The British Virgin Islands, known affectionately as the 'BVI', is the world's pre-eminent offshore jurisdiction for company incorporations. As such it is perhaps unsurprising that companies are by far the most popular form of vehicle for businesses domiciled in this jurisdiction. That said, it is also possible to undertake business as a partnership, trust (such as a unit trust), sole trader or other similar unincorporated association.

Under the BVI Business Companies Act, 2004 ('BVIBCA') the principal f forms of companies in the BVI are as follows:

  1. a company limited by shares;
  2. a company limited by guarantee which is not authorized to issue shares;
  3. a company limited by guarantee which is authorized to issue shares;
  4. an unlimited company that is not authorized to issue shares; and
  5. an unlimited company that is authorized to issue shares.

Furthermore, a BVI company can be formed as a restricted purpose company or as a segregated portfolio company.

Companies limited by shares continue to be by far the most common type of company incorporated in the BVI. Restricted purpose companies and segregated portfolio companies must be companies limited by shares.


Incorporation of companies in the BVI is effected by the registered agent of the company, an entity licensed by the BVI Financial Services Commission. An application is filed with the Registrar of Companies together with the memorandum and articles of association of the proposed company. Under the BVIBCA and the accompanying regulatory regime, only a registered agent can incorporate a company in the BVI.

Once the Registrar is satisfied with the incorporation documents filed with the Registry, the Registrar will register the documents electronically and issue a unique company number to the company and issue a certificate of incorporation. The issuing of a certificate of incorporation is conclusive evidence that the company has complied with the BVIBCA and the company is incorporated for BVI purposes from the date stated on the face of the certificate of incorporation.

Limited liability

BVI law follows the English common law. For these purposes, and in compliance with principles established under Salamon v. Salamon & Company Ltd. (1897) a BVI company is a legal entity in its own right separate from its members and continues in existence until it is dissolved. As such, liability is limited to the company itself and not the members. As a separate legal entity, the company is capable of suing and being sued in its own name.


It is also possible in the BVI for partnerships to be formed under the Partnership Act, 1996. Partnerships may be established as general partnerships, a concept very familiar across all common law jurisdictions, or else as limited partnerships. Under a limited partnership the liability of limited partners is limited to their participation in the limited partnership provided they do not become actively involved in the management of the limited partnership's business. The general partner, usually itself a special purpose vehicle incorporated as a limited liability company, will shoulder unlimited liability within the limited partnership.


Discretionary trusts are formed in the jurisdiction under the Trustee Act, 1961. Trustees of discretionary trusts are subject to considerable fiduciary duties. In response, the Government of the BVI enacted the Virgin Islands Special Trust Act, 2003. Trusts formed under the 2003 Act are known colloquially as VISTA trusts. Many of the more traditional fiduciary duties of trustees are 'switched off' in VISTA and the day to day running of management may be reserved for the settlor of a VISTA trust.


The management, direction or supervision of a company's business and affairs are entrusted to the directors under the BVIBCA for which they have all necessary powers, subject to any modifications or limitations in the memorandum and articles of association.

Standard board structure

A 'director' is defined as a person occupying or acting in the position of director by whatever name called. 'De facto' directors (i.e. persons acting as directors and carrying out their function but without formal appointment as directors) would be considered directors with all rights and liabilities attached to them. However, 'shadow directors' (i.e. persons in accordance with whose directions or instructions the directors are accustomed to act) are not within the definition of directors.

In the BVI it is common for a company to appoint a sole director, whether that be a natural person or a corporate person. In Holland v. HMRC (2010) the UK Supreme Court held that where a corporate person is a sole director of a BVI company, the directors of the corporate person will not be considered as shadow directors or de facto directors of the BVI company.

Certain individuals, as follows, are disqualified from acting as directors:

  1. individuals under the age of 18 (the age of majority in the BVI);
  2. disqualified persons under the Insolvency Act, 2003 ('IA 2003'); restricted persons under the IA 2003; and
  3. undischarged bankrupts.

