BVI Voluntary Liquidation: The Complete Guide

The BVI Business Companies Act, 2004 (as amended) (the “Act”) provides for a solvent company in the British Virgin Islands to be dissolved through a process referred to as “voluntary liquidation”.

A company can be placed into voluntary liquidation provided it meets one of the following criteria:

1. it has no liabilities; or
2. it is able to pay its debts as they fall due and the value of its assets equals or exceeds its liabilities.

It is common for the directors of the company to take steps to prepare the company for liquidation to ensure the process is as smooth and quick as possible. In most cases, we recommend that the directors arrange for the payment of all creditors and for any surplus assets to be distributed prior to placing the company into liquidation. However, there may be tax or other reasons for these matters to be dealt with by the liquidator in the course of the liquidation.

In order for a company to be placed into voluntary liquidation, the directors must make a declaration of solvency and prepare a liquidation plan. We consider each of these in more detail below.

The directors must make a declaration of solvency which states that they are of the opinion that:

1. the company is, and will continue to be, able to discharge, pay or provide for its debts as they fall due; and
2. the value of the company’s assets equals or exceeds its liabilities.

A statement of assets and liabilities of the company must be attached to the declaration of solvency, showing the financial position of the company at the latest practical date before the declaration of solvency is made.

Any director that makes a declaration of solvency without reasonable grounds is guilty of an offence which carries a penalty of a fine up to the amount of US$ 10,000.

The company’s liquidation plan must state:

• the reasons for liquidating the company;
• the directors’ estimate of the time needed to liquidate the company;
• whether the voluntary liquidator(s) is authorised to carry on the business of the company if the voluntary liquidator determines that to do so would be necessary or in the best interests of the company’s creditors or shareholders;
• the name and address of each individual to be appointed as voluntary liquidator;
• the fees proposed to be paid to the voluntary liquidator(s);
• the place where the company’s business is located or its principal place of business (if there is more than one place); and
• whether the voluntary liquidator(s) must send to all shareholders a statement of account for the voluntary liquidation.

• The directors make a declaration of solvency and approve the liquidation plan.
• The voluntary liquidator consents to their appointment in writing.
• The shareholders approve the liquidation plan.
• The voluntary liquidator is appointed by a resolution of members (or directors where it is permitted by the company’s memorandum or articles of association)
• The shareholders or(if appointed by the directors) the directors notify the voluntary liquidator(s) of the appointment.

The voluntary liquidator must file notice of the appointment with the Register of Corporate Affairs (“Registrar”) within 14 days of appointment

The voluntary liquidator arranges for notice of the appointment to be publishied in:

• the Official Gazette in the BVI;
• at least one issue of a newspaper published and circulating in the BVI; and
• if the company’s principal place of business is not in the BVI, at least one issue of a newspaper published and circulating in that jurisdiction.

The voluntary liquidator takes the steps necessary to complete the liquidation which includes:

• take possession of, protect and realise the assets of the company;

• identify all creditors of and claimants against the company;

• pay or provide for the payment of, or to discharge, all claims, debts, liabilities and obligations of the company;

• distributing any surplus assets to its shareholders; and

• prepare a statement of account for the voluntary liquidation and (if required to do so by the liquidation plan) send a copy of it to the shareholders.

On completion of the voluntary liquidation, the liquidator files a statement of completion with the Registrar. Once approved, the Registrar strikes the company from the register, formally dissolves the company and issues a certificate of dissolution.

The voluntary liquidator must then publish a notice in the Official Gazette in the BVI stating that the company has been struck off and dissolved.