Oct 2024
The British Virgin Islands has, as of 18 September 2024, extended the list of ‘Relevant Foreign Countries’ for the purposes of Part XIX of the BVI Insolvency Act, which governs Orders in Aid of Foreign Proceedings. These provisions allow foreign representatives – individuals authorized to manage the reorganization or liquidation of a debtor’s affairs – to seek wide-ranging powers from the BVI Court to assist in their foreign insolvency proceedings. It applies to collective mechanisms under the supervision of a foreign court (and therefore, for example, does not include singe creditor out of court receiverships).
Previously, the application of Part XIX was limited to insolvency proceedings taking place in Australia, Canada, Finland, Hong Kong, Japan, Jersey, New Zealand, the United Kingdom, and the United States. Whilst this list contained some important and notable jurisdictions from a BVI restructuring perspective, there were notable omissions. With the FSC’s recent expansion, the list now includes the Bahamas, Barbados, Belize, Bermuda, the Cayman Islands, Guernsey, Guyana, Ireland, the Isle of Man, Jamaica, Member States and Territories within the OECS, Nigeria, Singapore, Trinidad and Tobago, and the Turks and Caicos Islands.
The powers available to foreign representatives authorized in these jurisdictions are wide-ranging.
In relation to property rights, the BVI Court can:
- Restrain the commencement or continuation of any proceedings, execution, or legal processes against a debtor or their property.
- Limit the creation, exercise, or enforcement of any rights or remedies over the debtor’s property, excluding secured creditors.
- Require any individual to return any property or its proceeds belonging to the debtor to the foreign representative.
The BVI Court may also appoint an interim receiver for the debtor’s property or authorize the examination of any person who could be examined in a domestic insolvency proceeding.
In cases where domestic (BVI) insolvency proceedings are ongoing, the BVI Court can stay or terminate such proceedings, or issue orders that facilitate coordination between the domestic and the foreign proceedings. The court can also grant relief under section 470 (Additional Assistance), which expands its powers in providing assistance beyond what is outlined in section 467 of the Act.
In other words, properly used, the foreign assistance provisions can create a potent yet streamlined and focussed tool to assist foreign restructuring regimes.
As noted by Bannister J in Picard v Madoff, Part XIX grants foreign representatives from relevant countries explicit rights to apply for orders in aid from the BVI Court, without conferring status through the recognition of the foreign proceedings themselves.
The provisions of Part XVIII of the Act, which address cross-border insolvency and recognition of foreign insolvency proceedings, are not yet in force. The Government of the British Virgin Islands has indicated that these provisions will not be implemented until a “level playing field” with respect to the UNCITRAL model on cross-border insolvency is established. Until that time, the common law right of recognition remains, albeit without the practical utility that Part XIX provides. Part XIX operates independently of the need for such recognition.
Most corporate insolvencies in the British Virgin Islands involve a cross-border element, and the BVI’s insolvency laws recognize the international nature of these proceedings. The Insolvency Act contains provisions specifically addressing cross-border issues, and Part XIX has been utilized in several reported decisions, notably in cases involving Irving Picard, the US court-appointed trustee for the Madoff investment scandal.
In considering applications for assistance, Section 468 directs BVI courts to evaluate factors such as the fair treatment of all claimants in the foreign proceeding, the prevention of preferential or fraudulent transfers, and principles of comity.
The expanded list of ‘Relevant Foreign Countries’ signifies a commitment to enhancing cross-border support and underscores the BVI’s dedication to maintaining a robust legal framework that balances domestic interests with the need for international cooperation in insolvency matters.
As global financial landscapes evolve, the British Virgin Islands remains committed to providing an adaptable and effective legal infrastructure that addresses the complexities of international insolvency, fostering confidence and collaboration within the global financial community.