A BVI Plan of Arrangement is used for significant corporate restructurings, such as mergers, asset sales, re-organisation, reconstructions, and the dissolution of a company. It offers a flexible, court-supervised method to implement complex transactions, providing greater certainty and protection for directors and stakeholders compared to purely private corporate restructurings.

A Plan of Arrangement is commenced by a company’s directors. Alternatively, if a company is in voluntary liquidation, it will be initiated by the voluntary liquidator. The company need not be insolvent before a Plan of Arrangement can be considered.

The BCA defines an “arrangement” and the definition includes a reorganisation or restructuring of a company. The company’s directors need to consider whether a Plan of Arrangement is in the company’s best interests, or its creditors or its members. A Plan of Arrangement may permit a company to, among other things, reorganise, merge, consolidate or separate its businesses as well as dissolve the company.

The directors will need to approve the Plan of Arrangement. Once they have, the company must make an application to the BVI court to approve the proposed arrangement. The court has the power to approve, amend or reject the proposed Plan of Arrangement which is the subject of the application. The court will also determine (i) to whom notice of the proposed Plan of Arrangement is to be given, (ii) whether the approval by any person should be obtained and the manner of obtaining the approval, and (iii) whether to conduct a hearing and permit any interested person to appear.

Further, the court will also determine whether any holder of shares, debt obligations or securities in the company may dissent to the proposal – if so, any dissenting party may receive payment of fair value in respect of their shares, debt obligations or other securities. It should be noted that the BCA provides for the right of dissenters (unlike the Scheme of Arrangement provisions).

In the event that the court confirms the proposed Plan of Arrangement, the directors must give notice to and (if required) seek approval from the relevant persons. Once the Plan of Arrangement is approved by those persons, the directors will, on behalf of the company, execute the articles of arrangement which shall contain:

1. 1. the Plan of Arrangement;
   2. a copy of the court order which approved the Plan of Arrangement; and
   3. information of how the Plan of Arrangement was approved.

The executed articles of arrangement are then required to be filed with the Registrar of Corporate Affairs (“Registrar”) who shall register them. Once registered, the company will be issued with a certificate. The effective date of a Plan of Arrangement is the date that the articles of arrangement are registered by the Registrar (or on such date subsequent thereto, not exceeding 30 days, as is stated in the articles of arrangement).

In the BVI, Schemes of Arrangement are used for corporate restructuring and transactions like takeovers, allowing companies to achieve a court-sanctioned compromise with their creditors or members. They are typically used to bind all affected parties to the arrangement, provide greater certainty than private transactions, facilitate exemptions from other laws (like the US Securities Act), and manage complex restructurings, including demergers or consolidations.

A Scheme of Arrangement under the BCA is a statutory mechanism which enables a company to enter into a compromise or arrangement with its creditors, or its members. Similar to the Plan of Arrangement, there is no requirement that the company be insolvent when the application to the court is made.

An application for a Scheme of Arrangement can be commenced by (i) the company, (ii) a creditor, (iii) a member, (iv) if the company is in administration within the meaning of the Insolvency Act, by the administrator, or (v) a liquidator (either a voluntary liquidator or one appointed under the Insolvency Act) by applying to the court for a meeting of creditors or members.

A meeting will be convened, and the Scheme of Arrangement will be voted on. The Scheme of Arrangement will be approved if a majority in number representing at least 75% in value of the creditors (or class of creditors) or members (or class of members), as the case may be, present and voting either in person or by proxy at the meeting agree to the compromise or arrangement. If approved, the applicant must then return to the court for the court to sanction the Scheme of Arrangement, and, if sanctioned by the court, is binding on all the creditors or class of creditors, or the members or class of members, as the case may be, and also on the company or, in the case of a company in voluntary liquidation or in liquidation under the Insolvency Act, on the liquidator and on every person liable to contribute to the assets of the company in the event of its liquidation.

The Scheme of Arrangement will only be binding on all creditors, members, the company, and (where applicable) a liquidator once the court order (which sanctioned the Scheme of Arrangement) has been filed with Registrar. A copy of the court order shall be annexed to every copy of the company’s memorandum of association issued after the order has been made.

In the BVI, a CCA is typically used when a company is insolvent or likely to become insolvent and needs to restructure its debts with the approval of its creditors to avoid liquidation. The process is initiated by the directors or a liquidator and supervised by a BVI-licensed insolvency practitioner, with the aim of implementing a debt-restructuring plan that, if approved by 75% in value of the creditors, becomes binding on all creditors.

