Vol 9 (2012) - Issue 3

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Back to the Beginning: The Pendulum of Statutory Rectification under BVI Law

Introduction
Prior to the advent of the Commercial Division of the High Court, it was commonplace for disputes over title to shares in BVI companies to be resolved within the ambit of section 43 of the BVI Business Companies Act, 2004 (as amended) (the ‘BCA’), which governs rectification of share registers. Once the Commercial Court arrived it seemed statutory rectifications were on their way out, under the auspices of two High Court decisions (discussed below), which significantly limited the Court’s jurisdiction to grant rectification in the manner we had all become accustomed to under section 43(1) of the BCA. The roadmap outlined by those decisions did not bode well for legal certainty in the enforcement of security rights, which is prevalent in this jurisdiction, and the cost generally of resolving shareholder disputes in the BVI. However, a recent decision by the Eastern Caribbean Court of Appeal appears to have once again opened the doors to rectification, emphasising the wide ambit of the Court’s jurisdiction and discretion under section 43 of the BCA. This article retraces the steps of two interesting cases in this fertile area of BVI law and highlights the important implications in practice going forward.

Rectification – section 43
Under section 41 of the BCA, a BVI company must keep a register of members containing, inter alia, the names and addresses of persons who hold registered shares in the company, the number of each class and series of registered shares held by each shareholder and the date on which any person ceased to be a shareholder. Where information required to be entered in the register of members under section 41 is omitted from the register, inaccurately entered in the register or there is unreasonable delay in entering such information in the register, a member of the company or any person aggrieved by the omission, inaccuracy or delay may apply to the Court under section 43(1) of the BCA for an order that the register be rectified. Under section 43(2) of the BCA, where rectification proceedings are brought under section 43(1), the Court has a discretionary power to determine any question relating to the right of a party to the proceedings, whether the question arises between two or more members or alleged members, or between members or alleged members and the company. Furthermore, section 43(2) expressly provides that the Court may determine any question that may be necessary or expedient to be determined for the rectification of the register of members. In the face of this encompassing statutory language, a line of decisions by the Commercial Court, culminating in Claim No. BVIHCV 2010/039 between Royal Westminster Investments S.A. and Others v Nilon Limited and Another, effectively restrained the apparently broad discretionary power of the Court under section 43(2) to determine any question that may be necessary or expedient to be determined for the rectification of the register of members. Prior to this line of cases, the broad discretion of the Court under section 43(2) was viewed sui generis and definitive of the scope of the Court’s jurisdiction to entertain applications under section 43(1). The Commercial Court judgment in Nilon clearly rejected this view and re-defined the threshold to be surpassed in order for an applicant to successfully invoke the Court’s jurisdiction under section 43(1). Before turning to the Court of Appeal judgment in Nilon, it may be useful to re-visit two of the earlier decisions by the Commercial Court which set the stage for the recent Court of Appeal decision.