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A liquidation in the British Virgin Islands (BVI) can be either: (1) an insolvent liquidation and therefore governed by the Insolvency Act 2003 (as amended); or (2) a solvent liquidation and therefore governed by the BVI Business Companies Act (as amended) (Companies Act). The Companies Act was amended by the BVI Business Companies (Amendment) Act 2022 and BVI Business Companies (Amendment) Regulations 2022 (the Amendments).

This article sets out some of the key points in relation to voluntary liquidations in the BVI.

Purpose. A voluntary liquidation is commonly used where the company is no longer required by a business and is to be dissolved. This will enable the liquidator to deal with the company’s assets (if any) and to pay off any liabilities (if any) in order to dissolve the solvent company.

Procedure. A company may only be placed into voluntary liquidation if it: (1) has no liabilities; or (2) is able to pay its debts as they fall due, and the value of its assets equals or exceeds its liabilities.

Declaration of solvency and approval of liquidation plan. Where the appointment of a voluntary liquidator is proposed, the directors must make a declaration of solvency and approve a liquidation plan.

A director who makes a declaration of solvency without having reasonable grounds for the opinion that the company is and will continue to be able to discharge, pay or provide for its debts in full as they fall due will commit an offence, and will be liable on summary conviction to a fine of USD10,000.

The liquidation plan must be approved by the directors no more than six weeks prior to the date of the resolution to appoint a voluntary liquidator.

Resolution. A voluntary liquidator may be appointed by a resolution of directors or by a resolution of members.

If the company is a regulated entity, the BVI Financial Services Commission must give its prior written consent to the company being placed into voluntary liquidation, and must have approved the individual proposed to be appointed as voluntary liquidator, otherwise the appointment will be void.

Requirements of voluntary liquidator. The amendments have introduced new requirements for those who can be a voluntary liquidator. These include, inter alia, the voluntary liquidator being: (1) a BVI resident who must have physically lived in the BVI for at least 180 days (either continuously or in aggregate) prior to their appointment (it is possible to appoint joint voluntary liquidators where only one voluntary liquidator meets the BVI residency requirements); and (2) experienced in liquidation (at least two years’ experience).

Notice. Where appointed, the voluntary liquidator will have 14 days from the date of their appointment to file: (1) a notice of their appointment; (2) the declaration of solvency; and (3) a copy of the liquidation plan.

The voluntary liquidator will have 30 days from commencement of the liquidation to advertise notice of their appointment.

Duration. A voluntary liquidation must not exceed two years (unless the court extends this period).

Effect of appointing voluntary liquidator. From the commencement of the voluntary liquidation: (1) the voluntary liquidator has custody and control of the company’s assets; and (2) the company’s directors will remain in office, but they cease to have any powers, functions or duties (other than those required or permitted under the Companies Act).

Voluntary liquidator’s duties. The duties of the voluntary liquidator include, inter alia, taking possession of, protecting and realising the company’s assets.

Voluntary liquidator’s powers. The voluntary liquidator has, in order to perform its duties, all the powers of the company that are not reserved to the members in the Companies Act (or in the memorandum and articles). These include, but are not limited to, the following: (1) selling any of the company’s assets at public auction or by private sale without any notice; and (2) negotiating, compromising and settling any of the company’s claim, debt, liability or obligations.

Completion of liquidation. On completion of a voluntary liquidation, the voluntary liquidator shall file a Notice of Completion. On receiving this, the Registrar of Corporate Affairs will strike off the company from the Register of Companies and issue a Certificate of Dissolution.

The company’s dissolution is effective from the date of the issue of the Certificate of Dissolution. The voluntary liquidator shall, immediately after the registrar issues the Certificate of Dissolution, publish in the gazette a notice that the company has been struck off the register and dissolved.

Gary Smith is a partner at Loeb Smith Attorneys in the Cayman Islands, and Edmond Fung is a senior associate at Loeb Smith Attorneys in Hong Kong