10 July 2009
The transitional provisions regarding BVI bearer shares and bearer share companies (i.e. companies whose constitutions authorise the issuance of bearer shares) will expire on 31 December 2009 ("Transition Date"). This update serves to remind owners of BVI companies incorporated under the former International Business Companies Act of the legal position after the Transition Date and the action to be taken before this date.
Legal position after 31 December 2009
By virtue of the BVI Business Companies (Amendment of Schedules) Order 2007, the transition date for the immobilisation of BVI bearer shares not deposited with a custodian is set at 31 December 2009 (the "Transition Date"). With effect from midnight on the Transition Date:
- bearer shares issued by a BVI company and not placed into custodianship will be "disabled", meaning that the bearer shares will cease to carry any of the rights and entitlements which it would otherwise carry (i.e. the right to vote or to receive dividends), and any transfer of an interest in such shares shall be void.
- the constitutional documents of BVI companies containing provisions dealing with bearer shares will be "deemed" to be amended so that such companies will automatically lose the power to issue bearer shares and the power to convert registered shares for bearer shares, unless such companies have elected to disapply the deeming provision before the Transition Date.
- the licence fee for BVI companies which can issue bearer shares and have elected to disapply the deeming provision will be increased to US$1,100 per annum (or US$1,350 per annum, if the company is authorised to issue more than 50,000 shares).
Action to be taken by companies with bearer shares not in custody
For a company with bearer shares which are not in custody:
(a) the holders of bearer shares should, before the Transition Date, either
- deposit the bearer share certificates with an authorised custodian (a licensed person in the BVI or a foreign entity approved by the BVI Financial Services Commission to act as a custodian) or a recognised custodian (an investment exchange or a clearing organisation operating a securities clearance or settlement system in a FAFT country); or
- arrange for the bearer shares to be converted by the company into, or exchanged for, registered shares, and
(b) to retain in its constitution the right to issue bearer shares, the company should file with the BVI Registrar of Companies, before the Transition Date, a "notice of disapplication" with a declaration as to how it has dealt with its bearer shares.
Action to be taken by companies with no bearer shares but which are authorised to issue bearer shares
For a company without bearer shares but whose constitution allows for the issue of bearer shares, if the company does not wish to issue bearer shares in the future, no action is required. With the "deemed amendment of memorandum" becoming effective on the Transition Date, the company will automatically lose the power to issuer bearer shares and will not be subject to the increased licence fee applicable to a bearer share company.