Insolvency Law at British Virgin Islands (BOT)
The insolvency law in the British Virgin Islands (BVI), a British Overseas Territory (BOT), is governed primarily by the Insolvency Act, 2003 and its associated regulations, which set out the framework for dealing with corporate and personal insolvency.
Here’s an overview of the key features:
🔹 Governing Legislation
Insolvency Act, 2003: The main statute covering both corporate and individual insolvency.
Insolvency Rules, 2005: Provide procedural details for implementing the Act.
🔹 Corporate Insolvency Procedures
Liquidation (Winding Up)
Voluntary Liquidation:
Initiated by shareholders or members.
Company must be solvent to qualify (i.e., can pay its debts).
Compulsory Liquidation:
Initiated by creditors, shareholders, or the company itself.
Based on insolvency (inability to pay debts) or other grounds such as just and equitable reasons.
Receivership
A secured creditor may appoint a receiver over a company’s assets if there's a charge or mortgage over them.
Administration
Not available in BVI like in the UK. BVI law focuses on liquidation and restructuring via schemes or arrangements.
🔹 Tests of Insolvency
Cash Flow Test: Inability to pay debts as they fall due.
Balance Sheet Test: Liabilities exceed assets.
🔹 Officeholders
Liquidator: Must be a licensed insolvency practitioner in the BVI.
Powers include collecting assets, investigating company affairs, and distributing proceeds.
🔹 Creditor Rights
Creditors can:
File for liquidation.
Prove debts.
Participate in meetings.
Challenge transactions like unfair preferences or fraudulent conveyances.
🔹 Cross-Border Insolvency
BVI courts may recognize foreign insolvency proceedings under common law principles, though the UNCITRAL Model Law is not formally adopted.
Cooperation with courts in other jurisdictions (especially UK, US, Hong Kong) is common in practice.
🔹 Restructuring Mechanisms
Scheme of Arrangement under the BVI Business Companies Act (not the Insolvency Act), used as a restructuring tool.
Requires court approval and creditor consent.
🔹 Personal Insolvency
Similar framework under the Insolvency Act.
Includes bankruptcy orders, administration orders, and compositions with creditors.
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