The memorandum and articles of association of a BVI company may also disqualify certain persons from being directors in relation to the company. A person who is disqualified but still acts as a director is nevertheless subject to the duties and obligations imposed on directors.

There is no residency requirement under the BVIBCA for a director to be a resident in the BVI. However, it should be noted that if the BVI company is conducting some form of regulated business, certain pieces of financial services legislation will require that at least one of the directors of the BVI company be based in the BVI.

Once a company is incorporated it is the responsibility of the registered agent to appoint the first directors within six months.

The officer structure

There is no specific definition of 'officer' under BVI companies legislation. In practice, the company's memorandum and articles may specify from time to time who are the officers of the company. Persons such as the secretary and auditors are considered officers under general corporate law. Importantly, the BVI's regulatory regime recognizes the term 'senior officer'. Senior officers are persons appointed to undertake or have responsibility for one or more of the supervisory or managerial functions in respect of a company that holds a license issued by the Commission.

Who are senior managers and senior officers?

For regulatory law purposes, a senior officer and senior manager has a specific meaning and overlap to an extent. A consideration of their precise meaning is outside of the scope of this summary. In an unregulated context, BVI law does not define either term, although it would certainly be open for a company to do so in its memorandum and articles of association.


Corporate duties

The BVIBCA gives statutory footing to the equitable and common law duties owed by a director. In respect of equitable duties, the directors are under a duty to act honestly and in good faith and in what they believe to be the best interests of the company. They must also exercise their powers for a proper purpose and must not act or agree to the company acting in a manner that contravenes the BVIBCA or the memorandum and articles of association. The common law duty of care and skill is enshrined in the BVIBCA. A director must exercise the care, diligence and skill that a reasonable director would exercise in the same circumstances taking into account the nature of the company, the nature of the decision, their position and the nature of the responsibilities undertaken by the individual.

The BVIBCA specifies the circumstances in which a director can rely upon the information (including books, records, financial information) and advice of others, but they are more restrictive than the position at common law. The directors, for example, can rely on an employee, a professional adviser or expert if they believe on reasonable grounds that they are competent in relation to the matter within their expertise. They can also rely on another director or a committee of directors on matters within the latter's designated authority. However, they can only rely on any of these if they act in good faith, make a proper inquiry as indicated by the circumstances; and have no knowledge that their reliance on the information or advice is not warranted.

The duties in the BVIBCA are in no way designed to be exhaustive. For example, directors would be subject to the general equitable duty of not putting themselves in a position where their duty and interest may conflict, and they may be liable for any secret or unauthorized profit that they make out of office.

Directors are fiduciaries and as such remain subject to applicable common law and equitable rules which regulate them as such.

The consequences for breaches of those duties are not in itself specified in the BVIBCA and therefore the position at common law must be considered. For breaches of the equitable duty, a director may be held accountable for profits, while for breaches of the common law duties a director will be liable to compensate the company for any loss it suffers. The BVIBCA is also silent on whether the breaches may be ratified, and once again the common law position will need to be considered.

Regulatory duties

All of the duties outlined above will also be applicable to licensees. However, the BVI regulatory regime places the responsibility on the licensee (i.e. the BVI company) to carry on its business in accordance with the principles for business outlined in the Regulatory Code, 2009 and to determine in which circumstances it would be prudent to adopt higher standards.

A licensee's business must at all times be well structured and monitored. The directors must monitor and control the business with the support of senior management. Systems and control must be established, regularly reviewed and updated and must take into account the nature, scale, complexity, and the diversity of the licensee's business.


Criminal liability

The directors may be personally liable for criminal acts committed in their capacity as a director, for example offences of dishonesty or for failing to comply with particular statutory provisions such as a failure to comply with a notice received under section 282(1) of the IA 2003.

There are also provisions in the Interpretation Act, cap.136 that may place criminal liability on directors.

