British Virgin Island law sets out clear procedures for striking off, dissolution, and restoration of BVI companies. Governed by the BVI Business Companies Act and the Insolvency Act, the procedures apply to BVI Business Companies as well as former International Business Companies (IBCs). But what are the reasons for dissolving a company or having it struck off? And in what cases can it be restored?
There are a number of reasons for dissolving a company. A creditor may pursue liquidation of a company to recover a debt; voluntary liquidation and dissolution may be sought in cases where the company was formed for a specific purpose which has now been fulfilled; or the Registrar may strike off a company for failure to comply with statutory requirements. These are all typical circumstances leading to dissolution of BVI Business Companies, but by no means are they exhaustive.
The Registrar of Corporate Affairs (Registrar) has the power to strike a company off the Register of Companies (the Register) where a company defaults on its statutory obligations, such as by failing to have a registered agent, failing to pay annual licence fees and penalties, or ceasing to carry on business.
Initially, the company will merely be struck off, but will continue to exist as a legal entity until the date that it is dissolved and continues to incur liabilities. BVI Business Companies struck off the Register on or before 15 October 2006 were dissolved after having been struck for a continuous period of 10 years. Any company struck after 15 October 2006 is dissolved after being struck for a continuous period of seven years.
A company is also dissolved following voluntary liquidation or insolvent liquidation under the Insolvency Act, 2003. In those cases, an orderly distribution of the company’s assets is completed and dissolution takes effect immediately upon strike-off. The Registrar will then issue a Certificate of Dissolution.
The Property of a Dissolved Company
Any property not disposed of prior to a company’s dissolution is deemed to be owned by the BVI Government. However, if a company is restored, any tangible property that has not been disposed of must be returned to the company. Any money received by the Crown, or the value of property which had been disposed, is paid to the company out of the BVI Consolidated Fund.
A dissolved company also remains liable for all fees and penalties due and owing to the Registry, as if it was continuously registered, with the result that these fees are required to be paid by the company prior to its restoration.
The majority of restoration cases in the BVI involve companies that continue to own either valuable real, personal, or intangible property, or that desire to continue to operate as a going concern. It is often the case that property had not been effectively disposed of, and restoration is necessary in order to effectuate the valid transfer of that property.
A company can only be restored by application to the court, and that application must be made to the court within 10 years of a company’s dissolution.
One peculiarity of the restoration provisions is that a company is able to apply for its own restoration, even though it presumptively does not exist. An application can also be made by a creditor, member, director, or former liquidator of the company, or, in the case of BVI Business Companies, any person who can establish an interest in having the company restored to the Register. This last category of persons cannot apply for restoration of former IBCs.
When Will the Court Grant a Restoration Application?
In Patrick Smulders v Registrar of Corporate Affairs and Financial Secretary, Adderley J held that there must be an identifiable special or beneficial purpose for restoration. He also went on to list the matters that should be considered by the court when determining whether to exercise its discretion. In summary these are as follows:
- The applicant must fall within the statutory class of persons who can bring the application
- The purpose for which the company was formed
- The purpose for which it is to be restored—which should be for a beneficial purpose
- The reason why the company was struck off
- The length of time that it was dissolved and any delay in seeking its restoration
- Any potential prejudice to a third party
- Whether in all the circumstances it is just to restore the company
The court may refuse to restore a company, but this discretion must be exercised proportionately, and such a decision should be the exception and not the rule where it is just to do so.
The Court may also attach conditions when granting a restoration application. For example, if a company was struck off for failing to have a registered agent, the court may well impose a condition that the applicant first confirm that a licensed person has agreed to act as its registered agent upon its restoration.
However, in cases of dissolution following a liquidation, the court is prohibited from making an order of restoration unless certain pre-conditions are fulfilled, such as the nomination of an eligible person who has consented to act as liquidator (in practice a licensed insolvency practitioner) and proof of satisfactory provisions for the expenses and remuneration of the liquidator.
The Effect of Restoration
A company is restored effectively on either the date and time that the sealed order of the court is filed, or where applicable, the date of the court order or other date specified in the order.
When a company is restored to the Register, it is deemed to have continued in existence as if it had not been dissolved or struck off the Register. A company restored following winding-up would be restored in liquidation. A company which was dissolved following administrative strike-off would be restored in good standing but would be liable to pay all statutory fees and penalties from the last date that these were paid to the date of restoration.
The author, O’Neal Webster commercial litigator Asha Johnson-Willins, is regularly instructed in company liquidations, restorations, rectification of shareholder registers, and a range of other corporate and commercial litigation matters. For further queries, she may be reached at firstname.lastname@example.org.