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Legal analysis by Harneys lawyers

Class rights in BVI company law

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Publication Date:
30 May 2017

BVI company law has two overarching characteristics. Firstly, it maximises flexibility to ensure that international users of offshore vehicles can structure their companies in a way that suits their needs. Secondly, it provides very clear black letter descriptions of even basic corporate procedures, so that there is always a roadmap to follow. However, one area of law where both those rules seem not to apply is in the area of class rights.

The BVI Business Companies Act 2004 (the Act) is almost completely silent when it comes to the issue of class rights. Although the Act refers to classes and class rights, it never takes the time to define them or to regulate them. But it does two things: firstly, it specifies that all class rights must be set out in the memorandum of association (but not, curiously, the articles), and secondly, it defines a class by reference to shares holding the same rights, as specified in the memorandum. 

Whether the rights are set out in the memorandum or the articles will probably not have much impact on the willingness of a court to intervene in cases of clear minority prejudice. For parties documenting their arrangements who wish to avoid recourse to the courts, clearly setting out all class rights – even for “informal classes” – in the memorandum of association remains the advisable course.

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