The British Virgin Islands (BVI) is a popular jurisdiction for establishing companies due to its favourable tax and regulatory environment. However, there are instances when a BVI company is no longer needed, and the decision must be made to either strike it off or initiate a voluntary liquidation. This article aims to shed light on the recent reform in BVI company regulations, highlighting its significance, potential impact, and the consequences of ignoring these changes.
Why is this new reform important?
The new reform in BVI company regulations introduced crucial changes that affect the process of striking off or liquidating a BVI company. Previously, a company struck off the BVI register would remain in a suspended state for seven years before automatic dissolution. However, effective 1 January 2023, companies failing to pay their licence fees can now be struck off and dissolved after a notice period of up to 90 days. This revision streamlines the dissolution process and eliminates the prolonged waiting period.
Impact on stakeholders
The reform has significant implications for various stakeholders, including BVI company owners, directors, and creditors. Voluntary liquidation is now considered the recommended method for closing a BVI company, as strike off and dissolution can leave the company in a vulnerable state during the waiting period. By opting for voluntary liquidation, stakeholders can ensure a formal and secure closure of the company, protecting their rights and interests.
Consequences of ignoring the reform
Failure to comply with the new regulations can have severe consequences for companies that choose to ignore them. If a dissolved company had remaining assets at the time of dissolution, those assets may be vested in the Crown authority (the BVI state). To reclaim rights to the assets, a formal application must be submitted to the BVI court within five years. Ignoring the reform puts the company’s assets at risk and may lead to potential loss and legal complications.
Furthermore, disregarding the new regulations can hinder the company’s ability to conduct business or defend itself against legal actions during the suspension period. This lack of legal standing can have adverse effects on the company’s reputation, financial stability, and ability to engage in future business activities.
Conclusion
The recent reform in BVI company regulations emphasises the importance of opting for voluntary liquidation over strike off and dissolution. By adhering to the revised process, stakeholders can ensure a secure closure of their BVI company, protect their assets, and avoid potential legal complications.
Ignoring these changes not only jeopardises the company’s assets but also exposes it to reputational damage and limited legal standing. It is crucial for BVI company owners and directors to stay informed and act in accordance with the new regulations to safeguard their interests and ensure a smooth transition out of their BVI company.
Related resource: Striking off in the BVI