Anda di halaman 1dari 17


November 2010

Creditors Rights in Insolvency Proceedings: A Practical Guide for Smaller Practices

TheBVIinsolvencyregimehasbeenconsideredbysometobeessentiallyacreditor friendlyone.TheInsolvencyAct2003(theAct)andtheInsolvencyRules2005(the Rules) provide the legislative framework which is largely responsible for the jurisdictionearningthischaracterisation.Withinthatframeworkthereareanumber of insolvency mechanisms available in the BVI, namely: liquidation, creditor arrangements, receivership, administrative receivership and (possibly in the future) administration.ItshouldbenotedthattheadministrationregimeunderPartIIIofthe Act, which allows insolvent companies to be reorganisedand refinanced, supported byastatutorymoratoriumhasnotyetcomeintoforceanditappearsthatitisunlikely tobebroughtintoforceinthenearfuture. ThecompaniescoveredundertheActandRulesarecompaniesregisteredunderthe BVIBusinessCompaniesAct2004andcompaniesregisteredundertheInternational Business Companies Act, which were reregistered as BVI business companies on 1 January2007.Licensedentitiessuchasbanks,trustcompaniesandinvestmentfunds are subject to the same proceedings as BVI business companies, except for the additional requirement of notice to the relevant regulator. There are separate provisionsforlicensedBVIinsurancecompanies,whichwedonotintendtoaddress inthisarticle. BeforeconsideringinsolvencyproceedingsintheBVI,weshouldfirstconsiderwhat insolvency means, as a matter of BVI law. A company is insolvent if: (i) it fails to complywithastatutorydemand;(ii)anexecutionorprocessissuedonajudgment, decreeororderoftheBVICourtinfavourofacreditorisreturnedwhollyorpartly unsatisfied;(iii)thevalueofthecompanysliabilitiesexceeditsassets(theestablished

British Virgin Islands

balancesheettest);and(iv)thecompanyisunabletopayitsdebtsastheyfalldue(the establishedcashflowtest).

1. Creditors rights before an insolvency proceeding is opened 1.1 Filing for the declaration of debtors insolvency 1.1.1 Court Appointed Liquidator
A creditor may initiate the corporate insolvency process by serving a statutory demand on the debtor company in the sum of at least US$2,000, that being the prescribed minimum. Noncompliancewiththestatutorydemandwithin14daysof thedebtorbeingservedresultsinthedebtorcompanybeingdeemedtobeinsolvent. ThisperiodwithinwhichthedebtorcansatisfythedebtorapplytotheCourttohave to have the statutory demand set aside is nonnegotiable. It cannot be extended. Recentjudicialdeterminationshaveexploredtheextenttowhichacreditorwhofails tochallengeastatutorydemandcanraiseargumentsastothevalidityofthedebtat thestagewhentheapplicationtoappointaliquidatorisdetermined. Inadditiontotheinsolvencyground,aCompanymayalsobeliquidatedbytheCourt ifitissatisfiedthatitisjustandequitabletodoso,orthatitisinthepublicinterest.

1.1.2 Members Appointed Liquidator

The members of a company may appoint a liquidator by a resolution passed at a properly constituted meeting of the company by a majority of 75 per cent, or if a highermajorityisrequiredbytheMemorandumandArticlesofAssociation,bythat higher majority, of the votes of those members who are present at the meeting and entitledtovoteontheresolution. Itisimportanttonotethataresolutiontoappointaliquidatorbythemembersofa companywouldbevoidandofnoeffectif: (a) anapplicationtotheCourttoappointaliquidator hasbeenfiledandserved butnotyetdetermined; (b) aliquidatorhasbeenappointedbytheCourt;or (c) the person to be appointed liquidator has not consented in writing to his appointment.