Corporate liability

Directors are not normally personally liable for any debt, tort, breach of contract or obligation by a company or default of a company, although if a company has committed a tortious act, a director may be liable as a joint tortfeasor. Where a director is liable their liability may be joint or several as between directors or joint with the company. A director or directors may in certain circumstances be subject to specific liabilities under the BVIBCA. There is usually unlimited liability for each director (subject to indemnities). There are three areas of general liability that directors need to consider:

  1. personal responsibility to a third party in relation to a particular matter;
  2. breach of their statutory or equitable duty; and
  3. misfeasance and insolvent trading under the IA 2003.

Regulatory liability

Where a breach of any regulatory obligation occurs, the Commission has at its disposal a number of tools that it can draw on to sanction the company as well as the directors. A few examples are below:

  1. administrative penalties imposed under the Financial Services (Administrative Penalties) Regulations, 2010;
  2. suspension or revocation of licenses;
  3. public statements and advisory warnings; and
  4. enforcement action.

In respect of directors specifically, there are provisions in certain legislation. For example, in the Securities and Investment Business Act, 2010 ('SIBA') the liability i is placed squarely on the director, who knowingly authorized, permitted or acquiesced in the commission of the office. A director who commits any infraction of SIBA also commits an offence and is liable on conviction to the same penalty as prescribed for the company.

The contractual relationship between the company and directors

There is no contractual relationship between directors and BVI companies. Once appointed to the office of director, a director will be required to comply with the duties and obligations outlined above. In practice, a company may have a specific agreement with a director and in those cases one would need to look to the contract to understand the contractual relationship between the company and the director.


A number of defenses may be available to the company and the directors depending on the factual circumstances underpinning the claim. In a claim of misrepresentation for example, the company and the directors may be able to prove that there was no reliance on the truth of the representation or that there is no proof of any loss or damage as result of the misrepresentation. In a claim for Negligence, directors' will have a defense if it shown that they exercised the reasonable care, skill and diligence to be expected of a reasonably diligent person having the general knowledge, skill and experience of a director. It should be noted, however, that the exculpation and indemnity provisions that are often contained in a company's articles of association will not necessarily protect a director if the court finds that there was willful neglect on the part of the director. Commentary on this is in Weavering Macro Fixed Income Fund Limited (In Liquidation) v. (1) Stefan Peterson and (2) Hans Ekstrom.


The amount and type of damages available when a director breaches his duties will depend on which duty has been breached and how the breach occurred. As for remedies for a breach of directors' duties, it is possible to obtain damages, injunctions, restoration of the company's property or an account of profits. In some circumstances it may also be possible to avoid contracts.


Directors of an insolvent BVI company may face a number of liabilities under the IA 2003 as well as common law; We summarize a few of them as follows:

  • Delinquent Directors:In the event that a director has misapplied or retained or become accountable for any money of the company in solvent liquidation, or if the director's actions could be described as misfeasance or a breach of fiduciary duty, then the court can make an order that such director or officer repays, restores or accounts for money or assets or any part of it be paid to the company as compensation for the misfeasance or breach of duty.

    A separate common law action lies for breach of fiduciary duty, but this is likely to be in the same terms as the misfeasance action. The IA 2003 misfeasance action merely puts on a statutory footing the powers at common law.
  • Fraudulent Trading:The court can also make an order if it is satisfied that, at any time before the commencement of the liquidation of the company, any of the business has been carried on with the intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose. If this is the case then the court can declare that the director is liable to make a contribution which the court considers proper to the company's assets.
  • Insolvent Trading:The court can make an order against a person who is or was a director if satisfied that if at any time before the commencement of the liquidation that the person knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation. The court can order that the person makes a contribution which the court considers proper to the company's assets. The court cannot make such an order if the person demonstrates that he or she took every step reasonably open to him or her to minimize the loss to the company's creditors.
  • Fraudulent Conduct:The IA 2003 makes fraudulent conduct of the director an offence, which is where a director made or caused to be made any transfer of the company's assets during the 12 months prior to the liquidation. It is a defense if the director proves that he or she had no intent to defraud the creditors.
  • Disqualification:The court, on the application of the Official Receiver may make a disqualification order against a director or former director of a company that has become insolvent and who has been guilty of fraud in relation to the company, or of any misfeasance or breach of duty as a director; where the court is of the opinion that the person's conduct as a director, either taken alone or taken together with their conduct as director makes them unfit to be concerned in the promotion, formation or management of companies or in their liquidation or dissolution.