A CCA is a compromise between a company and its creditors which enables the parties to vary the rights of the creditors and to cancel the liability of a debtor (in whole or in part).

The directors of the company initiate the process by proposing an arrangement and nominating an interim supervisor to act. The board of directors can commence this procedure if it believes on reasonable grounds that the company is insolvent or is likely to become insolvent. If the company is already in liquidation, the liquidator can make the proposal.

The directors must pass a resolution:

1. 1. stating that the company is insolvent or is likely to become insolvent;
   2. approving a written proposal which explains how the creditors’ rights will be varied or cancelled; and
   3. nominating an eligible insolvency practitioner to be appointed interim supervisor.

Unless the secured creditors agree in writing to the contrary, a CCA will not affect a secured creditor’s right to enforce its security interest or vary the liability secured by the security interest. It is the same in relation to preferred creditors. It should be noted that unless agreed in writing, a preferred creditor will not receive less than it would have received in a liquidation had the company liquidation commenced on the same date as the CCA.

The proposal must be approved by 75% of the creditors (calculated by reference to the value of the debt rather than on a poll vote basis). If the proposal is approved by 75% of the creditors in value, the supervisor will be appointed. The CCA will be binding on the company, each member and each creditor. The supervisor will immediately take possession of the company’s assets. It should be noted that the directors (or the liquidator, if applicable) will remain in control of the company. The supervisor’s main function is to ensure that the CCA terms are implemented. After the approval of an arrangement, the board (or the liquidator, if applicable), shall forthwith take all necessary steps to put the supervisor into possession of the assets included in the arrangement.

It should be noted that there is no statutory time period within which a CCA must be completed. To date, CCAs are not popular in the BVI. A reason for this is perhaps because the supervision aspect discourages a company from considering this option and opting for a Scheme of Arrangement instead. Further, given that the BVI is a creditor friendly jurisdiction, it is common for a creditor to serve a statutory demand and apply for the appointment of a liquidator as the procedure set out in the Insolvency Act is fairly straightforward.

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This publication is not intended to be a substitute for specific legal advice or a legal opinion. For specific advice on the matters covered in this Legal Insight, please contact your usual Loeb Smith attorney or any of the following: 

E: gary.smith@loebsmith.com
E: robert.farrell@loebsmith.com
E: elizabeth.kenny@loebsmith.com
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E: edmond.fung@loebsmith.com

Under the Beneficial Ownership Secure Search System Act, (Revised 2020) which was first enacted in June 2017 (the “BOSS Act”), the BVI adopted a conservative approach to the collection and monitoring of beneficial ownership information. All information uploaded to the platform was tightly controlled with access only being granted for official purposes to regulators, international tax authorities and other international governmental and quasi-governmental agencies and authorities.

Under the Beneficial Ownership Secure Search System Act, (Revised 2020) which was first enacted in June 2017 (the “BOSS Act”), the BVI adopted a conservative approach to the collection and monitoring of beneficial ownership information. All information uploaded to the platform was tightly controlled with access only being granted for official purposes to regulators, international tax authorities and other international governmental and quasi-governmental agencies and authorities.

Whilst reform seemed inevitable for the reasons given above, the rulings of the ECJ in the above-mentioned cases led to an announcement in December 2023 that the BVI would, broadly speaking, follow the approach approved by the ECJ whereby beneficial ownership information would only be disclosed to those with a ‘legitimate interest’ in receiving it. This approach has now been enacted in the BVI Business Companies and Limited Partnerships (Beneficial Ownership) Regulations 2024 (as revised) (the “Regulations”).

Under the Regulations and subject to the exemptions described below, beneficial ownership details for all BVI Business Companies and BVI registered limited partnerships must be disclosed via upload to the ‘VIRGGIN’ database. This applies to beneficial owners who beneficially own 10% or more of the entity in question. The beneficial ownership information that must be disclosed is:

• • the full legal name, nationality and date of birth of each beneficial owner per their official document (e.g. government issued photo identification);
  • the current residential address of each beneficial owner;
  • the nature of each beneficial owner’s ownership or control (e.g. voting rights, direct / indirect ownership and/or the ability to appoint and remove directors); and
  • the date on which they became a beneficial owner, within the meaning of the Regulations.

