De-registering security in the

Service area ⁄ Corporate Location ⁄ British Virgin Islands Date ⁄ October 2016

British Virgin Islands (“BVI”) companies regularly provide for the purposes of this guide that the chargee should always security over their assets (both located within and outside of ensure that security granted by BVI companies is publicly the BVI) as part of financing transactions. registered to protect priority.

Once the obligations secured by this security are repaid in full Details of security registered on the public register can be and the security released or discharged, it is important that found through a company search carried out in the BVI and, in any security registrations which have been put in place in the order to remove such registration from the register, a notice of BVI are removed, as outstanding security registrations can release or satisfaction of charge must be prepared (please lead to delays in future transactions. contact your Carey Olsen BVI contact in this regard) and submitted to the Registry. The notice must contain specific However, an important headline point is that the de- information required by the Registry, and must either be registration of registered security interests is a separate signed on behalf of the chargee (or by the chargee’s BVI legal process to the actual release or discharge of the security, counsel) or filed by BVI legal counsel or a registered agent which will be governed by the terms and governing law of the acting on behalf of the chargee. A partial release uses the relevant security document. As such, de-registration is not a same form but must set out details of the property released requirement in order for the underlying security to be released; from the charge and confirm that it is only part of the property nor will any de-registration achieve a release or discharge in of the company. Each filing is subject to a government filing itself. fee of US$50 payable to the Registry.

Public register of charges From a practical perspective, there are two important points to note: (i) a specific form of notice is required to make the filing; Section 163 of the BVI Business Companies Act as amended and (ii) as a consequence of the requirement for the form to (the “Act”) provides for the creation of a public register of be either signed or filed by or on behalf of the chargee (or its charges by filing an application to register a charge with the BVI legal counsel or a registered agent acting on its behalf) it is BVI Registry of Corporate Affairs (the “Registry”). This filing is not possible to make such a filing without the involvement of optional and can be made by the company’s registered agent the chargee, even where it has granted a valid release of the or by BVI legal counsel to the company or the chargee. Further underlying security. information on this may be found in Carey Olsen’s guide titled “Registering security in the British Virgin Islands”; suffice to say

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BERMUDA BRITISH VIRGIN ISLANDS CAPE TOWN HONG KONG LONDON careyolsen.com For completeness, we note that amendments were made to to update the company’s private register to remove the the Act to permit a statutory declaration to be filed with the relevant charge. The registered agent can then update the notice of release or satisfaction of charge, which had been internal register to note the security has been released. thought would provide a mechanism for a company which had been granted a valid release by a chargee to complete Register of members the administrative act of de-registration without requiring the Although not strictly a form of security registration, where further involvement of the chargee (particularly useful where, security has been granted over shares of a BVI company, a for example, the chargee has subsequently ceased to exist). properly advised chargee will require the BVI company to Unfortunately, the Registry has in our experience not generally make an annotation on its register of members containing been willing to accept filings made on the basis of statutory certain information specifically provided by the Act to evidence declarations made by directors of the company whose assets that the shares have been mortgaged or charged. have been released, much reducing the usefulness of this option. It is also common for a chargee to require as a term of the share security that the annotated register of members be filed Upon a correctly completed filing being made, the Registry will with the Registry, the effect of which is to make the register of issue a certificate of release or satisfaction of charge members available for public inspection, increasing the (“Certificate of Release”). The Certificate of Release will, likelihood of a potential acquirer of a legal interest in the among other things, confirm the effective date of the de- shares obtaining actual knowledge of the security interest. registration (being the date on which the release filing was submitted). The process is straightforward, is conducted Where security over the shares of a BVI company is released, it electronically, and is often achieved on a same day basis (but is therefore important to check whether an annotation was generally within no more than 1-2 business days). entered in the company’s register of members and, if so, a copy of the deed of release should be sent to the registered Following the Certificate of Release being issued by the agent of the company, instructing them to remove the Registry, the Certificate of Release will form part of the results annotation. of any subsequent company search carried out in respect of the company, thereby effectively removing the security If the annotated register of members has also been filed with registration from the company’s public register (although the the Registry, a further step is required and the updated register historic filing relating to security will still be included in the of members with the annotation removed should be filed at overall search results). the Registry. The company should also consider at this point whether it wishes to continue maintaining a public register of Private register of charges members - unless there is new security and the company is In addition to the public register of charges, Section 162 of the required to maintain the public filing, this would be very rare. Act requires all BVI companies to maintain a register of all To stop publicly filing its register, the company needs to file a charges created by the company, a copy of which must be notice with the Registry, which notice can be filed at the same kept at the company’s registered office or at the registered time as the updated register of members showing the prior office of the registered agent of the company. As a private security has been discharged. It should be noted that any document, details of the charges contained in this register will register of members that has been filed with the Registry will not be disclosed on a company search (details of the charges remain a public, albeit historical, document and it cannot be will only be disclosed in a certificate of incumbency/ registered removed from the company’s public records. agent’s certificate - i.e. with the consent of the company). The entries, or removal of entries, do not have any impact on the Old companies validity, enforceability or priority of any security, but as a Most security registrations currently registered and matter of good practice and to avoid mismatches with the outstanding in the BVI were registered under the Act, being the public records, the updating of this register should also be current corporate statute. However, for companies which were attended to promptly following any release of security. incorporated and created security prior to 1 January 2007, it is necessary to check whether any security registration was In order to ensure that the private register of charges is made under the former corporate statute, being the updated to remove any security which has been released International Business Companies Act, 1984 (the “IBC Act”). (following the execution of a deed of release as discussed above), a copy of the deed of release / release document Where registration was made under the IBC Act, the security should be sent to the registered agent of the company registration process was slightly different and involved a (together with a copy of the Certificate of Release if the private register of mortgages, charges and other security has also been released from the company’s public encumbrances (which determined priority) together with an register of charges) with an instruction to the registered agent optional ability to publicly file the register (for notice reasons).

Continued

2 ⁄ De-registering security in the British Virgin Islands careyolsen.com The first step in respect of the de-registration of such security is to check with the company as to whether such a register of mortgages, charges and other encumbrances was maintained and to check search results to see if there was any public filing of the register. FIND US Carey Olsen (BVI) L.P. If a register of mortgages, charges and other encumbrances was maintained, the Rodus Building company will need to update it to record the release / discharge. Where such a PO Box 3093 register was also publicly filed with the Registry (which as noted above was optional), Road Town de-registration requires the register to first be updated by the company and then for Tortola VG1110 the updated register to be filed with the Registry. British Virgin Islands One practical difference from the registration / de-registration process under the Act T +1 284 394 4030 is that in relation to the filing of an updated register of mortgages, charges and other E [email protected] encumbrances under the IBC Act, only the company’s registered agent can make such filing (third parties such as chargees or legal counsel to either the chargee or the company cannot).

Summary FOLLOW US The de-registration of security in the BVI is a relatively straightforward, electronically conducted process which can usually be completed within a few days. It is however important to ensure on the release of any security over the shares or assets of a BVI Visit our corporate team at company that the BVI security registration aspects are taken into account at the time careyolsen.com and that BVI legal advisors and the registered agent of the company are involved in the process in order to ensure that there are no surprises left to be discovered on future transactions.

PLEASE NOTE This briefing is only intended to provide a very general overview of the matters to which it relates. It is not intended as legal advice and should not be relied on as such. © Carey Olsen 2020.

3 ⁄ De-registering security in the British Virgin Islands careyolsen.com