British Virgin Islands: The Company's Property – Litigation Funding And Insolvent Companies

Last Updated: 8 June 2017
Article by Colin Riegels

Tucked away in dusty corners of the Insolvency Act 2003 are two slightly obscure provisions: sections 251 and 257. Those sections deal with various rights of action vested in the liquidator of an insolvent company, and they provide that any proceeds of an action for either a voidable transaction under Part VIII1 (s.251) or for either insolvent or fraudulent trading (s.257) are "deemed to be assets of the company". Everyone other than insolvency geeks will be tempted to gloss over that provision and move on. Those seven little words lead to a multiplicity of consequences not often appreciated.

For those two sections, all claims would be rights of action vested in the liquidator rather than being assets of the company. English case law stretching back 80 years suggested that this had three particular consequences:

  • Firstly, any recovery by a liquidator under those statutory causes of action did not accrue to the company itself, but instead was held on statutory trust for the company's unsecured creditors (Re Yagerphone [1935] 1 Ch 392). It followed from this that even if the company had an all-assets floating charge which would otherwise catch after acquired property, it would not catch the fruits of these claims because they were never the property of the company - they were only vested in the liquidator personally (contrast for example, the position of misfeasance claims, which are rights vested in the company itself, and are caught by the floating charge - see Re Anglo Austrian Publishing [1892] 2 Ch 158).
  • Secondly, because those rights of action did not relate to property of the company, it followed that any claims made by the liquidators were not expenses of the winding-up, as expenses of the winding-up were limited to claims to recover the company's property - not pursuing rights of action vested in the liquidator (see Re MC Bacon (No 2) [1991] Ch 127, Re Floor Fourteen [2001] 3 All ER 499).
  • Thirdly, and most relevant for this article, because those rights of action were personal to the liquidator, they were not within the scope of the liquidator's powers to assign claims vested in the company to a third party. Accordingly, an attempt to assign such a claim is void as contravening prohibitions on champerty (see Re Oasis Merchandising Services Ltd [1998] Ch 170).

In relation to the first point (proceedings held on trust for the unsecured creditors), the position under BVI insolvency law remains the same as the common law position. Although those two statutory provisions deem the rights of action to be property of the company, they each further go on to specify that the proceeds are to be "available to pay unsecured creditors of the company". The wording is perhaps inelegant, but the intent is clear: the proceeds are not caught by a floating charge. However, it is certainly not clear why this should be the case. For example, if the liquidator successfully challenges a transaction at an undervalue, the undervalue is reversed and the money comes back into the company's estate. The creditor who has suffered the loss as a result of the undervalue transaction is the floating chargeholder, but the recoveries go to benefit the unsecured creditors. The unsecured creditors receive a windfall and actually benefit from misconduct on the part of the company, which is difficult to justify.

In relation to the second point (liquidator's expenses), the position in the BVI has been modified from the common law. Rule 199(b) indicates that the costs and expenses of the liquidation will include "costs and expenses of any legal proceedings which the liquidator has brought ... whether in his own name or in the name of the company". This should be wide enough to include claims which sections 251 and 257 refer to.

However, it is the third point (assignment of claims) that is arguably of most interest. Because those claims are deemed to be assets of the company, and because the liquidator is imbued with statutory power to sell company assets as part of the liquidation, it means that the liquidator has power to sell such claims to a claims management company to pursue, and Re Oasis Merchanding should not be followed in the BVI. This is potentially very important as in many liquidations the liquidator simply does not have funds to pursue what may appear to be promising causes of action. The ability to assign claims and utilise litigation funders is a valuable way to swell potential recoveries for the general body of creditors.

To date, there have not been a great many such claims before the BVI courts. That may simply be a function of lack of awareness in relation to the viability of monetising such claims. Certainly directors of offshore companies – on paper at least – make attractive targets, not least because they are often comprehensively insured. They seem like natural targets for types of claims favoured by litigation funders.

It remains to be seen whether more liquidators afford themselves of the opportunity to assign these wider rights of action in the way which is expressly provided for in the BVI legislation - albeit in a highly understated manner.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions