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The British Virgin Islands (BVI) is home to more than 416,000 active companies. This article considers the benefits of using a BVI company in financing transactions.
BVI’s attractive features include political stability, tax neutrality and the absence of exchange controls and currency restrictions. Creditor-friendly, it has a well developed, English-based legal system, a bespoke commercial court and flexible, commercial legislation. BVI also upholds international compliance standards.
These factors all contribute to BVI being a ‘jurisdiction of choice’ for corporate vehicles entering into financing transactions.
The most common types of security are mortgages, charges and assignments. As most BVI companies are holding companies their assets are often shares in subsidiaries, BVI security usually consists of an equitable mortgage over shares – a ‘Share Mortgage’.
Under a Share Mortgage, the lender receives certain deliverables, to allow control of the company on enforcement. Articles of association may also be amended to include certain share charge-related provisions. It is also standard for a notation that the shares have been charged to be placed on the register of members and filed with the registrar, thereby putting third parties on notice.
There is no concept of perfection of a charge in the BVI. BVI companies are required to keep a register of all relevant charges created. Where a company creates a relevant charge an application to register the charge may be made to the Registrar of Corporate Affairs pursuant to Section 163 of the BVI Business Companies Act. A charge so registered has priority over any subsequently registered and unregistered charges. Third parties are deemed to have notice of any publicly registered charge.
BVI companies feature prominently in all types of financing structures. We regularly act on behalf of lenders and obligors on acquisition finance, structured finance and asset finance transactions in sectors including European property, oil in the Middle East, energy in North America, telecoms in South America, worldwide resorts and hotels, and shipping in the North Pacific, to name but a few.
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Reasons to Use BVI Companies for Financing Transactions
This article was originally published in The Lawyer July/August 2017 issue