Choice of the insolvency representative

WhilsttheappointmentoftheliquidatorismadebytheCourt,theapplicant/creditor mayproposealiquidatortotheCourt.Inreality,theapplicantalwaysproposesthe intendedliquidator.Thatproposedliquidatormustbeaneligibleperson,thatisan insolvency practitioner licensed to practice in the BVI. A notice of eligibility and

Page 2 of 17

British Virgin Islands

consenttoactsignedbytheproposedliquidatormustbeattachedtothesupporting documentation. If there is already a creditors arrangement in place, the Court may appoint the supervisorofthearrangementasliquidatorofthecompany.


Packaged insolvencies

The concept of the prepack is not a widely recognised one in the BVI, largely on account of the fact that most BVI Companies that are subject to restructuring are holding entities. In principle, there is, however, no objection to them, although as noted above, given the lack of an effective administration/moratorium provision, it can be appreciated that the scope for using such mechanisms is inherently more limitedthanmightotherwisebethecase.Subjecttoproperdischargeofthedutiesof amortgagee,BVIreceivershipoffersapotentialroutetoeffectingaprepacksolution.


Cross-border insolvencies and specific country rights

WhilsttheBVIisnotasignatorytoanytreatiesoninternationalinsolvency,theAct has adopted the United Nations Commission on International Trade Law (UNICTRAL)ModelLawonCrossBorderInsolvency.Thatsaid,thoseprovisions arenotpresentlyinforce,andagain,itisnotanticipatedthatthisstateofaffairswill changeanytimesoon. Nevertheless, the rights of creditors who reside in the BVI and those outside of the jurisdiction are the same. Once the liquidator is appointed by the Court and he has called for claims to be submitted to him, it does not matter where the debt was incurredorwhatlawgovernsit.Ofcoursewhetheradebtactuallyexistsisamatter fortheproperlawofthedebttodetermine,butoncethecreditorhasanexistingdebt thenaclaimcanbemadeintheliquidation. EvenwheretheassetsofthedebtorcompanyarerelocatedoutsideoftheBVI(asis most frequently) the case in this jurisdiction, such assets fall within the scope of the liquidatorspowers.Theonlyhurdleforhimatthatpointisobtainingrecognitionof his authority abroad, but the Courts in commonlaw jurisdictions will generally recognise a liquidator of a foreign company appointed by the Court of the place of incorporationashavingtheauthoritytoadministertheassetsofthedebtorcompany worldwide. IfaBVIcompanyhasbeenwoundupbyaforeigncourt,itcanneverthelessstillbe placedinliquidationintheBVIbyeithertheappointmentofaliquidatorbytheCourt or by the members. It is considered that only the liquidation of the company in its placeofincorporation(thatis,theBVI)willgenerallyberegardedasfinallywinding

Page 3 of 17

British Virgin Islands

up the company. It is of course open for the foreign liquidator to apply to the BVI courtsfortherecognitionofhisauthorityasliquidator. Other insolvency mechanisms specified under the Act are also available to a BVI company which is in liquidation abroad, and these regimes by themselves will not negatetheforeignliquidationofthecompanyalthoughonapracticallevel,itcanbe anticipatedthatconflictsmightariseastocontrolofparticularassets. Part XIX of the Act provides a selfcontained regime for judicial assistance in insolvencyproceedings.ThisallowsaBVICourttomakeanorderassistingaforeign states insolvency or restructuring process. It allows the foreign representatives of certain types of insolvency proceedings, that is, collective judicial or administrative proceedingsinwhichthepropertyandaffairsofthedebtoraresubjecttocontrolor supervisionbyaforeigncourt(soliquidations,asunderstoodfromaBVIperspective fall within that group) that take place in designated territories to apply to the BVI courts for assistance. Countries which can take advantage of these provisions are designatedbytheFinancialServicesCommission. The representatives who can apply for such orders are persons authorised to administer the reorganisation or liquidation of the companys property or affairs or who are authorised to act as representatives of the foreign insolvency proceedings. ThereliefavailableisverywideanddiscretionaryandtheCourtmay,ifitconsidersit just,applyforeignlawtothereliefsought. Thereliefthatmay,intheCourtsdiscretionbegranted,includes: Therestrainingofanyproceedingsorotherlegalprocess. The restraining of the creation or exercise of any right or remedy over propertyofthedebtor.Propertyisdefinedforthesepurposesaspropertythat issubjecttoorinvolvedintherelevantforeignproceeding. Therequirementthatanypersondeliveruptotheforeignrepresentativeany propertyofthedebtororitsproceeds. The making of orders designed to coordinate a Virgin Islands insolvency proceedingwithaforeignproceeding. Theappointmentofaninterimreceiverofanypropertyofthedebtor. The authorisation of the examination by the foreign representative of the debtororofanypersonwhocouldbeexaminedinaVirginIslandsinsolvency inrespectofthedebtor.

