“All good things must come to an end.” – Well-known saying by Geoffrey Chaucer (1374).
Why Choose Voluntary Liquidation
BVI companies are commonly incorporated without a specific termination period. However, once they have served their useful business purpose their owners must consider the best way of terminating the entity. Under BVI law, when a BVI company has not paid its licence fees for a period of seven consecutive years it will be deemed dissolved.
Although some owners opt to use this route, it is not advisable. During that period, the company still exists and may be sued and incur liabilities. Fiduciary duties of company directors also remain during that period.
Accordingly, the best way to formally terminate a solvent BVI company is through a voluntary liquidation process, which is quite straightforward and puts the company to rest once and for all.
Voluntary Liquidation Process
To begin voluntary liquidation, the directors must make a solvency declaration (the Declaration) pursuant to the provisions of the BVI Business Companies Act, 2004 (as amended). The Declaration must confirm that the company is able to discharge its debts as they fall due, and that the value of the company’s assets equals or exceeds its liabilities. The directors must also approve a liquidation plan (the Plan) and approve the appointment of a voluntary liquidator. Shareholders must adopt resolutions approving the liquidation, including the Plan and the appointment of the voluntary liquidator. It is important to note that the voluntary liquidator must be an individual, and must consent to the appointment in writing.
The Declaration must be dated no more than four weeks earlier than the date of the resolution appointing the voluntary liquidator, and a statement of assets and liabilities must be attached. The Plan has no effect unless it is approved by the directors no more than six weeks prior to the resolution date appointing the voluntary liquidator.
When all the above is in place, then a notice of appointment of the voluntary liquidator, the Declaration, and a copy of the Plan must be filed at the Registry of Corporate Affairs within fourteen days of the liquidator’s appointment. The liquidation commences upon the filing of the notice of the voluntary liquidator’s appointment at the Registry of Corporate Affairs. Notice of the voluntary liquidator’s appointment must be advertised in the BVI and also in the jurisdiction where the company has its principal place of business.
Completing Voluntary Liquidation
Upon completion of the liquidation, the voluntary liquidator must prepare a statement confirming that the liquidation has been completed and file a Notice of Completion of Liquidation with the Registrar of Corporate Affairs. The Registrar will then strike the company off the Register of Companies and issue a Certificate of Dissolution to that effect. A notice that the company has been struck off and dissolved must also be published in the BVI Gazette.
Generally, for a company with minimal assets or no assets at all, the process can be completed with a month, while more complex companies will take a little more time. The voluntary liquidation process is the best way to terminate a BVI company as it properly puts the company to rest and the directors’ fiduciary responsibilities cease. The company can no longer be sued, nor can it incur liabilities.
For more information about BVI voluntary liquidations, please contact Christopher Simpson csimpson@onealwebster.com or your usual O’Neal Webster lawyer.
