What Receivers should know about their regulatory obligations under BVI law

While BVI law also permits the appointment of receivers in and out of court, most appointments are made out of court under the terms of the relevant security documentation (as any well drafted security document will provide for out of court appointment) and so this article focusses on the latter.

It is important to note that BVI law prescribes those persons who are ineligible for appointment as receiver in respect of a BVI company (and by extension, who cannot accept any such appointment). Broadly speaking, the list of ineligible persons includes the following:

• a body corporate
• a mortgagee of any of the relevant company’s assets
• any officer or employee of any mortgagee of any of the company’s assets who currently holds that position or has done so within the preceding two years
• any shareholder or member of the relevant company or any related company who currently holds that position or has done so within the preceding two years
• any person disqualified by virtue of being bankrupt or otherwise subject to a disqualification order
• the Official Receiver

Any person falling within any of the foregoing categories who accepts an appointment to act commits an offence under BVI law.

The security document under which receivers are appointed will generally include a power that permits the appointment of two or more joint receivers, an additional receiver to act jointly with a receiver in office and a receiver to succeed a receiver who has vacated office. Where there are joint receivers, they may act jointly or severally unless the instrument under which they are appointed expressly provides otherwise.

Once validly appointed (which must be done in writing), a receiver has 7 days to accept the appointment in writing and each receiver will have the powers expressly or impliedly conferred on him or her by the security document or other instrument under which he or she is appointed. With those powers come certain filing obligations under BVI law, including (but not necessarily limited to) the following:

• Filing of Notice of Appointment which includes the following:
• the requirement to send notice of his or her appointment to the relevant BVI company (in practice, this is typically done by sending notice to the company at its BVI registered office address)
• the requirement to file notice of his or her appointment (1) with the BVI Registrar of Corporate Affairs (the BVI Registrar) and (2) (where the company is or has been a regulated person under BVI law), with the BVI Financial Services Commission.
• Preparation and filing of Receivership accounts

The requirement to prepare and maintain accounts of receipts and payments (which can take the form of a simple extract) covering the following periods:

• the period of twelve months following appointment
• each subsequent period of six months
• where the receiver ceases to act as receiver, the period from the end of the period covered by the last accounts required to be filed, or if he or she acted as receiver for less than twelve months from the date of appointment, to the date of ceasing to act; and the period from the date of appointment to the date of ceasing to act (unless filed previously).
• Filing of Notice of Completion which includes the following:

• • the requirement to send notice to the relevant BVI company (or if the company is in liquidation, to its liquidator)
  • the requirement to file notice of his or her appointment (1) with the BVI Registrar and (2) (where the company is or has been a regulated person under BVI law), with the BVI Financial Services Commission.

Where a receiver is appointed in relation to specific asset(s), there is also a requirement for every public document issued by or on behalf of the company or the receiver in relation to the relevant asset(s) to contain a statement that reflects the appointment of a receiver. While the validity of any such document will not be affected by a failure to comply with this requirement, it does constitute an offence under BVI law on the part of anyone responsible for causing, permitting of acquiescing to the failure.

Additionally, where a receiver resigns or otherwise vacates the office of receiver, there is also an obligation to (as soon as practicable) provide notice to:

• the person who appointed him
• the relevant company (or if it is in liquidation), its liquidator; and
• where relevant, the members of any creditors’ committee.

He or she also has seven days to provide notice thereof to the BVI Registrar or, where the relevant company is or has been a regulated person, the BVI Financial Services Commission.

When appointed, any receiver over the assets of a BVI company would do well to seek BVI law advice to ensure compliance with their regulatory obligations under BVI law.