Page 4 of 17

British Virgin Islands

The staying or termination, or the making of any other appropriate order, in relationtoaVirginIslandsinsolvencyproceeding.

There are certain specific matters the Court is required to have regard to when consideringwhethertograntsuchrelief; Any such order made must not adversely affect the rights of a secured or preferentialcreditor. There must be just treatment of all persons claiming in the foreign proceedings. The protection of persons in the BVI that have claims against the company againstprejudiceandinconvenienceintheprocessingofclaimsintheforeign proceeding. Thepreventionofpreferentialorfraudulentdispositionsofproperty. The need for distributions to claimants in the foreign proceedings to accord substantiallywiththeorderofdistributionsinaBVIinsolvency;and Comity.

2. Creditors rights aimed to meet claims (credit, titles, contracts etc.)


Filing a claim

Wheretheliquidatorofacompanyhassufficientfundstomakeadistribution,after taking into consideration the sums that may be necessary for his remuneration and theothercostsandexpensesoftheliquidation,anoticeissenttothecreditorsofthe company,fixingadateonorbeforewhichcreditorsaretosubmittheirclaimstohim. Aspecificclaimformisprovidedintherulesanditsetsoutthetotalamountofclaim as at the date of appointment of liquidator; particulars of how and when debt incurred; details of documents by reference to which the debt can be substantiated; and particulars of any security held, the value of the security and the date it was given.Itistheliquidatorsresponsibilitytosendtheclaimformtoeachcreditorheis awareofatthetime.Theclaimformmustbesignedbythecreditororonhisbehalf andreturnedtotheliquidator. Where a creditor does not submit a claim by the date specified in the notice he is excludedfromthebenefitofanydistributiononorafterthatdatethatismadebefore he submits his claim. Thereafter, when the creditor makes a late claim and it is accepted by the liquidator, the creditor is entitled to be paid, out of any money

Page 5 of 17

British Virgin Islands

availablefordistributingafurtherdividend,andheshouldbepaidbeforethatmoney isusedtodistributeafurtherdividendtocreditors. It is up to the liquidator to reject or accept the claim, in whole or in part, and if he rejects it, the liquidator must provide a notice to the creditor stating the reasons for rejectingtheclaim.


Privileges for secured claims

A liquidator will apply the proceeds of the realised assets and pay creditors in the followingorder: a) creditors secured by a fixed charge or mortgage out of the proceeds of the assetsubjecttothefixedchargeormortgage; b) theliquidatorscostsandremuneration; c) preferentialcreditors; d) allotherclaims;and e) interestonclaims.

2.2.1 Secured Creditors

The Act expressly provides that liquidation does not affect the rights of secured creditorstoenforcetheirsecurity. Creditorswhocanestablishvalidretentionoftitleandotherproprietaryclaimswill beentitledtolooktotheirsecurity,irrespectiveofthemakingofaliquidationorder. A secured creditor may opt to either value the assets subject to the security interest andclaimintheliquidationofacompanyasanunsecuredcreditorforthebalanceof itsdebt;alternativelyitmaychoosetosurrenderitssecurityinteresttotheliquidator for the general benefit of creditors and claim in the liquidation as an unsecured creditorforthewholeofhisdebt.Ofcourseitmaydecidetotakeneitherroute. Ifasecuredcreditoromitstodisclosehissecurityinterestwhensubmittingaclaimin the liquidation of a company, he surrenders his security interest for the general benefitofthecreditors.

