Applications to Court for the Restoration of Dissolved BVI Companies
This article also appeared in the August 2013 edition of the BVI International Finance Centre's newsletter. A copy can be found here.
A wide category of applicants can seek the restoration to the register of a dissolved British Virgin Islands ("BVI") company. The category was originally restricted to creditors, former directors, former members or former liquidators, but has been expanded (by amendments to the BVI Business Companies Act, 2004) and now also includes any person who can establish an interest in having the company restored.
Restoration is a discretionary remedy, which allows the Court to impose conditions on the restoration if it considers that it would be appropriate to do so. It also enables the Court to give any directions or orders which it considers necessary or desirable for the purposes of placing the company and any other persons as nearly as possible in the same position, as if the company had not been struck off.
Prior to statutory amendments in 2012, there had been some debate in the BVI over the status in which a dissolved company would be restored to the register, as well as to the grounds on which the Court would exercise its discretion.
As far as status was concerned, the key question was what should happen in the case of a company that had been struck off and dissolved following a voluntary liquidation. Was the company to be restored in good standing or in liquidation? English case law (which is persuasive in the BVI) was to the effect that the company was to be restored to the state in which it was immediately prior to the dissolution being effective. The BVI Court, however, took the view that it should not require a company to return to voluntary liquidation upon restoration, since there would no longer be a liquidator in office, and since the Court could not compel the discharged liquidator to resume his duties. Despite this approach, where the Court was prepared to order restoration, it generally required an undertaking from the company that it would petition for its own winding up once the purpose for which it was being restored had been achieved.
The legislature has taken a different view. The 2004 Act now expressly provides that, where a company was dissolved following the completion or termination of its voluntary liquidation under the 2004 Act or its liquidation under the Insolvency Act, 2003, the Court can only restore the company to the register if the applicant nominates an eligible person to be liquidator of the company. The Court must then appoint that person (or another eligible person) to act as liquidator if it restores the company.
Despite these changes, it seems that the test that the Court will apply remains as it was under the previous regime. The overriding question is whether it is in the interests of justice for the company to be restored. The Court has given some clear guidelines as to when it is likely to consider that the interests of justice are met and has stated that it will generally be difficult to persuade the Court that restoration should be granted, other than for the purpose of enabling newly discovered assets to be distributed or of enabling claims to be made against the company. Restoration has also been granted so that a company could defend itself against litigation that had been commenced in another jurisdiction, which might (amongst other matters) have the effect of restoring property to the company's ownership. The Court has emphasised that - other than perhaps in the most exceptional circumstances - there would be no good grounds for avoiding the dissolution of a company that had been wound up simply so that its owners could resume carrying on business as though nothing had happened.
For further information, please speak with your usual Maples and Calder contact or one of the individuals listed above.