Registration of security granted by a BVI business company
Following execution of the security document(s), the secured party will want to ensure that particulars of the security are filed with the Registrar of Corporate Affairs in the British Virgin Islands (the "Registrar"). Each BVI business company providing the security and the secured party has the option of making an application to register the security in the register of registered charges held by the Registrar. If the security is duly registered with the Registrar it will, in respect of the secured assets, have priority over any security interests which are not registered or which are subsequently registered in the register of registered charges in respect of those assets. Registration of the security in this manner also provides constructive notice of the existence of the security to third parties. The security provider should deliver a copy of the certificate of registration of charge and the stamped particulars issued by the Registrar to the secured party once the filing has been made (unless the secured party is themselves making the application). The register of registered charges maintained by the Registrar is a publically searchable register.
In addition, the secured party will want to ensure that particulars of their security package are entered on the register of charges of the company which is maintained by the company or its registered agent in the BVI pursuant to the BVI Business Companies Act, 2004 (as amended). Each BVI business company providing security must enter particulars of the security in that register, including a short description of the property mortgaged or charged, the amount of charge and the name of the person entitled to the charge. Failure to register leaves the company open to financial penalty, but does not invalidate the security itself. The security provider should then deliver to the secured party a copy of the updated register of charges, duly certified if requested. Unlike the register of registered charges maintained by the Registrar, the register of charges maintained by the company/its registered agent is not publicly searchable. While no statutory priority is afforded to the secured party by ensuring its security is included in the register of charges, it does put third parties who have viewed the register on actual notice of the existence of the security.
Unlike some jurisdictions (England and Wales, Hong Kong or Australia, for example) there are no statutory time limits for registration of the security with the Registrar or in the company's register of charges, although it is prudent for a secured party to ensure security is registered with the Registrar as soon as possible so that the secured party can take advantage of the priority afforded by registration and protect themselves against competing security interests.
There is no requirement to file an original of the security document itself either with the Registrar or with the company/its registered agent in respect of the registrations referred to above, although where a registered agent is requested to update the register of charges maintained on behalf of the company it will often request a copy of any relevant security document for the company records. The security documents would not be liable to stamp duty in the British Virgin Islands but note that that a fee is payable to the Registrar in respect of the security filing.
Note that other registration requirements may need to be addressed depending on the nature of the transaction (for example, if a British Virgin Islands registered ship is involved).
Annotation of the register of members
In addition, often a BVI business company will have its shares charged or mortgaged as security. Where this occurs, it is common practice to enter a notation on the register of members of the company to the effect that the shares are secured in favour of the relevant secured party and have the register of members filed with the Registrar (thereby making it publically searchable).
Amending the memorandum and articles
Depending on the memorandum and articles, a party taking security over shares in a BVI business company may wish to require the company to amend its constitutional documents (for instance, to remove any provisions allowing the directors of the company to refuse or delay a transfer of shares in the company). If parties agree, a resolution can be passed in accordance with the memorandum and articles of association and then a copy of such resolution and/or an amended and restated set of memorandum and articles of association can be filed with the Registrar, whereupon the changes are immediately effective.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.