2.2.2 Preferential Creditors

Preferentialclaimsincludethefollowing: Government Sumsduetothegovernmentinrespectofanytax,duty,includingstampduty, licencefeeorpermit;and SumsduetotheFinancialServicesCommissionoftheBritishVirginIslands.

Page 6 of 17

British Virgin Islands

Nongovernment Wages and salary owing to a present or past employee that were/fell due during the period of six months immediately prior to the winding up of the company; The amount due to the BVI Social Security Board in respect of employees contributions deducted from the employee and in respect of employers contributions payable for the six months immediately before the liquidation date;and Theamountdueinrespectofpensioncontributionsorcontributionsinrespect of medical insurance payable during 12 months immediately before the liquidationdate. The Act provides that so far as the assets of a company in liquidation available for payment of the claims of unsecured creditors are insufficient to pay the costs and expenses of the liquidation in accordance with the prescribed priority and the preferentialcreditors,thosecosts,expensesandclaimshavepriorityovertheclaims of chargees in respect of assets that are subject to a floating charge created by the companyandshallbepaidaccordinglyoutofthoseassets. Most companies incorporated in the BVI will not be operating from within the BVI andthereforethelikelihoodofpreferentialcreditorsarisingotherthanfeespayablein respectofannualfeesformaintenanceofthecompanyisgenerallylow.

2.2.3 Unsecured Creditors

It is a central principle of BVI insolvency law that unsecured creditors share in the assetsavailabletothemparipassu.


Continuation of contracts entered into with the debtor

Ontheapplicationofapersonwhois,asagainsttheliquidatorofacompany,entitled tothebenefitorsubjecttotheburdenofacontractmadewiththecompany,theCourt may make an order rescinding the contract on such terms as to payment by or to eitherpartyofdamagesforthenonperformanceofthecontract,orotherwiseasthe Courtconsidersjust.Otherwise,andsubjecttoanyexpresscontractualstipulationto the contrary, liquidation does not of itself affect the operation of any outstanding contractualobligationsoforenjoyedbyaBVIcompany.


Cross-border and specific country entitlements

In relation to security interests, the proper law of the instrument that creates the security governs the right of enforcement and the legislation does not add to those

Page 7 of 17

British Virgin Islands

rights or detract from them. Certain foreign jurisdictions may impose limitations on therightsofsecuredcreditorstoenforcetheirsecurityininsolvencyand,iftheassets overwhichthesecurityisgrantedaresituatedthere,questionsarelikelytoariseasto whetherthesecuredcreditorissubjecttosuchlimitations.


Creditors rights proceeding






General creditors rights Creditors are entitled to file their claims with the appointed liquidator, and if a creditors claim is not rejected by the liquidator, he is entitled to inspect the claims whichhavebeensubmittedtotheliquidator. Before the date of the first creditors meeting, the creditor may request and receive fromtheliquidatoralistofthecreditorsofthecompanyknowntotheliquidator;and any other information concerning the affairs of the company that the liquidator is reasonablyabletoprovide. After distribution of a dividend, the each creditor participating in that dividend is entitled to receive from the liquidator a statement with respect to the companys assets and affairs, so as to enable the creditors to understand the calculation of the amountofthedividend. 3.2 Specific rights of information during the proceeding


3.2.1 Right to Examine Court Documents

ThereisnorightunderBVIlawautomaticallyentitlingacreditortoobtaindisclosure of documents filed in insolvency proceedings. A creditor may however under the Rulesrequestacopyoftheapplicationfromtheapplicant. Ifacreditorsarrangementhasbeenproposedoraccepted,acopyoftheapplication must be sent to the interim supervisor or supervisor appointed in respect of the arrangementortheproposedarrangement.

