British Virgin Islands company law
The British Virgin Islands has approximately 30 registered companies per head of population, which is likely the highest ratio of any country in the world.
Annual company registration fees provide a significant part of Government revenue in the British Virgin Islands, which accounts for the comparative lack of other taxation.
That legislation was passed specifically to try and promote the incorporation of offshore companies as a method of economic development in the wake of the cancellation by the U.S. of the double taxation treaty which had existed between the two countries prior to that time.
However, in the early 2000s the British Virgin Islands came under external pressure to repeal statutes such as the International Business Companies Act which provided for "ring-fenced" taxation (i.e. entities which were exempt from taxation in the British Virgin Islands provided they did not engage in business within the jurisdiction).
[2] The change had relatively little impact on incorporation rates as the British Virgin Islands imposes virtually no form of direct taxation.
Slightly unusually, in the British Virgin Islands the formation of a company does not involve the issuing of subscriber shares.
Re-positioning itself as a responsible international financial centre and tax planning destination, the BVI has turned its attention to Asia-based clients.
In exception circumstances the courts are prepared to "pierce the corporate veil" and treat the assets of the company as belonging to the members (or, conversely, treat the company's obligations as the obligations of the members), but the circumstances in which this will be done are rare and exceptional.
Furthermore, various matters are required by law to be regulated in the memorandum of association of the company,[16] irrespective of the provision of any shareholders' agreement.
Directors owe strict duties of good faith to exercise their powers for a proper purpose and in the best interests of the company.
There are extremely few matters of corporate governance whereby the board is required to obtain the approval of the company's members.
Members typically operate by a simple majority vote (there being no statutory concept of "special resolutions" in British Virgin Islands law any more), although there are special statutory provisions to protect minority shareholders against "unfair prejudice" on the part of majority shareholders,[21] and this is largely based upon unfair prejudice in United Kingdom company law.
This reflects the offshore nature of most British Virgin Islands companies, and the different social and economic environments in which they operate.
[26] This is based upon the removal of the requirement to state an authorised capital in a company's constitutional documents (instead a company only needs to state the maximum number of shares it is authorised to issue), combined with the abrogation of capital maintenance rules (in the British Virgin Islands so long as a company remains solvent after the distribution, it can distribute money or other assets back to its shareholders by way of dividend or share redemptions[27]).
Furthermore, various other British Virgin Islands statutes require companies conducting certain types of business to maintain certain levels of share capital.
The approach to share capital in the British Virgin Islands is extremely flexible, and this reflects the desire to maintain the appeal of companies formed in the jurisdiction for finance transactions.
Shareholder voting in the British Virgin Islands is still predicated by the normal basis of majority-control.
[29] British Virgin Islands companies still technically have the power to issue bearer shares where their constitutional documents so provide.
Bearer shares which are not deposited with a licensed custodian are disabled by law, and cannot vote or receive distributions.
Companies are not required to file financing statements in the British Virgin Islands when borrowing money.
[31] British Virgin Islands companies may give financial assistance for the acquisition of their own shares without the requirement of going through a "whitewash" procedure.
[48] British Virgin Islands law only provides for a very small class of preferential creditor, and these are rarely commercially significant in insolvent liquidations.
Under British Virgin Islands law it is possible to appoint an administrative receiver pursuant to a floating charge over all or substantially all of a company's assets and undertaking.
The insolvency regime in the British Virgin Islands does not really provide for any form of debtor in possession rehabilitation.
Unusually, the entire Companies Registry in the British Virgin Islands falls under the purview of the FSC.
