Vol 5 (2008) - Issue 4

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Insolvency & Restructuring in the BVI: An Emerging Trend of Using Insolvency Practitioners in the Context of Commercial Litigation?

Introduction

Nobody knew what effect the enactment of the BVI Insolvency Act in 2004 would have on the insolvency and restructuring market in the BVI, but it has not necessarily developed in the manner expected by some insolvency and legal practitioners. The flow of insolvent liquidations and receiverships has been fairly modest, but despite progressive increases, there has not been the explosion of appointments some had expected from a jurisdiction with almost 803,000 company registrations at 30 June 2007. This can easily be explained by the generally benign global economy which has applied equally to BVI registered companies as others.

Statistics produced by the BVI Financial Services Commission for the years ended 31 December 2004, 2005 and 2006, show the total number of appointments under the Insolvency Act has increased significantly from 23 appointments in 2004 to 46 in 2005 and 87 in 2006.

The current global economic slowdown and the typical roles of BVI companies, for example, as holding companies in complex group structures, vehicles for joint ventures, hedge/mutual funds and captive insurance companies, amongst others, are almost certain to result in an increase in the number of insolvencies of BVI companies during 2008. It is clear, however, that any anticipated increase in the number of insolvencies can be accommodated following the significant growth in the teams of experienced insolvency practitioners (IPs) and lawyers now well established in the BVI.

A major development in the judicial system in the BVI is the future establishment of the Commercial Court, which will be part of the Eastern Caribbean Supreme Court. Premises have been identified and advertisements placed for an experienced judge. This development will be welcomed as it continues to demonstrate the BVI’s commitment to meeting the needs of companies registered in the jurisdiction.

An emerging trend?

Commercial cases reaching the Courts in the BVI often involve large, complex and frequently, highly acrimonious disputes which are global in reach. The creation of the dedicated Commercial Court will further enhance the reputation of the BVI as a reliable jurisdiction, with its appeal routes to the Eastern Caribbean Supreme Court of Appeal and the Privy Council in London. The level of litigation involving BVI companies means that IPs are frequently being appointed by the BVI Court as Court-appointed Receiver or Provisional Liquidator of companies involved in commercial disputes.