3.2.2 Right to be heard

Once an application has been made to appoint a liquidator over a company, the applicantmustadvertisetheapplicationatleastsevendaysbeforethehearingdate. ThisadvertisementwhichisplacedinthenewspaperandGazettegivescreditorsthe opportunity to file and serve a notice of intention to appear at the hearing, stating their entitlement to do so, the amount of debt owing and whether their appearance

Page 8 of 17

British Virgin Islands

will be to support or object to the application. The Act and Rules do not specify where the newspaper advertisement should appear, but in addition to a local BVI newspaper, applicants are well advised to also consider advertising in publications thatappearwherecreditorsarelikelytobelocated. If a creditor fails to file and serve his notice on the applicant within the time frame allowed, he may seek leave from the Court to appear at the hearing for the appointmentoftheliquidator. Thehearingofanapplicationtoappointaliquidatorisinvariablyheldinopencourt to which the public are admitted, a creditor or its representative may attend the hearing;subjecttotheabove,itmayalsoformallyappear. If the applicant proposes as liquidator the supervisor of an established creditors arrangement, the supervisor must send a notice to each creditor of the company statingthatanapplicationhasbeenmadefortheappointmentofaliquidatorofthe company and that he has been proposed to be appointed liquidator; and he must advise the creditor of the date fixed for the hearing of the application. The creditor mayrespondtothenoticeforexampleifhewishestoraiseanyobjections. Claims submitted by unsecured creditors may be amended or withdrawn by the creditor at any time before the liquidator has admitted it. The Court may on applicationbyacreditorexpungeoramendanadmittedclaimifitissatisfiedthatthe claimshouldnothavebeenadmittedorshouldbereduced.

3.2.3 Right to Receive Periodic General Reports

Theliquidatorisrequiredtoprepareapreliminaryreportcovering,tothebestofhis knowledgeandbelieftheamountofcapitalissued,subscribedandpaidup;theassets andliabilitiesofthecompany;andifthecompanyhasfailed,thecausesofthefailure. Acopyofthisreportmustbesenttoeachcreditor.ItisnotuncommonfortheOrder appointingaliquidatortorequirehimtoprovideperiodicreportsonthecourseofthe liquidation,howeverthesetendtobereportstotheCourt,andnottocreditors.

3.2.4 Right to Inspect Company Documents

Atanytimeaftertheappointmentofaliquidatorofacompany,acreditormaymake an application to the Court to grant an order for the inspection of specified books, records and documents of the company that are in its possession; other than that, thereisnogeneralright.

3.2.5 Right to Enforce Liquidators Duties

Page 9 of 17

British Virgin Islands

If a liquidator fails to file any notice, return, account or other document, a creditor may serve a notice on the liquidator requiring him to remedy the default. If the liquidatorfailstoremedythedefaultacreditormayapplytotheCourtforanorder thattheliquidatorremedythedefaultwithinsuchtimeastheCourtmayspecify.


Approval rights not delegated to a creditors committee

The creditors arrangement which will be discussed below is the only regime providedundertheActwherebyanykindofacceptanceofcompromiseagreements orproposalsbythecreditorscanbemade.

3.4 4.

Cross-border and specific country rights (entitlements) Creditors rights aimed to participate actively in the proceeding


Creditors meetings Thefirstcreditorsmeetingisusuallycalledwithin21daysoftheappointmentofthe liquidator. However the liquidator is not obligated to call creditors meeting if he considersgiventhestateofaffairsofthecompanyitisnotnecessaryforameetingto be held. This decision can be overturned however, if 10 per cent in value of the creditors give written notice to the liquidator within 10 days of receiving his notice, that they require a meeting to be called. A list of the creditors supporting the requisition, showing the amounts of their respective claims; and the written confirmation of each creditor on the list that he supports the requisition should accompanythenotice. Atthisfirstmeetingifthecreditorsaredissatisfiedwiththeliquidator,theycanvote toappointsomeoneinhisplaceandalsoformacreditorscommittee. Thequorumforameetingofcreditorsisatleastonecreditorentitledtovote. The majority required for the passing of a resolution at a creditors meeting is in excessof50percentinvalueofthecreditorspresentinpersonorbyproxywhovote ontheresolution. Acreditorwhowishestovoteatacreditorsmeetingmustgivewrittennoticeofhis claim to the liquidator and any proxy that he intends to be used on his behalf. The votesofacreditorarecalculatedonthevalueofthecreditorsclaim.Acreditormay notvoteinrespectofaclaimforanunliquidatedorundeterminedamount.Asecured


