Member Article

Phasing out of the International Business Companies Act, 1984 (the IBC Act) On 1 January 2005, the BVI Business Companies Act 2004 (the New Act) was introduced. Pursuant to the New Act, from 1 January 2006, new BVI companies can only be incorporated under the New Act, and companies already existing under the International Business Companies Act 1984 will continue to be subject to the IBC Act until the 1 January 2007, when all IBC Act companies will be automatically re-registered under, and become subject to the New Act. The New Act The following changes have been introduced by the New Act: • seven different types of companies are now available under the New Act (including companies limited by guarantee, unlimited companies and segregated portfolio companies) whereas previously, under the IBC Act, a company limited by shares was the only type of company available; • concepts of authorised share capital and general capital maintenance have been removed; • companies are no longer restricted to paying a dividend only out of "surplus" if certain formalities are satisfied; • registration of charges under the New Act will be made with the companies registrar (as opposed to on the company's private register) and the chargee can effect the registration of the charge itself without the assistance of the company; • foreign characters (e.g. Chinese characters) can now be included in the name of the company; • directors may act in the best interests of a company's holding company even if it is not in the best interests of the company itself so long as this is permitted by the Memorandum and Articles of Association; • a sole director who is also the sole member of a company can nominate a reserve director to act in his/her place upon his/her death; and • a minority shareholder can take statutory derivative actions when granted leave of the court to do so. Please note that the deadline for re-registering new memoranda and articles of association in accordance with the New Act expires on 1 January 2007. Adoption of new memoranda and articles of association is not mandatory but there may be some inconsistencies between the existing sets of memoranda and articles of association adopted under the IBC Act and the New Act or companies may wish to take advantage of some of the provisions of the New Act. Existing memoranda and articles of association will be automatically re-registered under the New Act on 1 January 2007.