The BVI continues to be a popular place in which to establish asset holding companies and joint venture companies due to its flexible corporate legislation and widely respected commercial court.
This guide examines the main rights of a shareholder in a BVI company and the potential remedies available to a shareholder when things go wrong.
The principal sources of shareholder rights and remedies under BVI law are set out in the:
- BVI Business Companies Act 2004 (the Companies Act);
- Insolvency Act 2003 (the Insolvency Act); and
- company's memorandum and articles of association (M&A).
This guide assumes that the company has a single class of shares and relatively standard M&A.
BVI company law basics
It is a long established principle of company law that directors are agents of the company and act as its directing mind and will.1 Under the Companies Act (and normally under the company's M&A), the directors are given the power to manage the company's business.
The shareholders (or owners of the company) do not generally have the power to interfere with the way the directors manage the company's business, however, if they are unhappy with the way the company is being run, they have the power to remove the directors unless the company's M&A state otherwise.2
Majority rule principle
The majority rule principle is another long established principle of company law. It recognises that, to allow a company to function properly, a decision made by a majority of its shareholders should generally prevail and bind the company. Consequently, the court will not normally interfere with the internal management of the company where it is acting within its powers.3 However, as noted below, the Companies Act contains a number of provisions which protect the interests of minority shareholders in the event that the directors or majority shareholders abuse their powers or act in an unfair way.
Unlike the position in other jurisdictions, there is no concept of a special resolution or an extraordinary resolution under the Companies Act.
- (unless the Company's M&A state otherwise) under the Companies Act a written resolution to remove a director must be passed by a majority of at least 75 per cent of the shareholders entitled to vote;4
- under the Companies Act a resolution to approve a scheme of arrangement must be passed by a majority in number of shareholders representing at least 75 per cent in value of the shareholders present and voting at the meeting; and
- under the Insolvency Act, a resolution to appoint a liquidator in respect of the company must be passed by a majority of at least 75 per cent (or any higher majority specified in the M&A) of the votes cast by shareholders present and voting at the meeting.
- Consequently, with few exceptions, in the absence of specific provisions in the company's M&A, under BVI law there is no minority shareholding that can block a resolution from being passed by a simple majority of shareholders.
Basic shareholder rights
A shareholder has the following basic rights under the Companies Act and normally under the company's M&A.
Attend shareholder meetings
A shareholder has a right to receive notice of, attend and vote at, a shareholder meeting or to sign (or refuse to sign) a written shareholder resolution. Unless the company's M&A state otherwise, a shareholder is entitled to cast one vote for every share held.
The Companies Act requires that shareholders be given a minimum of seven days' written notice of any shareholder meeting, although this period can be waived by shareholders who hold at least 90 per cent of voting rights on all matters to be considered at the meeting unless the company's M&A state otherwise.
Unless the company's M&A state otherwise, a shareholder has a right to receive a proportionate share of any distribution paid to shareholders according to the number of shares held.
Receive surplus assets on liquidation
Unless the company's M&A state otherwise, on the liquidation of a company, a shareholder has a right to receive a proportionate share of any distribution of the company's surplus assets made to shareholders according to the number of shares held.
Transfer of fully paid shares
Most companies' M&A do not restrict the transfer of fully paid shares in registered form. If a shareholder complies with the transfer provisions in the company's M&A, the shareholder normally has a right to transfer the shareholder's fully paid shares without restriction.
Where a transfer of shares complies with the transfer provisions in the company's M&A but the company refuses to register the transfer, the shareholder has a right to apply to the High Court to have the transfer registered in the company's register of shareholders (See Rectification order below).
Copy of company's M&A
A shareholder has a right to be provided with a copy of the company's M&A upon paying the company the reasonable cost of providing it.
Additional shareholder rights
A shareholder has the following additional rights under the Companies Act.
Appoint and remove directors
Unless the company's M&A state otherwise, the shareholders have the right to appoint and remove directors.
Call shareholder meeting
Shareholders have the right to require the directors to call a shareholder meeting if they:
- ask the directors to do so in writing; and
- are entitled to exercise at least 30 per cent (or any lower percentage stated in the company's M&A) of the voting rights in respect of the matter for which the meeting is called.
Court ordered shareholder meeting
A shareholder (or a director) has the right to apply to the High Court for an order calling a shareholder meeting and the court will make the order if it is of the opinion that:
- it is impractical to call or hold a shareholder meeting in the manner specified in the Companies Act or the company's M&A;
- the directors have failed to call a shareholder meeting when they have been required to do so by shareholders holding the necessary percentage of voting rights; or
- it is in the interests of the shareholders that a meeting is held.
The court may make an order on any terms it thinks fit, including in relation to the way the meeting is to be held and as to the costs of conducting the meeting and as to the provision of security for costs.
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1. Halsbury's Laws of England, Companies (Volume 14(8) (2016)), para 270.
2. Hollington on Shareholders' Rights (8th Edition), 5-12 to 5-17.
3. MacDougall v Gardiner (1875) 1 Ch. D. 13; Carlen v Drury (1812) 1 VES and B 149.
4. Subject to a company's M&A, a resolution removing a director may also be passed at a meeting of the members called for the purpose of removing a director.
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.