Page 10 of 17

British Virgin Islands

creditor is entitled to vote only in respect of the balance, if there is any, of his debt afterdeductingthevalueofhissecurityinterest. Iftheliquidatororchairmanofthecreditorsmeetingdecidesthatacreditorcannot vote for whatever reason, then the creditor may appeal to the Court to reverse his decision.


Creditors Committee

4.1.1 Nomination
Aresolutiontoestablishacreditorscommitteeandalsoappointingthefirstmembers ofthecommitteemaybepassedatthefirstcreditorsmeeting.Wheretheliquidatoris satisfiedthatacreditorscommitteehasbeenvalidlyestablishedhemustfileanotice withtheCourttothateffect.Thenoticeshouldspecifythenamesandaddressesof the persons appointed to the creditors committee. Until such time as the notice is filedthecreditorscommitteecannotact. A person is eligible to be a member of the committee if he is a creditor and has consentedtoservingonthecommittee.Ifacreditorsclaimhasbeenrejectedbythe liquidator, he cannot serve on the committee. A creditors committee consists of at least three but no more than five individuals. The chairman of a creditors meeting shouldbetheliquidator. The creditors committee ceases to exist on the termination of the insolvency proceedinginwhichitwasappointed.

4.2.2 Functions
Thefunctionsofacreditorscommitteeare: (a) to consult with the liquidator about matters relating to the insolvency proceeding; (b) toreceiveandconsiderreportsoftheliquidator;and (c) toassisttheliquidatorindischarginghisfunctions. Acreditorscommitteemayalsocallameetingofcreditors;requiretheliquidatorto providethecommitteewithsuchreportsandinformationconcerningtheinsolvency proceeding or request his attendance before the committee to provide it with such informationandexplanationsconcerningtheinsolvencyproceedingasitreasonably requires.Acreditorscommitteecannotgivedirectionstotheliquidator.

Page 11 of 17

British Virgin Islands

Wherealiquidatordisposesofanyassetsofthecompanytoapersonconnectedwith thecompany,heshouldnotifythecreditorscommitteeofsuchdisposition.

4.2.3 Voting Mechanisms

A meeting is quorate if notice of the meeting has been given to all members and a majorityofitsmembersarepresentatthemeeting.Eachmemberhasonevoteanda resolutionispassedbyasimplemajorityofthosememberswhoarepresentandvote. The committee may agree procedures for the participation by members in meetings bytelephoneorotherelectronicmeans;andthepassingofcircularresolutions.

4.2.4 Remuneration of the Member of the Committee

The members of the creditors committee are entitled to reimbursement for their expenses. The reasonable travelling expenses of members directly incurred in attendingameetingofthecreditorscommitteeshallbepaidbytheliquidatoroutof theassetsofthecompany,orasanexpenseoftheinsolvencyproceeding.Wherethe liquidator is of the opinion that a meeting of the creditors committee called by a member was unreasonably called he may refuse to pay members expenses. The creditors may then pass a resolution that the expenses should be paid by the liquidator out of the assets of the company, or as an expense of the insolvency proceeding.


Other forms of direct creditors participation

TherearenootherformsofdirectcreditorsparticipationoutlinedintheActorRules, although of course individual creditors may well have direct communications and dealingswiththeliquidatoronanyindividualissues.Thereisalsoprovisionunder theActforanypartywhoisdissatisfiedwiththeactsoromissionsofaliquidatorto applytoCourtfordirections.Weaddressthisfurtherbelow.