Company and shareholders

As a general rule, directors owe their duties to the company and do not, solely by virtue of their office owe their duties to the shareholders either collectively or individually. A shareholder may in an appropriate case bring a claim against the directors in respect of a personal right or a right vested in the company.

Requirements for bringing a derivative action against the directors

The relevant law as to questions of protection of the minority shareholders of a company incorporated under the BVIBCA is the BVIBCA itself and the common law. So far as derivative actions are concerned, whilst of course the principles of many court decisions established at common law clearly remain relevant, in terms of bringing proceedings, whilst this has not been tested by the BVI courts, there is a clear intent that derivative actions should be brought only under the BVIBCA.

The BVIBCA provides a shareholder with a statutory footing upon which to bring a derivative action, where they consider that the affairs of the company have been, are being, or are likely to be, conducted in a matter that is, or any act or acts of the company have been or are likely to be oppressive, unfairly discriminatory or unfairly prejudicial to them in that capacity.

Leave of the High Court must be sought before any such member's application may be brought, enabling a member to bring proceedings in the name and on behalf of the company; or to intervene in proceedings in which the company is a party for the purpose of continuing, defending or discontinuing the proceedings on behalf of the company.

When considering whether to grant leave for a derivative action, the court must take into account the following:

  1. whether the member is acting in good faith;
  2. whether the derivative action is in the interests of the company taking account of the views of the company's directors on commercial matters;
  3. whether the proceedings are likely to succeed;
  4. the costs of the proceedings in relation to the relief likely to be obtained; and
  5. whether an alternative remedy to the derivative claim is available.

A member may not bring any action in the name of or on behalf of a BVI company without first obtaining the approval of the court and the court must be satisfied that: the company does not intend to bring, diligently continue or defend, or discontinue the proceedings, as the case may be; or it is in the interests of the company that the conduct of the proceedings should not be left to the directors or to the determination of the shareholders or members as a whole.

Representative Actions

The BVIBCA specifically provides for 'representative actions' whereby a member who is bringing proceedings against the company and has the same or substantially the same interest as other members may be appointed to represent some or all of the other members. This however also requires specific court sanction.

Third parties

A director can also in certain circumstances incur personal liability to third parties. If a director makes a negligent statement to a third party relating to the company's client or its business generally and the third party suffers a loss as a result of reliance upon such statement, the director could be personally liability.


Corporate/regulatory indemnification

A company's memorandum and articles of association may provide for directors to be indemnified by the company against all expenses including legal fees and all judgments, fines or amounts paid in settlement and amounts reasonably incurred in connection with legal, administrative or investigative proceedings. In practice, most companies will permit wide indemnification of members of the board of directors under their memorandum and articles of association although the directors will not normally be entitled to enforce such provisions because of privity of contract.

A company may indemnify the director in circumstances where the director is, or was threatened to be made a party to proceedings for the mere fact that the individual is a director or he or she was at the request of the company acting as a director of another body corporate or acting on behalf of another enterprise, for example, a partnership or a trust. In these circumstances the company can indemnify the directors but only if they acted in good faith and honestly, and in what they believed to be in the best interests of the company, and in the case of criminal proceedings they had no cause to believe that their actions were unlawful.

If the directors did not act honestly and in good faith and in what they believed to be in the best interests of the company, and in the case of criminal proceedings, had reasonable cause to believe that their conduct was unlawful, the company must not indemnify them and any purported indemnity by the company is void.

