI is not an asset class that is typically the subject of security.

What is the effect on secured creditors of the commencement of an insolvency procedure? None (without their agreement in writing)
Which creditors are preferred and to what extent? Employees up to $10,000 and the BVI Government in varying amounts.
What is the position regarding the recoverability and quantum of liquidator’s fees and expenses of the insolvency procedure?
  • Fees and expenses are payable out of the estate, subject to Court assessment
  • Typically liquidator’s fees charged at market hourly rates. Rarely fixed as a percentage

Avoidance transactions

Question Answer
What if any categories of transaction can be avoided/set aside? Potentially “voidable transactions” comprise:
  • Unfair preferences
  • Transactions at an undervalue
  • Voidable floating charges; and
  • Extortionate credit transactions

Other than extortionate credit transactions, the transaction must be an “insolvency transaction”: one entered into when the company is insolvent or which causes the company to become insolvent.

The vulnerability period is:

  • 2 years prior to the onset of insolvency for a ‘connected person’
  • 6 months prior to the onset of insolvency for any other person; and
  • 5 years in the case of extortionate credit transactions

“Onset of insolvency” = the date the application to appoint a liquidator was issued or the date the members’ resolution was passed.

A “connected person” includes related companies, and directors and members of the company and related companies.

Who is responsible for seeking orders to set aside such transactions? The liquidator.

Contributions to the liquidation estate and liability of officers

Question Answer
Can directors or shareholders be required to contribute to the liquidation estate? Yes, in the case of:
  • Delinquent officers: misapplication of assets, misfeasance or breach of duty
  • Fraudulent trading: intention to defraud creditors or the company had some other fraudulent purpose
  • Insolvent trading: director knew or ought to have known there was no reasonable prospect of avoiding insolvency (unless they also took every reasonable step to minimise loss to creditors)
What liability can directors or other officers attract in respect of an insolvent company? Delinquent officers
Possible orders against delinquent officers are:
  • To repay, restore or account for money or other assets
  • Pay compensation; or
  • Pay interest
Fraudulent trading or insolvent trading
The Court may order the payment of a contribution to the company’s assets.
In what circumstances can directors be disqualified as a consequence of a company being wound up?

When a director has been convicted on indictment:

  • Of an offence in connection with the promotion, formation, management or dissolution of a company that is or becomes insolvent; or
  • Of an offence under the Act that related to a company that at any time becomes insolvent

When the director:

  • Had an order for fraudulent trading or insolvent trading made against them
  • Is guilty of fraud in relation to an insolvent company or of any misfeasance or breach of duty to it as a director; or
  • In the opinion of the Court, conducted themself as a director of an insolvent company (and other companies) in such manner as to make them unfit to be a director

This guide is not intended to represent legal advice and cannot be relied upon as such, nor do we accept any liability in respect of its accuracy.

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