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Many BVI companies have only one director/shareholder. When that individual dies, the company can be left in a vulnerable position, especially if the company faces pending or contemplated court proceedings. Conyers’ Matthew Brown suggests ways of handling this difficult situation.
Companies incorporated in the British Virgin Islands are generally only required to have one director in place at any given time. In fact, it is fairly common for a BVI company to be incorporated with only one member and one director – often the same individual. This has some obvious benefits, but also a number of risks, not least the risk that the company will be left in an exposed position if or when the individual director/shareholder dies.
That risk only increases where there are pending or contemplated court proceedings against the BVI company (whether in the BVI or elsewhere). In the absence of an individual with the authority to take the necessary steps on its behalf, the company may find itself unable to respond to the claims against it, or indeed participate in claims it may have. Unfortunately, this is not an altogether uncommon scenario. In some cultures, the inherent reluctance to discuss one’s mortality inhibits succession planning in the corporate context.
This article sets out the potential solutions that may be available where a company finds itself in this awkward position. It does not address the option of appointing a ‘reserve director’, which remains a useful, though underused, means of avoiding some of the issues discussed below.
Under BVI statute, the business and affairs of a company are generally required to be conducted by, or under the supervision of, its directors (unless the articles of the company state differently). Those directors are usually, in turn, appointed by the members or by the existing director(s). Accordingly, where a sole director/shareholder dies, there are often at least two obvious consequences for the company: there is no-one who is able to carry on its business and affairs; and there is no-one who can appoint an alternative individual to carry out that task in his place.
It is usually possible to solve both of those problems once a personal representative has been appointed in relation to the deceased’s shareholder’s estate. Once that has happened, the duly appointed personal representative should be able to secure his registration as the shareholder of the BVI company, and thereafter use that position to appoint himself or another individual as the director of the BVI company. In short, obtaining his appointment as the deceased shareholder’s personal representative is a fundamentally important step in the process of taking control of the BVI company.
To continue reading full articles in PDF format:
Dealing with the Death of a Sole Director/Shareholder of a BVI Company