Singapore: Company continuations in and out of the BVI

06 Nov 2019

The Singapore government amended its companies legislation in October 2017 to introduce an inward re-domiciliation regime allowing foreign companies, including companies incorporated in the British Virgin Islands, to transfer their registration to Singapore.

While the Singapore regime now provides multinationals with greater flexibility to reorganise their corporate group structures, once a foreign company re-domiciles in Singapore the process is irreversible and there is no ability to continue back out should the company determine that the jurisdiction no longer suits its needs.

In contrast, the BVI Business Companies Act 2004 (as amended) provides a more flexible regime permitting:

a foreign entity to re-domicile in the BVI as a BVI Business Company (a BVI Company)
a BVI Company to continue out of the BVI under the laws of another jurisdiction

(referred to as a continuation or continuation in and a discontinuation or continuation out, respectively).

This guide provides an overview of the process and requirements for continuations and discontinuations in and out of the BVI.

Continuation in the BVI

Eligibility to continue in the BVI

The Act allows a foreign company to continue its existence as a BVI Company incorporated under the Act if:

the laws of its current jurisdiction of incorporation allow it to do so
the foreign company is not in, or subject to any undetermined court application for, liquidation or equivalent insolvency proceedings in any jurisdiction
no receiver or manager has been appointed over any of the foreign company’s assets
the foreign company has not entered into an arrangement with its creditors that has not been concluded

Simple procedure

The BVI’s statutory procedure to continue in is a simple process with minimal documentation and can be affected within a relatively short time frame. The foreign company must appoint a licensed registered agent in the BVI, who will:

reserve a proposed name with the BVI Registrar of Corporate Affairs
file with the Registrar:

an application form
a certified copy of the foreign company’s certificate of incorporation (or equivalent)
the foreign company’s proposed memorandum and articles of association to be adopted upon its continuation in, which must comply with the requirements of the Act (the BVI M&A)
evidence that the application to continue in and the BVI M&A have been approved by a majority of the directors (or other persons who exercise the power of the foreign company) or in such other manner as may be established by the foreign company for exercising the powers of the company
evidence satisfactory to the Registrar that the foreign company is not prohibited from continuing in the BVI. This typically takes the form of a director’s certificate attesting that the foreign company meets the eligibility requirements (set out above) and that the continuation is permitted under applicable foreign law. The director’s certificate must be notarised or legalised in accordance with the applicable foreign law and must be accompanied by an extract of the foreign law allowing the continuation

Certificate of Continuation

If the Registrar is satisfied that the requirements for continuation under the Act have been complied with, the Registrar will allot a unique number to the foreign company and issue a Certificate of Continuation. Such Certificate of Continuation is conclusive evidence that all requirements under the Act have been complied with and that the foreign company has been continued as a company incorporated under the Act on the date specified in the certificate.

While rare, the Registrar may refuse to continue a foreign company if it is of the opinion that it would be contrary to the public interest to do so.

Continuation out of the BVI

Eligibility to continue out of the BVI

The Act permits a BVI Company to continue out of the BVI to a foreign jurisdiction if:

it is in good standing (that is, it is up-to-date with payment of its government fees and is not struck-off)
its memorandum and articles of association do not prohibit it from doing so
it has complied with any requirements in its memorandum and articles of association in respect of the continuation (typically, the passing of a board or shareholders’ resolution)
the laws of the relevant foreign jurisdiction permit the continuation and the BVI Company has complied with those laws

Procedure

The procedure, documentation and timing for discontinuing a BVI Company out of the BVI will be largely driven by the requirements of the foreign jurisdiction. The BVI Company must take all steps necessary for it to continue into the foreign jurisdiction and it will not cease to be incorporated under the Act until it has done so.

For the purposes of the Act, the BVI Company must:

pass board or shareholders’ resolutions approving the discontinuation in accordance with its memorandum and articles of association
if a charge or other security interest is registered publicly in the BVI in respect of the BVI Company’s property which has not been released or satisfied and the security document does not prohibit the BVI Company continuing to the foreign jurisdiction, the BVI Company must file a written declaration (Security Interest Declaration) with the Registrar stating that:

a notice of satisfaction or release of the security interest has since been filed and registered
the chargee has been notified in writing of the intention to discontinue and has consented or not objected to it
having notified the chargee in writing of the intention to discontinue, the chargee has neither consented nor objected, but that the charge will not be diminished or compromised by the discontinuation, and, the BVI Company will continue to be liable for the debts secured by the charge

make a written declaration confirming that the laws of the foreign jurisdiction permit the continuation and that the BVI Company has complied with those laws (the Foreign Jurisdiction Compliance Declaration).

The BVI Company’s registered agent must then file with the Registrar:

a notice (in the prescribed form) of the BVI Company’s continuation to the foreign jurisdiction
the Security Interest Declaration (where relevant)
the Foreign Jurisdiction Compliance Declaration
proof that the BVI Company has continued into the foreign jurisdiction. Such proof is typically in the form of a certificate of continuance together with an extract of the foreign law relied upon or, where you have a chicken and egg scenario, that is, where the BVI Company’s continuation to the foreign jurisdiction is dependent on the Registrar issuing a certificate of discontinuance, the Registrar may issue a certificate of discontinuance on the basis of a provisional certificate of continuance issued by the foreign jurisdiction. If a provisional certificate is relied upon, the registered agent must subsequently file the final certificate of continuance once issued.

If satisfied that the requirements of the Act have been complied with, the Registrar will:

issue a certificate of discontinuance (which will usually be dated the date the notice in the prescribed form is filed by the registered agent)
strike the name of the BVI Company off the register of companies with effect from the date specified in the certificate of discontinuance
publish a notice of the BVI Company’s striking off in BVI Official Gazette

The certificate of discontinuance is prima facie evidence that all requirements of the Act have been complied with and the BVI Company is discontinued on the date specified in the certificate.

Effect of continuations and discontinuations

It is a commonly held misconception that the process of continuing to another jurisdiction may be disruptive to the company’s business operations. Under the Act, a continuation in the BVI or a discontinuation out will not change the company’s legal personality nor will it affect any of the company’s assets, rights or liabilities. Broadly, the Act provides that:

the company will continue to be liable for all of its obligations and liabilities that existed prior to its continuation or discontinuation
no conviction, judgement, ruling or order against the company or any member, director, officer or agent is released by its continuation or discontinuation
no proceedings, whether civil or criminal, by or against the company, any member, director, officer or agent will be impaired by the continuation or discontinuation, and such proceedings may be enforced, prosecuted, settled or compromised
any Security Interest Declaration will not operate as a bar to any legal action a creditor is entitled to take

It should be noted that, in the case of a BVI Company that has been discontinued, service of process may continue to be effected on its BVI registered agent in respect of any claim, debt, liability or obligation of the company during the period of its existence under the Act.

Conclusion

The BVI is the world’s leading incorporation jurisdiction due to the clarity and flexibility of its modern company law. The ability to continue a foreign company as a BVI Company or to continue a BVI Company as a company under the laws of a foreign jurisdiction quickly and seamlessly is just one example of this flexibility. The continuation regime, which allows a company to preserve its corporate history, branding and goodwill, provides a valuable alternative to setting up a new subsidiary which may have regulatory, strategic and organisational implications.