Rights related to reorganisation plans and proceedings

CreditorsArrangement A creditors arrangement is a procedure which enables a company to compromise liabilities with creditors. It is very flexible and can vary or cancel debts; it may provideforthewholeorpartialcancellationofaliabilityofthecompanyinreturnfor shares of any kind or for the issue by the company, or by any other person, of a debenture or a security interest; or relate to an amendment of the companys memorandumorarticlesthataffectsthelikelihoodofthecompanybeingabletopaya debt or satisfy a liability. An arrangement does not affect the rights of secured or preferential creditors without their written consent. There is no moratorium on creditorrightsandnoCourtinvolvement.

Page 12 of 17

British Virgin Islands

Aproposalforacreditorsarrangementmaybemadebytheboardonthebasisthatit believesthecompanyisinsolventorlikelytobecomeinsolventorbytheliquidator.If the company is being wound up, the liquidator may also make a proposal for a creditors arrangement and appoint another eligible insolvency practitioner as the interimsupervisororasisusuallydone,actastheinterimsupervisorhimself.Neither the creditors nor members of a company have any standing to propose an arrangement. The interim supervisor must call a creditors meeting to consider the arrangement within28daysofhisappointment.Hemustprepareawrittenreportontheproposal, and send each creditor, member and director a copy of it, along with a copy of the proposal,andacopyofthecompanysstatementofaffairs. If the creditors approve the arrangement by 75% in value of those present at the meeting,thearrangementtakeseffect.Thearrangementthenbindsallcreditorsofthe company (including dissenting creditors) and creditors who were not present at the meetingorwhodidnothavenoticeofit. Aftertheapprovalofanarrangement,theboardorliquidatorputsthesupervisorinto possession of the assets included in the arrangement so that he may carry out his duties,whichmayinclude: i. promptlydischarginganysumsduetotheliquidatorundertheActor theRules; ii. providing the administrator or liquidator with a written undertaking todischargeanysuchsumsoutoftheassetsassoonaspracticable; iii. discharginganysumsduetothepreferentialcreditors; iv. discharging all guarantees properly given, or obligations properly enteredinto,bytheliquidatorforthebenefitofthecompanyorinthe courseofhisduties; v. payingtheliquidatorsoutstandingremuneration. The supervisor should also keep accounting records, recording and explaining the receipts,expenditureandothertransactionsrelatingtohisactsanddealingsinandin connection with the arrangement, and prepare reports concerning the progress and efficacyofthearrangement.

Page 13 of 17

British Virgin Islands

If a creditor believes that an approved or modified arrangement unfairly prejudices himhemaymakeanapplicationtotheCourttorevokeorsuspendanydecisionmade approvingormodifyingthearrangement. Someofthedrawbacksofthisarrangementandfactorsthatlimititsutilityisthatthe arrangement does not affect the rights of secured or preferential creditors without theirwrittenconsentandthereisnomoratoriumoncreditorrights.Thereislittleto no court involvement in a judicial capacity unless some difficulty or disagreement arises. Thearrangementwillterminateuponcompletionofthearrangement,atwhichpoint notice is given to the company, the members, the creditors and the Registrar of CorporateAffairs,togetherwithareportsummarisingthereceiptsandpayments.


Cross-border and specific country rights

Any creditor, resident or not in the BVI, may be appointed as members of the creditorscommittee.

Creditors entitlements aimed at controlling the activities of the insolvency representative (the Court) Means creditors have to challenge decisions and acts of the insolvency representative


Aliquidator,whetherappointedbyresolutionofthemembersorbytheCourt,actsas an officer of the Court, not of the creditors. He is the agent of the company in liquidation. Any person who is aggrieved by an act, omission or decision of the liquidator may applytotheCourtonthatbasisandtheCourtmayconfirm,reverseormodifytheact, omissionordecisionoftheliquidator.

5.2 5.3

Substitution of the insolvency representative 5.2.1 Creditors Meeting

Atthefirstcreditorsmeeting,thecreditorsmayappointaliquidatorintheplaceof theliquidatorappointedbythemembers.Anapplicationmustthenbemadetothe Courttosanctionthisdecision.