As outlined earlier, the directors have fiduciary duties to a company under the BVIBCA and may be personally liable for a claim where:

  1. any action taken is not in the best interests of the company;
  2. any action is not in compliance with a proper purpose; or
  3. a director would not have acted in a manner that a reasonable director would have done.

Under BVI law, a director can be held jointly and severally liable. Directors can be held liable individually or they can be held jointly liable for failure to act in the best interests of the company, for failing to act with a proper purpose or for not acting in the manner in which a reasonable director would have acted.

The amount of liability that is placed on directors of a company would be determined on a case by case basis and in what the court determines after hearing the evidence presented.


The structure of the court system

The BVI court system falls within the jurisdiction of the Eastern Caribbean Supreme Court, established by the Virgin Islands (Courts) Order, 1967 and given effect in the BVI pursuant to the Eastern Caribbean Supreme Court (Virgin Islands) Act, 1969.

The Eastern Caribbean Supreme Court consists of the High Court (with is various divisions e.g. civil, criminal, family, commercial, probate), and a Court of Appeal. Both the High Court (a court of inherent jurisdiction) and the Court of Appeal are superior courts of record. The Commercial Division of the Eastern Caribbean Supreme Court is based in the BVI and hears matters of a commercial nature and in which the value attached to the subject matter in dispute is at least USD 500,000.

There are also a series of Magistrates Courts sitting throughout the BVI. The Magistrates Courts are creatures of statute and are the inferior courts. The Magistrates Court deals with matters of both a civil and criminal nature. The Magistrates Court is regulated by the Magistrates Code of Procedure Act, 1892 and its subsequent amendments.

The Eastern Caribbean Supreme Court is composed of the Chief Justice who is the president of the Court and head of the Judiciary, three Justices of Appeal and sixteen High Court Judges, and two Masters. Masters are responsible for dealing with and hearing procedural and interlocutory matters.

The practice in the High Court is governed by The Eastern Caribbean Supreme Court Civil Procedure Rules (as amended).

The Court of Appeal is headquartered in St. Lucia and is an itinerant court. It sits in the nine jurisdictions within its remit on a rotating basis. The decisions of the Court of Appeal are binding on the High Court and the Magistrates Court. Urgent matters can be listed for hearing before the Court of Appeal while it is sitting in another jurisdiction.

The Judicial Committee of the Privy Council is the court of final appeal for the United Kingdom overseas territories and Crown dependencies.

Enforceability of foreign judgments:

There is no statutory registration regime in the BVI for judgments. However, there can be enforcement of foreign judgments in the BVI against companies or directors and officers, either pursuant to the Reciprocal Enforcement of Judgments Act, 1922 or by way of fresh action under the common law.

Any final and conclusive monetary judgment for a definite sum obtained against the company (and by extension the directors or officers) in the foreign courts in respect of any transactions a company is partaking in would be treated by the courts of the BVI as a cause of action in itself and sued upon as a debt at common law so that no retrial of the issues would be necessary provided that:

  1. the foreign courts had jurisdiction in the matter and the company either submitted to such jurisdiction or was resident or carrying on business within such jurisdiction and was duly served with process;
  2. the judgment given by the foreign courts was not in respect of penalties, taxes, fines or similar fiscal or revenue obligations;
  3. the judgment was not procured by fraud;
  4. recognition or enforcement of the judgment in the BVI would not be contrary to public policy; and
  5. the proceedings pursuant to which judgment was obtained were not contrary to natural justice principles.

Other procedural issues:

The limitation period for actions founded on simple contract or on tort is six years. However, where the action is based on the fraud of the defendant or his agent or is concealed by such person, or where the claim is based on mistake, the period of limitation does not begin to run until the plaintiff has discovered the fraud or mistake or could with reasonable diligence have discovered it. Other issues such as: forum, pretrial issues, causes of action, remedies/defenses, evidence, costs, and alternative dispute resolutions are also factors to consider from a procedural standpoint.


Is director's liability insurance permissible under local law?

