MarburyWilsonHouse1001-2,19WyndhamStreet,Central,HongKongt+85221100848|[email protected]|www.marburys.com
MarburyClientandFriendMemo2November2016
BritishVirginIslands
WhydobusinessintheBVITheadvantagesofferedbytheuseofBVIcompaniesandthepositiveimpactoftheseondealcosts,andtheexpenseandeaseofongoingmaintenanceandgovernance
BritishVirginIslands(BVI)companiesprovidecost-effectivesolutionsforinvestmentandcrossbordertransactions.Inthevast
majorityofcasestheyareusednottoavoidtaxconsequences,butratherbecausetheydonotaddextralayersoftaxationto
thetaxesinvestorsalreadypayintheirhomecountry,creatingalevelplayingfieldforinvestorsfromalljurisdictions.
FeaturesoftheBVIasaplacetostructureandcompletedeals:
• BVIcompanystructuresfacilitatecapitalflowsintodevelopedandemergingeconomiesbyofferingaplatformforraisingfinance,andactingasefficientportalsforcollectiveinvestments.
• BVIcommonlawlegalprinciples,administrativesimplicityandtheabilitytoring-fenceliabilitiesareacknowledgedandenjoywidespreadlegitimacy.
• BVIsecuritieslawsarerecognisedbyregulatorsworldwide,enablinginvestorstoexitthroughaprivatesaleoralistingonamajorstockexchange.
• BVIcompaniescanlisttheirsharesonstockexchangesworldwide,includingtheLSE,theAIMexchange,theNYSE,NASDAQ,theInternationalSecuritiesExchange,theTSE,theSGXandtheHKSE.
• TheBVIdoesnotimposeadoublelayerofregulation(thereisnoBVItakeovercodeorBVIpublicfilingrequirementapplicabletoalistedcompany).BVIstatutecontainscertainprovisionssupportiveofthelistingprocess.
• Ultimately,aBVIbusinesscompanywillbehighlyflexibleinoperation,particularlyifthecompanyneedstoraiseequityfinanceforworkingcapitalpurposes.
SomekeybenefitsofusingBVIcompanies:
simplicity,costandstandards noadditionallayeroftaxandregulationmeansincorporationandongoingcostsofusinga
BVIcompanyarelow,eventhoughstandardsaremaintainedasrequiredbythe
InternationalOrganisationofSecuritiesCommissions(IOSCO),ofwhichtheBVIisa
member.
WhydobusinessintheBVI
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corporategovernance BVIcompanylawishighlyflexible.TheBVIimposesveryfewmandatorycorporate
requirements,socompaniescangenerallymodelcorporategovernancetosuitbusiness
needs.Generallytheboardcanoperateandmanagethecompanywithoutmember
involvement.
JVsandgroups adirectorofajointventurecompanymayactinthebestinterestsoftheJVpartythat
appointedhim,andadirectorofawhollyownedsubsidiarymayactinthebestinterestsof
theparentcompany,evenwheretheactionisnotnecessarilyinthebestinterestsofthe
jointventurecompanyorsubsidiary.
norestrictiononfinancial
assistance
aBVIcompanymaygiveassistancetoathirdpartytoacquireitsshares,andmaygive
securityonbehalfofarelatedorunrelatedthirdparty.
nosharecapital thereisnoconceptofsharecapital.Acompanyisauthorisedtoissueaspecifiedoreven
anunlimitednumberofshares.Thisallowsgreaterflexibilitywhenacompanyproposesto
declaredistributions,carryoutreversesharesplits,changetheparvalueofitsshares
and/oreffectredemptions.
dividends(distributions) distributionscanbemadewithoutmemberapprovalbytheboardsubjectonlytoabasic
solvencytest(thecompany'sassetsexceeditsliabilitiesandthatthecompanywillcontinue
tobeabletopayitsdebtsastheyfalldueimmediatelyafterthedistribution).
purchaseofownshares aBVIcompanymayacquirethesharesofamember,subjecttothesamebasicsolvency
test,andwiththeconsentofthemember,whichmaybeobtainedinadvance.
votingmajorities BVIlawdoesnotimposeprescribedstatutorymajorities(otherthanforverylimited
matters),butratherpermitsstructuringarrangementstosuitdealorbusinessneeds.
members'remedies BVIlawhascodifiedthetraditionalEnglishcommonlawbasisformembers'remedies.BVI
companylawgoesfurtherandprovidesstatutorydissentandappraisalrightsformembers
whoobjecttocertaincorporateactions,suchasamerger,compulsoryacquisition,or
dispositionofmajorassets.Thisenablesamembertoexitthecompanyatfairvalue
withouthaltingordelayingthetransaction(intheabsenceofwrongdoing).
squeeze-outprovisions theholdersofmorethan90%ofthesharesmaycausethecompanytoredeemthe
minoritysharesforfairvalue.Thereisastatutoryprocessfortheindependentappraisalof
fairvaluewithoutapplicationtocourt.
memberprotectionprovisions tailoredarticlesofassociationcanreflectthedesiredmember’sprotections(egdisclosure
ofdirectorinterests,authorityforissuanceofshares,independentvaluationforissuanceof
sharesfornon-cashconsiderationandretirementofthedirectorsbyrotation).
WhydobusinessintheBVI
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continuation/migration aBVIcompanymaymigratetoorfromanyotherjurisdictionthatpermitscorporate
redomiciliation.
statutorymergers/
consolidation
aBVIcompanycanmergewithoneormoreBVIcompanies,orforeigncompanies,andthe
survivingcompanymaybeinaforeignjurisdiction.Thisabilityprovidesgreatflexibilityfor
structuringmergersandacquisitions.
schemesandplansof
arrangement
awidevarietyoftransactionsmaybecarriedoutbywayofacourtapprovedschemeor
planofarrangement,whichisbindingonallmembersandcreditorsoncedulyadopted.
ForcreditorslendingtoortakingsecurityfromaBVIobligor,thejurisdictionoffersthefollowingadvantages:
• nocorporaterescuestatute:noUSstyleChapter11orUKadministrationprovisionsinforce.Theappointmentofaliquidatordoesnotpreventenforcementofsecuritybyasecuredcreditor
• statutoryrulesallowliquidatorstochallengetransactionsatanundervalue,unfairpreferences,andvoidablefloatingcharges
• limitedcategoriesofstatutorilypreferredcreditorsoninsolvency
• securitymayberegisteredpubliclyintheBVIprovidingstatutorypriority
• contractualsubordinationagreementsmayvarythestatutoryprioritywaterfall
• theenforceabilityofnettingandsetoffprovisionsisrecognisedbystatute
• sharesecurityisstatutoryandmaybegovernedbyforeignlaw,permitting,forexample,anEnglishlawgovernedchargeoversharesinaBVIcompanytoincludethe'self-help'remedyofappropriation
• theBVIhasamodern,purpose-builtdedicatedcommercialcourtwithanexperiencedjudge,excellentavailabilityandafastandcosteffectiveprocess.
FormoreinformationonanyaspectofthisbriefingpleasecontactanymemberoftheMarburyteam.