Page 14 of 17

British Virgin Islands

5.2.2 Court Removal

On application by a creditor, or creditors committee, the Court may remove a liquidatorfromofficeiftheliquidator: (i) isnoteligibletoactasaninsolvencypractitionerinrelationtothecompany, (ii) breaches any duty or obligation imposed on him by or owed by him under thisActortheRules,or (iii) failstocomplywithanydirectionororderoftheCourtmadeinrelationtothe liquidationofthecompany;or theCourtissatisfiedthat (i) theliquidatorsconductoftheliquidationisbelowthestandardthatmaybe expectedofareasonablycompetentliquidator,or (ii) theliquidatorhasaninterestthatconflictswithhisroleasliquidator

5.2.3 Death or Resignation

Wheretheliquidatorofacompanydiesorresigns,anapplicationmaybemadebythe creditorscommitteetothecourttoappointaneligibleinsolvencypractitionerinhis place.

5.2.4 Official Receiver

Where the Official Receiver has been appointed to act the liquidator in any of the situationsaddressedabove,hemaycallmeetingofthecreditorstohavethemresolve tothataneligibleinsolvencypractitionermaybeappointedinhisplace.


Cross-border and specific country rights (entitlements)

Foreign creditors have the same entitlements as local creditors. The exercise of their controlling rights is not prohibited by their being out of the jurisdiction as many of themmayappointlegalrepresentativestoactontheirbehalfandkeeptheminformed oftheliquidatorsactions.

Creditors obligations Responsibility for the remuneration of the insolvency representative


Where a liquidator of a company is appointed and, at the date that the application wasfiled,anarrangementwasbeingsupervisedbyasupervisor,theremunerationof thesupervisorisafirstchargeontheassetsofthecompany.

Page 15 of 17

British Virgin Islands

Theremunerationofaliquidatorisfixedbythecreditorscommittee,ifanyexistsor by the Court after the conclusion of the insolvency proceeding, though interim paymentsmaybearranged. If a creditor believes that the sum fixed by the creditors committee is excessive, he maywiththeconcurrenceofatleast25%invalueofthecreditorsapplytotheCourt for an order reducing the remuneration fixed. In the event that the creditors committee fails to fix the liquidators remuneration, or the liquidator considers that theremuneration,oraninterimpaymentfixedisinsufficientorunacceptable,hemay make the same application to the Court or if no committee exists, he may make an applicationtotheCourttofixhisremuneration,ortofixaninterimpayment. Themembersofthecreditorscommitteeorthecreditors,givennoticeofthehearing, mayappearandbeheardatthehearingoftheapplication.

6.2 Funding special activities of the insolvency representative (liquidator)

Thecreditorsdonotusuallyfundtheinsolvencyproceedings.Howeverintheevent that the debtor company has insufficient assets to cover the costs of the insolvency proceedings,theapplicant/creditorwillfrequentlybecalledupontodoso,pursuant to the terms of any indemnity that it has provided to the liquidator upon his appointment.


Specific country entitlements

There is no provision under the Act or Rules for the State to fund insolvency proceedings.

Appendix Basic forms Mark Fort

Partner +1 (284) 852 1113


Page 16 of 17

British Virgin Islands

This article is not intended to be a substitute for legal advice or a legal opinion. It deals in broad terms only and is intended to merely provide a brief overview and give general information.

About Conyers Dill & Pearman

Conyers Dill & Pearman advises on the laws of Bermuda, British Virgin Islands, Cayman Islands, Cyprus and Mauritius. Conyers lawyers specialise in company and commercial law, commercial litigation and private client matters. Conyers structure, culture and expertise enable responsive, timely and thorough service. Conyers provides clients with the highest quality legal advice from strategic global locations including offices in the worlds leading financial centres in Europe, Asia, the Middle East and South America. Founded in 1928, Conyers comprises 600 staff including more than 150 lawyers. Affiliated companies (Codan) provide a range of trust, corporate secretarial, accounting and management services. For more information please contact: Naomi Little +1 (441) 298 7828

Page 17 of 17