Notwithstanding the general requirement to disclose beneficial ownership, there are exemptions available which means beneficial ownership information need not be supplied. For example, the requirement to disclose beneficial ownership information under the Regulations does not apply to:

• • entities whose shares are listed on a recognised stock exchange (a “Listed Entity”);
  • entities who are themselves a subsidiary of a Listed Entity;
  • BVI entities who are regulated under alternative regimes and whose beneficial ownership information is separately monitored, such as investment funds (whether regulated in the BVI or elsewhere) or a subsidiary of such an investment fund; and
  • an entity in which the Government of the BVI (or other recognised international government) owns a majority stake.

Those who have a ‘legitimate interest’ may submit a request to access beneficial ownership information pursuant to the Policy on Rights of Access to the Register of Beneficial Ownership for BVI Business Companies and Limited Partnerships (the “Policy”). The applicable fee for single access to beneficial ownership information is US$75 which will not be refunded even if the application is refused.

The Policy defines a ‘legitimate interest’ as a “demonstrable and bona fide interest in accessing beneficial ownership information” for one of the following purposes:

• • in connection with the investigation, prevention or detection of suspected activity involving money laundering, terrorist financing and/or proliferation financing;
  • conducting customer due diligence obligations in the context of certain types of entity; and
  • where the legal entity concerned is connected with a person who has been convicted of, or is the subject of criminal proceedings for, an offence involving money laundering, terrorist financing or proliferation financing,

provided that access under this regime is limited to persons who (whether directly or indirectly), hold an interest of 25% or more in the relevant BVI entity (i.e. disclosure will not be made in respect of persons holding an interest of less than 25% in the relevant entity, regardless of any legitimate interest).

Upon receipt of a request for ‘legitimate access’, the Registrar will process the application within 12 business days of receipt. If the Registrar determines that the application for legitimate access meets the requirements of the Policy and the Regulations, the Registrar will notify the entity that is the subject of the request (the “Subject Entity”). This notification will include:

• • where the person submitting the request is an individual, the purpose of the request only; and
  • where the person submitting the request is not an individual, the name of the requesting person and the stated purpose of the request.

The Subject Entity will then have a period of five business days within which to object to the disclosure of its beneficial ownership information. To file such an objection, the Subject Entity must give reasons for the objection which may include:

• • a reasonable belief that disclosure would expose a beneficial owner to disproportionate or other serious risks such as persecution, fraud, kidnapping, blackmail, extortion, harassment, violence or other intimidation;
  • a statement confirming that the beneficial ownership information relates to a minor or other person lacking legal capacity;
  • a statement confirming that disclosure of beneficial information will or is likely to raise issues of national security (whether in the BVI or elsewhere); and/or
  • a statement that the request is of a nature that the Registrar should form the view that disclosure of the beneficial information is not in the public interest.

Supporting evidence should also be provided which justifies the objection that is raised. If the objection is upheld, the requester will be notified of the decision and of their right to appeal. If the objection is not considered to be justified, the Registrar will grant access to the information and the Subject Entity will be informed of its right to appeal. If such an appeal is lodged, beneficial information will not be disclosed pending the outcome of that appeal.

In circumstances where no objection is raised, the beneficial information will be disclosed to the requester.

The above stated grounds (risk of harm, beneficial ownership information relating to a minor or person lacking legal capacity, issues of national security and disclosure not being in the public interest) may also be used to make an application to the Registrar for exemption from disclosure of beneficial information. Supporting evidence must be provided with this type of application also and the Registrar will generally make a decision within 12 business days of receipt of the application.

The Regulations and the Policy appear to be well structured and well considered. The Regulations (supported by the Policy) strive to strike the right balance between permitting disclosure where it is legitimate and proportionate in order to continue the fight against, money laundering, terrorist financing and proliferation financing whilst also protecting those who might be placed at risk if disclosure is permitted. The Regulations and the Policy do not adopt the UK model where all such information is publicly available, but instead follows the broad approach that has been approved by the ECJ and, by doing so, the BVI has aligned itself with international best practice on beneficial ownership transparency, providing competent authorities with access to necessary information while maintaining robust safeguards. This measured approach demonstrates a pragmatic balance between transparency, regulatory effectiveness, and the protection of legitimate privacy interests, positioning the BVI as a jurisdiction that is both compliant with global standards and sensitive to the operational realities of its businesses and residents.

