BVI Companies: Voluntary Liquidation vs. Strike-Off

For winding down a British Virgin Islands (BVI) company, directors and shareholders typically face two primary options: voluntary liquidation or strike-off and dissolution by the Registrar of Companies. Each method has its own set of procedures, benefits, and potential drawbacks. Here, we compare these two processes to help you make an informed decision.

Voluntary liquidation is a formal process that provides a definitive and structured closure to a company. Here are the key steps and considerations:

• 1. Appoint a Liquidator:
  • o The liquidator must be a qualified individual (not a company) and must reside in the BVI.
  • o The liquidator cannot have been in a management position within the company for the previous two years or be a close relative of the directors.
  • o Shareholders and Directors must formally adopt the liquidation plan and appoint the liquidator.

• 2. Declare Solvency:
  • o The directors must declare that the company’s assets exceed its liabilities and that it can meet its debts as they fall due.

• 3. Distribute Assets:
  • o The liquidator will settle the company’s obligations and distribute any surplus assets to the members.

• 4. Certificate of Dissolution:
  • o Upon completion, the liquidator files the required documents, and the Registrar issues a Certificate of Dissolution.
  • o All records must be retained for five years post-dissolution.

• Advantages:
  • o Finality: Voluntary liquidation results in the complete dissolution of the company, leaving no legal existence.
  • o Risk Mitigation: It reduces risks for shareholders and directors as all debts and obligations are settled.

• Disadvantages:
  • o Restoration Complexity: If any assets were not discovered during liquidation, restoring the company can be lengthy and costly process.
  • o Costs and Time: Althoughstraightforward, the process involves administrative tasks and fees.

• Strike-Off and Dissolution
  • o The liquidator must be a qualified individual (not a company) and must reside in the BVI.
  • o The liquidator cannot have been in a management position within the company for the previous two years or be a close relative of the directors.
  • o Shareholders and Directors must formally adopt the liquidation plan and appoint the liquidator.

• Advantages:
  • o Simplicity and Speed: This process is typically faster and involves less effort as compared to voluntary liquidation.
  • o No Costs to Consider: There are no costs to consider as this is achieved by non-payment of licence fees.

• Disadvantages:
  • o Restoration Challenges: If any assets significant assets are discovered post dissolution, the restoration and reinstatement process is cumbersome and potentially expensive.
  • o Costs and Time: Althoughstraightforward, the process involves administrative tasks and fees.

Which Method to Choose?

Voluntary Liquidation is suitable for companies seeking a structured and definitive closure, ensuring all assets and liabilities are addressed and risks are minimized. It is a preferred choice for solvent companies looking for a clean and orderly wind-down. If the company has significant assets/liabilities to be distributed/settled, then this method should be the primary option.

Strike-Off and Dissolution is appropriate for companies looking for a faster and less costly exit. However, this method carries risks, especially with the immediate dissolution and potential difficulties in restoring the company if necessary. If the company has zero or minimal assets and liabilities then this is a suitable option.

Conclusion

The decision between voluntary liquidation and strike-off and dissolution should be based on the specific circumstances of the company. Consulting with legal and financial experts is advisable to ensure compliance with BVI regulations and to safeguard the interests of all stakeholders.

Request a Quote or Learn More If you are considering liquidation options for your BVI company, we can assist you through each step, ensuring all requirements are met and the process is smooth. Contact us for a personalized consultation and quote.

Written by Glenn Harringon