|What are the principal insolvency procedures for companies in your jurisdiction?||
|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?||
i) it fails to comply with, or set aside, a statutory demand
Insolvent voluntary liquidation
Scheme of Arrangement
|What is the procedure and how long does it typically take?||
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.
The time taken depends on the compliance and agreement of the creditors but can be relatively quick.
Scheme of Arrangement
|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.
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?||
|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.
|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:
Permissible orders are very wide:
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?||
|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.
|What are the principle forms of security taken in
your jurisdiction in respect of movable and immovable property?
|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?||
|What if any categories of transaction can be avoided/set aside?||Potentially “voidable transactions” comprise:
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:
“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
|Can directors or shareholders be required to contribute to the liquidation estate?||Yes, in the case of:
|What liability can directors or other officers attract in respect of an insolvent company?||Delinquent officers
Possible orders against delinquent officers are:
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:
When the 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.