Amendments to the BVI Business Companies Act 2004 – Voluntary liquidators - FAQs
You will be aware from our update issued on 18 August 2022 that on 1 January 2023, various significant amendments to the BVI’s Business Companies Act 2004 (the BCA) will come into force.
The purpose of this note is to try to answer some of the more frequently asked questions relating to the changes affecting voluntary liquidators of solvent BVI business companies (a company).
Are there any changes to the circumstances in which a company can be liquidated?
No. A company may only be liquidated under Part XII of the BCA if:
- it has no liabilities; or
- it is able to pay its debts as they fall due and the value of its assets equals or exceeds its liabilities.
If the company is not solvent or there are any doubts as to solvency, legal advice should be sought immediately. In addition, the appointment of a voluntary liquidator under Part XII of the BCA is not permitted if:
- an administrator or liquidator of the company has been appointed under the Insolvency Act 2003 (the Insolvency Act); or
- an application has been made to the Court to appoint an administrator or a liquidator of the company under the Insolvency Act and the application has not been dismissed.
Are there some new regulations that affect who can act as a voluntary liquidator?
Yes, that is right. Amendments to the BCA allow for regulations to be issued with respect to the qualifications and categories of individuals who are permitted to act as voluntary liquidators and which explain what types of record must be collected and retained by a voluntary liquidator.
What are the new rules and when do they apply?
Any voluntary liquidator appointed on or after 15 October 2012 will need to meet the following criteria:
- has liquidation experience of not less than 2 years;
- has professional competence to liquidate the specific company concerned;
- is able to demonstrate that he or she:
- holds an insolvency practitioner’s licence issued by the Financial Services Commission pursuant to the Insolvency Act; or
- has an appropriate professional qualification (such as in law or accountancy) and experience of providing legal or financial advice or support to companies in the financial services sector; and
- is fully conversant with relevant financial services legislation connected to the business of the company to be liquidated, including the Financial Services Commission Act and the BCA,
As previously, they must also not have been disqualified from acting as the voluntary liquidator of a company because of one of the following reasons, noting the new requirement at (h) which is discussed further below:
- a disqualified person or an individual subject to an equivalent disqualification under the laws of a country outside the Virgin Islands;
- a restricted person or an individual subject to an equivalent restriction under the laws of a country outside the Virgin Islands;
- a minor;
- an undischarged bankrupt;
- an individual who is, or at any time in the previous two years has been, a director of the company or an affiliated company;
- an individual who acts, or at any time in the previous two years has acted, in a senior management position in relation to the company or an affiliated company and whose functions or responsibilities have included functions or responsibilities in relation to the financial management of the company or an affiliated company;
- an individual who is a close family member of an individual specified in paragraph (e) or (f); and
- an individual who is not resident in the Virgin Islands in accordance with section 2(2) of the BCA.
I have heard that there is now a residency requirement of sorts – is that the case?
Yes, that is correct. The definition of “voluntary liquidator” in the BCA has been amended to provide, relevantly that it means a liquidator who is resident in the Virgin Islands or an Insolvency Act liquidator ”. An Insolvency Act liquidator already has a residency requirement so the new change for voluntary liquidators brings them in line with insolvency liquidators. Also, as noted above, not being resident in the BVI is a trigger for disqualification.
What does “resident in the Virgin Islands” mean for this purpose and if there are joint liquidators does it apply to all of them?
To qualify, an individual must have physically lived in the BVI for at least 180 days, either continuously or in aggregate, prior to their appointment.
What if I was appointed as a liquidator of a company prior to 1 January 2023, but I do not satisfy the new residency requirements
Although the liquidator must have the qualifications to act sent out in the answer to Q3 above if they were appointed after 15 October 2012, the additional residency requirement only applies to those who are appointed after 1 January 2023.
What about joint liquidators, do they both need to satisfy the residency requirement?
No. Where there are joint liquidators at least one of them needs to satisfy the residency requirement.
What are the new record keeping obligations?
A voluntary liquidator now has an obligation to collect the records kept and maintained by the company which are in such form as are sufficient to show and explain the company’s transactions and will at any time enable the financial position of the company to be determined with reasonable accuracy and which include any annual return. In other words, the accounting records of the company must be collected by the voluntary liquidator.
What does the voluntary liquidator need to do with these records?
At the end of the liquidation, the voluntary liquidator is required to send copies of the records he has collected to the registered agent who then needs to keep and maintain them for at least 5 years from the date of receipt. The liquidator must also send to the registered agent a copy of every document he has either filed with the BVI Registry or was required by the BCA to provide to the directors or members of the Company.
What if the company is a regulated entity, are there any additional obligations on the voluntary liquidator?
Yes, the voluntary liquidator must send a copy of any record it has collected and retained as described in the answer to Q8 above to the Financial Services Commission.