BVI insurance law is based on a mixture of English common law principles, and on the other side, bespoke BVI insurance regulation and legislation, which together determine the rights and obligations of parties to insurance contracts involving BVI persons. The legislation is set out in the Insurance Act, 2008 ('IA 2008') and the Insurance Regulations, 2009.

The IA 2008 is not without controversy in that it may be interpreted as imposing an obligation on all BVI persons to refrain from obtaining insurance, including director liability insurance, from anyone other than a BVI licensed insurer or else a syndicate of Lloyds of London, the latter benefiting from specific exemptions to the restriction. However, in practice the regulatory authorities have enforced this restriction only in respect of BVI companies actually carrying on day to day business activities in the BVI. Unsurprisingly the fraction of businesses utilizing BVI companies to which this applies in practice is tiny.

Assuming the insurer in question may validly provide the insurance to the BVI company, there are no limitations in law as to what can and cannot be covered in respect of obtaining a quote for the coverage.

Can an insurer write D&O insurance on a non-admitted basis?

As mentioned above, the IA 2008 may be interpreted as restricting such non-admitted insurers. However, the interpretation which seems to be adopted by the regulatory authorities is that this would only apply in respect to BVI companies carrying on day to day businesses in the BVI.

Is a specific license required for the insurer to write D&O insurance?

To the extent that a license is necessary, an insurer may apply for one of the following types of insurance licenses:

  • Category A, which may be issued only to a BVI business company and which entitles the holder to carry on insurance business including domestic business;
  • Category B, which may be issued only to a company incorporated, registered or formed in a jurisdiction outside the BVI and which entitled the holder to carry on insurance business in the BVI, including domestic business;
  • Category C, which may be issued only to a BVI business company and which entitles the holder to carry on insurance business that is not domestic, including, if the license permits, reinsurance business that is not open market reinsurance business;
  • Category D, which may be issued only to a BVI business company and which entitled the holder to carry on reinsurance business, including open market reinsurance business.

Are claims made and reported policies permissible under local law, or does the law require occurrence?

Assuming the insurer in question may validly provide the insurance to the BVI company, there are no limitations in law as to what can and cannot be covered in respect of obtaining a quote for the coverage.

Can defense costs be covered inside the limit of liability?

Yes, the limit of liability can include any potential defense costs.

Claims brought directly against the insurer

Claims cannot be brought against the insurer itself. In practice, the insurer would seek to protect itself from any potential claim or liability that may arise in respect of its client i.e. the insured.

On what grounds can the insurance be avoided/rescinded?

In practice, insurance policies can be rescinded on grounds such as criminal negligence on the part of the company or the directors, material non-disclosure, non-payment of premiums, and any breach of warranties. This list is by no means exhaustive and how a policy could be rescinded will be determined by the terms of the policy itself entered into between the insurer and the insured.

Further, an insurance contract entered into in breach of the IA 2008 may be rendered void or voidable by the parties.

Severability and exclusions

There are no specific laws on this, only conditions imposed by the underwriters. BVI law in this case would follow English common law principles.

If a local company is a subsidiary of a foreign parent and such foreign parent has a worldwide director and officer policy which covers the local subsidiary, is a separate local policy also required to be issued for such subsidiary to comply with local law?

In most cases, no separate policy would be necessary and we do see the regulatory authorities accepting group policies even though the insurer is conducting business on an unlicensed basis. However there may be a risk that this is called into question by the authorities where the subsidiary carries on day to day activities in the BVI.

Influence of foreign law

Yes, the BVI is an overseas territory of the United Kingdom and its common law is based on English common law. Rulings of the Privy Council have the force of law in the BVI and rulings in other English Courts may be highly persuasive for the local court.

In regards to the insurance legislation, the model adopted in the BVI is one familiar to offshore jurisdictions, particularly the system used in Bermuda. Over the years, the legislation has been designed to incentivise the captive insurance industry in the BVI.

Extended reporting/discovery period

There is no law in regards to offering an extended reporting period.

Originally published in A Global Guide to Directors' and Officers' Issues Around the World 2013, Zurich General Insurance.

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.