Every year, we advise dozens of clients seeking to continue their companies into the BVI. A continuation, known in other jurisdictions as a “re-domiciliation” or “migration” is, according to the BVI Business Companies Act, 2004 (as amended) (the Act), permissible so long as the law of the foreign jurisdiction also permits continuation. However, as experience demonstrates, some jurisdictions are harder to leave than others. This article seeks to demystify the process of continuing a foreign company into the BVI.
Why continue your company into the BVI anyway?
We see companies migrate in to the BVI for all sorts of reasons (adverse regulatory or legislative change in the home jurisdiction or an increase in operational costs, for example), but most investors are motivated by a desire to take advantage of our flexible corporate laws, light but effective regulation and the popularity and familiarity of the BVI vehicle with global investors.
Continuation is a fantastic legal tool as it permits entities to “emigrate” without affecting their legal personality, ownership structure, assets or legal activities and without reconstituting or re-setting their corporate existence. It is not a liquidation and re-incorporation in the BVI, but rather a true ‘continuation’. In many ways, it is no different from a person packing up their home and emigrating, life intact, to greener pastures.
Continuation in is not a flight mechanism
As a responsible jurisdiction, which (by virtue of its modern legal concepts and straightforward operation backed by a robust common law for which English common law is highly persuasive authority and a specialized commercial court) is a mainstay of high profile cross border transactions, the BVI has legislated to ensure the continuation process cannot be used for nefarious reasons or as a means of escaping obligations, liabilities or claims. The Act is unequivocal that continuation will not release or impair any court ruling or claim, debt, obligations due or to be due or any existing cause, abate or discontinue any legal proceedings or prevent the enforcement, prosecution or settlement thereof. Continuation does not operate to extinguish liabilities. The BVI has no interest in welcoming in those in search of a holiday from reality and the legislation is clear: if you come to the BVI, you bring your baggage with you.
Conversely, companies that continue in to the BVI are welcomed in with full recognition of their assets and rights, and the Act is carefully constructed to ensure that pre-continuation ownership structures are preserved. A shareholding deeming provision provides that all shares in the company that were outstanding prior to the effective time of continuation into the BVI are deemed to have been issued in conformity with BVI law, ensuring shareholders can enjoyed continued ownership of their company, whilst also protecting members from any fraudulent dissipation of their shares.
Mi casa, es su casa
In addition to compliance with local laws, foreign entities seeking to make the BVI home do need to meet various eligibility criteria.
- The first is the requirement to be a body corporate, and as expected when dealing with entities from different legal systems - sometimes as different as common law versus civil law systems - complications can arise in respect of the identity or personality of various entities. Prior to beginning the process an applicant for continuation into the BVI should seek the advice of legal counsel in the foreign jurisdiction to determine whether the applicant is, under the laws of the foreign jurisdiction, regarded as a “body corporate”. Only then can it apply to become a BVI body corporate.
- All continuations must be approved by the BVI Registrar of Corporate Affairs who has, upon receipt of an application, the discretion to refuse to continue a foreign company on public interest grounds. It seems reasonable to assume that the Registrar’s jurisdiction will override any claims by the foreign company that it has otherwise complied with all the requirements of the Act.
- Further, whilst the Act does not grant the Registrar an express discretion to refuse continuation on compliance grounds (i.e. suspicion of money laundering, terrorist financing etc.), companies who cannot meet Financial Services Commission compliant client due diligence checks will find themselves unable to engage a BVI registered agent, which agent will also want to ensure the company passes sanctions checks and does not otherwise pose a reputational risk to the jurisdiction.
- Logically, we do not accept applications to continue in from companies that are in liquidation, or subject to insolvency proceedings (in the widest sense of that phrase) in another jurisdiction. Likewise, if a receiver or manager has been appointed in relation to any of the foreign company’s assets, or if it has entered into an arrangement with its creditors, the foreign company must adduce evidence of the conclusion of all such proceedings before continuing into the BVI.
- Finally, companies seeking to continue in should ensure they have taken advice on, and are able to comply with, BVI economic substance regulation. A dedicated team of experts is on hand at Harneys to assist: https://www.harneys.com/economic-substance/
Upon the effectiveness of a continuation, as a matter of BVI law, the applicant company will become a BVI body corporate company with separate legal personality and subject to suit in its own name, capable of exercising all the powers of a company incorporated under BVI law and fully regulated thereby. It will no longer be treated as a foreign company. Crucially, there is no liquidation and re-incorporation in the BVI and the foreign company is not deemed a different or separate entity but the very same one, continued in. It’s like automatic naturalisation for a company.
Procedure for continuing into the BVI
By law, all BVI companies must have a BVI registered agent (RA), and as the RA physically files the application for continuation, on-boarding needs to be completed first. To extent the emigration analogy, this process is akin to finding a visa sponsor, but it doesn’t need to be painful. In short, from a registered agent’s perspective the process is almost as easy as a new incorporation; especially so for companies that take advantage of Intelligent Onboarding, the app developed by Harneys to allow clients to submit all CDD and pass through compliance from the comfort of home: https://harneysfiduciary.com/harneys-intelligent-on-boarding-app/
Our jurisdiction welcomes newcomers and the application procedure for continuation in under the Act is very straightforward. Challenges only usually arise where the laws of the outgoing jurisdiction have special or particularly onerous requirements or where the one is navigating two very different legal systems. Your usual legal contacts at Harneys are well versed in dealing with some of the trickier jurisdictions, such as Malta, which has a concept of provisional continuation out, or Alberta, which has legal concepts not recognised by BVI law, and will be able to offer a variety of practical solutions and work seamlessly with foreign counsel to ensure that all loose ends in the home jurisdiction are tied up.
When is the continuation effective?
The effective date of continuation is the date specified in the certificate of continuation issued by the Registrar. Once the application has been submitted to the Registrar by the registered agent, the turn-around time is usually about 3 to 4 working days. However, timing depends on the workload at the offices of the Registrar, with the first week of August (Emancipation Festival), Christmas and New Year naturally being the busiest time of year when applications may take a day or two more. To avoid delays at any time of the year, or for clients with particularly urgent needs, there is an expedited filing process with a four hour turn-around time if the application is submitted within the required window on a BVI business day. Both regular and express applications are made 100% electronically, a feature that proved extremely important in the aftermath of 2017’s Hurricane Irma and which has ensured business continuity during the covid-19 pandemic. Indeed, our own experience is that there has been no impact on BVI Registry turnaround times for continuation applications, even during the three-week-long 24/7 lockdown in the British Virgin Islands when the entire Territory was working remotely.
The BVI welcomes foreign body corporates who can satisfy our compliance rules to continue in and enjoy the many benefits of our jurisdiction, a lightly but effectively regulated stable and neutral microstate boasting the world’s most flexible corporate laws, a deep bench of experienced common law judges upholding a strong rule of law and global endorsement as a strategic and genuine offshore financial centre. Whilst our Territory’s borders remain partially closed for the coming months, the BVI jurisdiction is most definitely open for business.
For more information, please contact Amy Roost or your usual contact at Harneys.
This article was authored by Amy Roost, Director of Harneys Fiduciary client services.