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Disabling of Bearer Shares in BVI Corporations

Disabling of Bearer Shares in BVI Corporations

Disabling of Bearer Shares in BVI Corporations

Friday, 30 October 2009 15:30

By Christopher Hooley, Partner

Bearer shares in BVI corporations incorporated prior to 1st January 2005 will be "disabled" after 31st December 2009.

This has potentially serious implications for the holders of any bearer shares in BVI corporations and anyone that intends to acquire shares in a BVI corporation which was incorporated prior to 1st January 2005.


What is it all about?


Under the BVI Business Companies Act, 2004, with effect from midnight 31st December 2009:

  • Bearer shares issued by a BVI corporation and not deposited with an "authorised custodian" or "recognised custodian" will be "disabled", meaning that the bearer shares will cease to carry any of the rights and entitlements which they would otherwise carry (i.e. the right to vote or to receive dividends), and any transfer of an interest in such shares would be void.
  • The Memorandum and Articles of Association of BVI corporations which contain provisions dealing with bearer shares will be deemed to have been amended to state that such companies are not authorised to issue bearer shares, convert registered shares to bearer shares or exchange registered shares for bearer shares, unless such BVI corporations have filed an election to the contrary.

What should you now do?

For a BVI corporation with bearer shares which are not deposited with an "authorised custodian" or "recognised custodian", the holders of such bearer shares must, before the year end 2009, either (i) deposit the bearer share certificates with an "authorised custodian" or "recognised custodian"; or (ii) arrange for the bearer shares to be converted by the BVI corporation into, or exchanged for, registered shares.

If a BVI corporation wishes to retain the power to issue bearer shares in its Memorandum and Articles of Association, it must file a notice along with a declaration on how to deal with its bearer shares with the BVI Registrar of Companies and pay an increased licence fee.

For a BVI corporation incorporated after 1st January 2005 with the capacity to issue bearer shares, such BVI corporation is already subject to an increased licence fee and any bearer shares issued by such BVI corporation must already be placed with an "authorised custodian" or "recognised custodian".

For a BVI corporation without bearer shares but whose Memorandum and Articles of Association allow for the issue of bearer shares, if the BVI corporation does not wish to issue bearer shares in the future, no action is required and in that case, the BVI corporation will not be subject to an increased licence fee.

Conclusion:

In view of the impending "disabling" of bearer shares, all such bearer share holders must take appropriate actions to deposit such shares with an "authorised custodian" or "recognised custodian" or convert such shares into registered shares before the year end 2009.

BVI corporations which have power to issue bearer shares in their Memorandum and Articles of Association must file with the BVI Registrar of Companies, before the year end 2009, to elect to retain such power.

OLN's Corporate and Commercial Practice Group regularly advises on corporate structuring and business planning and we are happy to give you further advice and strategic overview on the above topic.



This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.