Shareholder disputes in the British Virgin Islands

In the prevailing economic conditions, shareholders in offshore companies registered in the British Virgin Islands (BVI) are increasingly being forced to consider their rights against directors who may have been responsible for mismanagement of company affairs. Minority shareholders are keen to understand the availability of remedies that allow them to overcome “wrongdoer control”, i.e., where the composition and direction of the board is controlled by majority shareholders.

 Scope of duties

The BVI Business Companies Act, 2004 (as amended) sets out the law governing the “duties of directors and conflicts”. This includes:

• The duty to “act honestly and in good faith” and in what the director believes to be in the company’s best interests; and
• A requirement that directors, after becoming aware they are “interested in a transaction entered into or to be entered into by a company”, shall “disclose the interest” to the company’s board.

What is the standard of care that a director owes? The act provides that a director “when exercising powers or performing duties as a director, shall exercise the care, diligence and skill that a reasonable director would exercise in the same circumstances, taking into account but without limitation:

1. The nature of the company;
2. The nature of the decision; and
3. The position of the director and the nature of the responsibilities undertaken by him.

This duty is qualified to the extent that the director is entitled to rely on the register of members, books, records, financial statements and other information prepared or supplied, and on professional or expert advice given by, for example:

Requiring the company or any other person to pay compensation to the member; and

Appointing a receiver or liquidator of the company.

The summary set out above was first published in Asia Business Law Journal and you can find it at the following link:
https://law.asia/bvi-shareholder-remedies/

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