30 April 2020
British Virgin Islands insolvency legislation
Carey Olsen presents this unofficial consolidation of the BVI Insolvency Act 2003 (the “Act”) and the Insolvency Rules 2005 (the “Rules”), which we hope will be of interest as a reference guide for anyone involved in cross border restructuring and insolvency.
The British Virgin Islands is a small country with a very significant role in the global financial system. Today, there are roughly half a million active companies incorporated in the BVI, operating in every business sector across the globe and facilitating the distribution of capital throughout the international economy. Many of these companies are listed on major stock exchanges around the world. The BVI is also home to over a thousand investment funds which are active in financing projects in developed and emerging markets, and a number of major exchanges for crypto currency. The BVI’s undoubted success as an international financial centre is founded on bespoke flagship legislation regulating company law, principally this Act and the Business Companies Act 2004, and related enactments. This legislative framework is underpinned by English common law principles under the auspices of the BVI’s Commercial Court and international arbitration centre.
The Act was put to the test in the aftermath of the 2008 global financial crisis. That resulted in the failure of a number of BVI companies and investment funds and spawned the largest liquidations, and resulting litigation, ever seen in the BVI. The period since 2008 has seen landmark decisions on a number of key issues such as the status in liquidation of investor redemption claims (Re. Monarch Pointe Fund Ltd), the clawback of redemption proceeds from Madoff funds on the basis of mistake (Fairfield Sentry Ltd v Migani), the extra-territorial effect of the voidable transactions provisions in the Act (UBS v Fairfield Sentry), and the scope of the statutory and common law jurisdictions to assist foreign insolvency practitioners (Re. C (a bankrupt)). Recently, the BVI Commercial Court has confirmed the availability of “soft-touch” provisional liquidation as a remedy to assist with a global restructuring (Re. Constellation Overseas Limited).
At the time of publication, after a period of relatively benign economic conditions, we anticipate that the BVI’s Insolvency legislation will come to prominence again. The pressures facing the global economy today are arguably more severe than those in the years following 2008. The slowdown of economic activity witnessed in the first quarter of 2020 as a result of the response to the COVID-19 pandemic is simply unprecedented in modern times, and the path to recovery uncertain. The lesson from 2008 is that difficult times undoubtedly lie ahead, and that normality (whatever that means) may not be restored for some time. We are confident that the BVI legal system, in particular in matters relating to insolvency and restructuring, will continue to adapt to this changing landscape and offer solutions to the problems that businesses will face in the weeks, months and possibly years to come.
This unofficial consolidation incorporates the amendments introduced by the enactments listed on the covering page, and we have endeavoured to include all relevant amendments up to the time of writing (31 March 2020). However, we must emphasise that this resource has been made available for reference only. It should not be considered authoritative and we urge readers to check the official primary legislation and seek appropriate advice before taking any steps in reliance of the contents of this document.
Parts III (Administration) and XVIII (Cross-Border Insolvency) have not been brought into force.
We wish to thank the people at Carey Olsen who have facilitated the production of this consolidation in particular Jevaughn Rhymer, Kathryn Hall, Maria Perrée, and Sarah Dowling.