One of the aims of the BVI Insolvency Act (“the Act”) is to bring certainty to the insolvency regime in the BVI, including time limits for compulsory winding up procedures. In two recent cases the High Court gave a clear message that time limits will be strictly applied, even where this means a BVI company is then subject to a liquidation order.
The first case, Asiacorp Development Limited v Greensalt Limited concerned section 168 which provides that an application to appoint a liquidator shall be determined within 6 months after it is filed, and if it is not, it is deemed dismissed. The court can extend this period, but only if the application is heard before the 6 months have expired. In Asiacorp the parties agreed directions for the filing of evidence which went over the 6 month mark, and the question arose whether this waived the 6 month rule, or whether the court had jurisdiction to make an extension order outside the 6 months.
The court held that it was the petitioner’s duty to ensure that a timely application was made and heard before the 6 months, and that it had no jurisdiction to grant an extension after that period, even where it would otherwise make an order on the facts. The court’s dismissal did not preclude the filing of a second petition, although there were, of course, significant costs consequences.
The second case continued this strict approach to time limits which had even more important consequences. Metalloyd Limited v Burwill Resources Limited concerned the failure to apply to set aside a statutory demand and the consequences on the subsequent petition hearing. The Act is similar to the English Insolvency Act 1986 in many respects, but in the case of demands made on a company there are important differences. First of all there is a set procedure and 14 day time limit to apply to set aside a demand. Also, and importantly, the Act provides that a company which fails to set aside a demand is therefore insolvent. The Act does not use the more common phrase “deemed insolvent” seen in legislation in other jurisdictions.
This was important in Metalloyd. The company failed to apply to set aside a demand, but did have a cross claim which it argued it should not be precluded from asserting at the petition stage. Whilst the court found that the company did have an arguable cross claim, which might otherwise prevent a liquidation order, the company could not assert a defence or cross claim it could have raised had it properly applied to set aside the demand.
Therefore the fact that the statutory demand was served and was not set aside, meant that the company was “insolvent” under the Act, and therefore should be wound up.
Neither case was appealed, and they show a BVI trend which inclines towards a strict interpretation of the time limits under the Act. Practitioners should therefore be careful not to assume that the time limits and concepts in their own legislation apply in the BVI. Whilst these cases might provide significant traps for the unwary, it does have the benefit of certainty, which was one of the purposes of the Act.
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