On 10 August 2022, the British Virgin Islands authorities passed a package of essential amendments to the BVI Business Companies Act, 2004, which is the primary law governing all BVI companies.
The amendments will enter into force on 1 January 2023. They are aimed at further ensuring the compliance of the BVI corporate legislation with international standards set by the Global Forum on Transparency and Exchange of Information for Tax Purposes and the Financial Action Task Force (FATF).
Below is an overview of the key changes envisaged by the new version of the law.
Consequences of striking-off
Under the current legislation, a BVI company that has been struck off the register (usually due to failure to pay annual fees) is not dissolved but remains “struck-off” for the subsequent seven years. Only after the said period expires is the company dissolved by operation of law. All this time, the company retains its legal personality and all the obligations assumed but cannot take any actions until it is restored to the register (brought back to good standing). A struck-off company may be restored by paying all due fees and penalties and eliminating other inconsistencies with the law.
As per the revised Act, the 7-year period of being struck-off will be abolished. All companies struck off the register after 1 January 2023 will be automatically dissolved, i.e., will cease to exist upon the official publication of the striking-off.
In light of this, the BVI companies, which are currently struck-off, but own assets or plan to continue their operations, are recommended to initiate restoration in the register and return to good standing before the end of the current year (2022). It is worth remembering that in case of dissolution of a struck-off company, its undistributed assets may be vested in the Crown.
Restoration of struck-off and dissolved companies
Until now, a court order was the only way to restore a dissolved BVI company.
Under the new legislation, the possibility of a fast-track restoration (without the need to apply to court) is provided under certain conditions for companies that are struck off the register and thereby dissolved. This will require a relevant application to the Registrar, which can be submitted within five years from the date of dissolution. Payment of a restoration fee, as well as all penalties accrued, will also be required to restore a company.
In addition, the registered agent must declare that it agrees to act as such for the restored company and that all information it holds in respect of the company is up-to-date and in compliance with various BVI regulations.
As before, a company (including a company dissolved upon a liquidation procedure) may be restored by a court. For example, such restoration may be needful for participation in legal actions instituted by or against the company and in any other cases as decided by the court.
Public access to company directors’ names
According to the new version of the Act, one can find the names of current directors of a company by applying to the Registrar through the online platform of the BVI Financial Services Commission (VIRGGIN). This service will be available only to registered users and most probably will be paid.
The BVI companies have been required to submit a copy of their current register of directors to the Registrar since 2016. However, the details of the directors remain confidential. With the entry of the amendments into force, the names of company directors will be available to the public in the manner indicated above. The information search will be run against a company name, not a director’s name. The dates of birth and addresses of directors, as well as the information on previous directors, will not be visible in the search results.
In addition to existing record-keeping obligations, the new legislation requires BVI companies to provide specific financial information in the form of an annual return to their registered agent. The structure of the return has not yet been approved. However, it is expected to include a balance sheet and a profit and loss statement. This return will not need to be audited.
The annual return will be prepared for each financial year of the company and submitted to the registered agent within nine months after the end of the financial year. For example, if a company’s financial year ends on 31 December 2023, the deadline for filing the first annual return will be 30 September 2024. If the registered agent does not receive the annual return from the company within 30 days after the end of the specified period, it will be obliged to report this to the Registrar.
The information from the annual return submitted to the registered agent will not be made public. There are no agent’s obligations to file such a return to any BVI authorities (except in cases of a specific request).
Listed companies and companies that file tax returns in the BVI will be exempt from the obligation to file the annual return.
Register of persons with significant control
The revised Act includes general rules necessary for the further implementation of a public register of persons with significant control. Such matters as the format of the register, the details to be included in it, data protection for registrable persons, and others are subject to further determination.
Earlier the BVI Government committed to implementing a public register of persons with significant control (“beneficiaries”) by 2023, subject to specific savings and qualifications. However, the exact timing of introducing the public register is not yet available, and it is unlikely to be launched precisely at the beginning of 2023.
New requirements for liquidators in voluntary liquidations
Currently, a person of full legal age who is not disqualified can act as a liquidator of a solvent BVI company in a voluntary liquidation procedure.
The new legislation provides that a liquidator must also have professional qualifications and experience in liquidating companies of at least two years. Moreover, the revised Act for the first time introduces a residency requirement for the liquidator. A person appointed as a liquidator must have physically lived in the BVI for at least 180 days (continuously or in aggregate) before their appointment. For companies to which joint liquidators are appointed, as permitted by law, at least one of such liquidators must meet the residency requirements.
Upon completion of the liquidation procedure, the BVI resident liquidator will be required to provide the company’s registered agent with copies of all corporate records maintained during the liquidation process.
The described innovations do not require any particular actions from BVI companies for the time being, except for currently struck-off companies planning to restore to the register. Such companies are recommended to return to good standing before the end of this year.
Existing BVI companies are recommended to ensure compliance with current requirements, in particular, the timely updating of the register of directors and the proper maintenance of financial records.
Companies planning to cease operations should assess the feasibility of going through the standard liquidation procedure or striking off under the new rules that will come into force on 1 January 2023.