BVI: Vesting Rights on Change of Security Agent
Maples and Calder represented both parties to a successful application brought by a retiring security agent and trustee, under an English law governed facility agreement, for an order under section 52 (1) (a) of the BVI Trustee Act vesting in the incoming security agent and trustee, all right to sue for and recover any thing in action existing under or governed by the laws of the BVI and vested in the retiring security agent and trustee including, without limitation, the things in action comprising its purely legal rights as security agent and trustee arising under equitable mortgages and debentures granted by several debtor entities.1
The need for such order arose principally because it has not since 1967 been possible to assign legal title to things in action under BVI law other than at common law and that requires, other than in cases of assignment to or by the Crown, debtor consent. In this case, it was not appropriate for debtor consent to be sought since, if given, it would arguably amount to a novation of the debt and security arrangements that would potentially have re-triggered vulnerability periods under applicable insolvency and creditor protection legislation in a number of jurisdictions where the debtor entities were incorporated or resident. The retiring security agent and trustee was, however, entitled to be rid of all outstanding title to trust property upon retiring and being discharged from the English law governed security trust arrangement and the incoming security agent and trustee was no less entitled to have all such title vested in it upon being appointed security agent and trustee in its place.
At a short oral hearing, the court indicated that it acknowledged the problem and that the solution proposed by the parties was an appropriate solution to it. The court therefore made the consent order sought.
The importance of this decision lies in the BVI Commercial Court's recognition of the legislative gap in BVI law and its ready acceptance of a practical solution to it, pending enactment of legal assignment legislation. As a result, the change in security agents and trustees under BVI law security arrangements can be completed (where permitted by the documentation) without debtor consent.
If you require further information please liaise with your usual Maples and Calder contact or any of the above contacts.
1 Wallbank J, 13 July 2017