Registration of security granted by a BVI business company ("BVI BC")
Where security is granted by a BVI BC, lenders should ensure the security package is properly registered for BVI law purposes as soon as the security documents are executed. To achieve this:
- Each BVI BC which has granted security must enter particulars of the security interests created pursuant to each relevant security document in its internal non-public register of charges.
- Lenders are able to register, or ensure that the BVI BC registers, particulars of each relevant security document in the BVI BC's publicly available register of registered charges maintained by the Registrar of Corporate Affairs in the BVI (the "Registrar").
Registration under 2 above is very important, as generally security documents must be registered in the register of registered charges to have priority as a matter of BVI law over security interests which are subsequently registered in respect of the same secured property, or which are unregistered. However, there are various exceptions including:
- The order of priorities provided for under the BVI Business Companies Act, 2004 (as amended) ("BVI BCA") is subject to the consent/agreement of the holder of a security interest that varies the priority of that security interest, for example in a subordination or inter-creditor agreement.
- A registered floating charge is postponed to a subsequently registered fixed charge unless the floating charge contains a prohibition or restriction on the power of the chargor to create any future charge ranking in priority to or equally with the charge.
- Certain older charges created by BVI companies incorporated under predecessor statutes to the BVI BCA or prior to their being continued into the BVI from another jurisdiction may still continue to have priority despite not being registered in the register of registered charges.
Note that other BVI registration requirements may need to be addressed depending on the nature of the transaction. For example, a BVI ship mortgage should be registered on the BVI ship register under the BVI Merchant Shipping Act, 2001.
Additionally, it should be noted that laws other than those of the BVI may also be relevant to the validity and priority of the charge created by a BVI BC, for example the law of the jurisdiction where the charged assets are situated. Advice as to any filing/registration requirements in such jurisdiction(s) necessary to preserve the validity or priority of the charge should also be taken.
BVI BC whose shares are charged: (a) annotation/registration of the register of members and (b) amending the memorandum and articles of association ("memorandum and articles")
Often a BVI BC will have its shares charged or mortgaged in favour of lenders. Where there is a share charge or mortgage taken over shares in the BVI BC itself, the BVI BCA allows for and it is common practice to enter a notation on the register of members of the BVI BC to the effect that the shares are secured in favour of lenders. A copy of the annotated register of members can be filed with the Registrar, although occasionally some BVI BCs will resist this on the grounds of confidentiality. The filing of the annotated register with the Registrar does not of itself constitute automatic constructive notice to all persons of the existence of the charge over shares, but in practice will provide actual notice to any person who carries out a company search in respect of the BVI BC.
Depending on the current drafting of the memorandum and articles of the BVI BC, it may be advantageous to the lenders to require the BVI BC whose shares are the subject of a share charge or mortgage to amend its memorandum and articles to include provisions which will improve the position of the lenders on any subsequent enforcement steps needing to be taken. Any amendments to the memorandum and articles must be registered with the Registrar in order to be valid and a copy of the amended memorandum and articles stamped by the Registrar should be obtained from the BVI BC's registered agent to verify this has been done.
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.