Vol 10 (2013) - Issue 1

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Plans of Arrangement under the BVI Business Companies Act, 2004: Rio Verde Minerals Corporation, EM Subco (BVI) Inc., Talon Metals Corp (BVI High Court (Commercial) Claim 30 of 2011)

British Virgin Islands ('BVI') legislation includes three types of statutory 'arrangement' into which a BVI company may enter. These enable a BVI company to enter into arrangements, restructurings and transactions which, with approval of the BVI Court under the relevant process, will be binding on members and creditors of the company. These three routes consist of 'schemes of arrangement' and 'plans of arrangement' each under the BVI Business Companies Act, 2004 (the 'BC Act'), and 'creditors' arrangements’ under the BVI Insolvency Act, 2003.
Schemes of arrangement and creditors’ arrangements are derived largely from English law, and benefit from a substantial body of well developed case law from throughout the Commonwealth, which has enabled advisers in BVI to guide companies through these arrangements with some certainty as to the process and the issues involved.
In contrast, 'plans of arrangement' in BVI were inspired by Canadian law and, although they have been available in BVI in a previous form in the (now repealed) International Business Companies (IBC) Act since 1984, and in the BC Act since 2005, BVI companies had been slow to take up the availability of the plan of arrangement until that route had been tested in the BVI Court.
The BVI Commercial Court has recently approved what is thought to be the first plan of arrangement to be used in the BVI, in the matter of Rio Verde Minerals Corporation, EM Subco (BVI) Inc., Talon Metals Corp (BVI High Court (Commercial) Claim 30 of 2011). This article examines the Court’s approach in that matter, and concludes that the Court’s application of the legislation and exercise of its powers fully supported the commercial potential for the plan of arrangement in corporate restructuring transactions.
The 'arrangements' which may be the subject of a plan of arrangement under the BC Act are:
(a) an amendment to the memorandum and/or articles of association of the company;
(b) a reorganisation or reconstruction of a company;
(c) a merger or consolidation of one or more companies that are companies registered under the BC Act with one or more other companies, if the surviving company (being one of the constituent companies) of the merger or the consolidated company (being a new company formed out of the consolidating companies) is a company incorporated under the BC Act;
(d) a separation of two or more businesses carried on by a company;
(e) any sale, transfer, exchange or other disposition of any part of the assets or business of a company to any person in exchange for shares, debt obligations or other securities of that other person, or money or other assets, or a combination thereof;
(f) any sale, transfer, exchange or other disposition of shares, debt obligations or other securities in a company held by the holders thereof for shares, debt obligations or other securities in the company or money or other property, or a combination thereof;
(g) a dissolution of a company; and
(h) any combination of any of the things specified in paragraph (a) to (g) above.

It can be seen from the above list that there is great potential for a wide variety of restructuring transactions to be effected by way of plan of arrangement. Almost any type of restructuring, reorganisation or reconstruction of a BVI company could be effected under the plan of arrangement process. In particular, it should be noted that 'reorganisation' and 'reconstruction', as referred to in paragraph (b) above are not defined and should be given a wide interpretation. The 'separation of two or more businesses carried on by a company' referred to in paragraph (d) above is likely to be available to achieve a demerger, which is itself not available as a statutory occurrence in BVI.