Re-domiciling a Company into the British Virgin Islands
08 Oct 2012
What is the legal effect of a continuation?
The continuation of a company to the BVI does not affect its continuity as a legal entity nor does it affect the assets, rights, obligations or liabilities of the company.
In addition, it should be noted that:
(a) no conviction, judgement, ruling, order, claim, debt, liability or obligation due, or to become due, and no cause existing against the company or against any member, director, officer or agent thereof is released or impaired by its continuation as a company under the Act; and
(b) no proceedings, whether civil or criminal, pending at the time of the issue by the Registrar of Corporate Affairs in the BVI (the "Registrar") of a certificate of continuation by or against the company, or against any member, director, officer or agent thereof, are abated or discontinued by its continuation as a company under the Act, but the proceedings may be enforced, prosecuted, settled or compromised by or against the company or against the member, director, officer or agent thereof, as the case may be.
All shares in the company that were issued prior to the continuation shall be deemed to have been issued in conformity with the Act and therefore remain unaffected by the continuation.
Once the company is continued to the BVI, the Act applies to the company as if it had been originally incorporated or formed under it and the company is capable of exercising all the powers of a company incorporated under the Act.
The company is no longer to be treated as a company incorporated under the laws of a jurisdiction outside the BVI and the memorandum and articles of association (filed as below) become the constitutional documents of the company.
What documents are required to continue to the BVI?
New Memorandum and Articles of Association
The company must adopt memorandum and articles of association that are compliant with the Act. These can either be in a standard format for BVI companies or can be tailored to remain as similar as possible to those in existence prior to its continuation. The memorandum of association must also state:
(a) the name of the company on the date of the application and the name under which it proposes to continue;
(b) the jurisdiction under which it was originally incorporated, registered or formed; and
(c) the date on which it was originally incorporated registered or formed.
Constitutional Documents of the Company
The Registrar requires a certified copy of the certificate of incorporation of the company or such other document as evidences of its incorporation, registration or formation in its current jurisdiction.
In order for a company to continue to the BVI, it must provide evidence that it is permitted to do so under the laws of the jurisdiction in which it was incorporated and that it is not disqualified from continuing to the BVI for any of the reasons set out in the Act: for example, that it is in liquidation, has appointed a receiver or has entered into an arrangement with its creditors.
The Registrar will accept a legal opinion from an attorney, practicing in the jurisdiction from which the company is continuing, confirming these matters. In addition to the opinion, if foreign counsel is unable to confirm that the company has not entered into any arrangement with its creditors, this can be done by way of affidavit from a director of the company confirming the same.
Evidence of Corporate Authority
The Registrar requires evidence that the continuation has been authorised by a majority of the directors, or other persons who may be charged with exercising the powers of the company. Because details of directors and shareholders of BVI companies are not public information, and are therefore not supplied to the Registrar, this requirement is satisfied by the Registered Agent supplying the Registrar with a certified extract of the resolutions in which such continuation was approved.
When is the continuation effective?
The relevant documents will be filed, by the Registered Agent of the company, with the Registrar. Once the Registrar has examined the documents and is satisfied that all requirements of the Act have been complied with, they will confirm that the continuation has been approved and will issue a certificate of continuation. It is the certificate of continuation that constitutes evidence of the fact that the company has been continued to the BVI.
The effective date of the continuation will be the date on which all the documents were filed with the Registrar.
Practical uses of a continuation
As set out above, the nature of a continuation (i.e. that it does not affect the existence of the company as a legal entity or its assets, rights, obligations or liabilities), means that it can be a useful corporate tool in structuring. Some potential circumstances in which they can be advantageous are:
(a) if there are negative tax consequences for a company remaining in its jurisdiction of incorporation, for example in the event of the promulgation of less favourable legislation;
(b) where it is impracticable, disadvantageous or costly to transfer the assets and liabilities between companies in different jurisdictions;
(c) where the company needs to be based in a jurisdiction with more flexible legislation in order to conduct its business more effectively; or
(d) in order to re-domicile the company prior to its listing on a recognised stock exchange. BVI companies are currently listed on a number of exchanges around the world including the London Stock Exchange (main market and AIM), the Toronto Stock Exchange and the Hong Kong Stock Exchange, to name a few.
The BVI has a modern and flexible statutory regime and continuation to the jurisdiction may be an attractive prospect for many companies. As demonstrated above, the requirements to effect a continuation to the BVI are straightforward in terms of steps to be conducted and documents that need to be prepared and filed.
Of Counsel London
T: +44 20 7466 1678