^[1] (C-37/20)
^[2] (C-601/20)

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This publication is not intended to be a substitute for specific legal advice or a legal opinion. For specific advice on the matters covered in this Legal Insight, please contact your usual Loeb Smith attorney or any of the following: 

E: gary.smith@loebsmith.com
E: robert.farrell@loebsmith.com
E: elizabeth.kenny@loebsmith.com
E: vanisha.harjani@loebsmith.com
E: vivian.huang@loebsmith.com
E: faye.huang@loebsmith.com

Historically, the BVI courts (adopting well-established English common law principles) recognised two classes of property:

1. 1. A chose in possession (i.e. something tangible which can be physically possessed by the owner, such as a valuable painting); and
   2. A chose in action (i.e. an intangible right or claim which is legally enforceable, such as a right to enforce and receive payment for a debt owed).

All digital assets are neither tangible property (which can be possessed) nor are they an asset that can give rise to a right that is enforceable. Notwithstanding this, the English High Court in AA v Persons Unknown and Others^[1] (“AA Case”) provided much needed clarity on the legal status of Bitcoin (and indeed other cryptocurrencies). In the AA Case, there had been a hack where the hacker (first defendant) demanded a ransom (in the form of Bitcoins) in exchange for decrypting software needed to re-access the hacked data and systems. US$950,000 in Bitcoins was paid to the hacker. A tracing investigation was undertaken which revealed that a substantial proportion of the Bitcoins had been transferred to a specific wallet or address linked to an exchange known as Bitfinex (operated by the third and fourth defendants). The claimant sought a proprietary injunction. The dilemma before the court was that the claimant would only be entitled to a proprietary injunction if Bitcoin was in fact a property. Justice Bryan held (at paragraph 61): “I am satisfied for the purpose of granting an interim injunction in the form of an interim proprietary injunction that crypto currencies are a form of property capable of being the subject of a proprietary injunction.” This finding is significant because it includes cryptocurrencies as a whole (and not just Bitcoin). The judgment also endorsed the view of the UK Jurisdictional Taskforce’s Statement which stated that crypto assets are to be treated, in principle, as property under English law.

English law is highly persuasive authority in the BVI. The AA Case was cited in the BVI case of Philip Smith and Jason Kardachi in their capacity as joint liquidators of Torque Group Holdings Limited (in liquidation) v Torque Group Holdings Limited (in liquidation)^[2] (“Torque Case”). Wallbank J. in the Torque Case stated (at paragraph 25) that “…it is a reasonable conclusion that crypto assets are to be considered as assets for the purposes of liquidation.”

In light of the above, the AA Case and Torque Case demonstrate that both the English courts and the BVI courts are flexible and have taken a more liberal view when defining crypto assets as property. Defining crypto assets is not simply a matter of academic discussion. It is of practical importance for at least two reasons:

1. 1. Traditional asset tracing tools which are applied in accordance with established legal principles will, in principle, be available to the victims of any crypto wrongdoing or misappropriation (similar to wrongdoing concerning traditional asset classes); and
   2. If crypto assets are seen as property in the eyes of the court (which they are), then the remedies which are available to claimants will be based on established proprietary rights.

Justice Jack in the BVI case of ChainSwap Limited v Persons Unknown^[3] (“ChainSwap”) re-affirmed that cryptocurrencies are a form of property. In ChainSwap, the claimant was a BVI company which provided a service that allowed cryptocurrency tokens to be transferred between different blockchains (known as a cross-chain bridge). Vulnerabilities in the claimant’s computer programmes were exploited by unknown hackers on two occasions (approximately a week apart). As a result of the two hacks against the claimant’s cross-chain bridge, the hackers were able to misappropriate assets from:

1. 1. private users that had authorised their wallets to interact with the bridge; and
   2. projects issuing digital tokens that had used the bridge to offer cross-chain operability on their tokens.

Some of the misappropriated assets were exchanged for stablecoins. The hackers had sought to obfuscate the origin of the stolen tokens by using Tornado Cash, a decentralised cryptocurrency tumbler. The tokens that were misappropriated following the hacking incidents were not owned by the claimant. The claimant did not seek a proprietary injunction in this matter since it was not asserting any proprietary right in the digital assets. The claimant sought, among other things, a worldwide freezing order against persons unknown (being those allegedly responsible for cybercrime consisting of the theft of the digital assets). Justice Jack (at paragraph 16) had no difficulty in granting a freezing order as there was “an obvious risk of dissipation if no freezing order is granted.”

The English case of Fetch.AI v Persons Unknown^[4] saw the court order, among other things, a proprietary injunction and a worldwide freezing order. Hackers had obtained access to accounts which were maintained by the first claimant (first applicant) with Binance, within which were held various cryptocurrencies (including Tether and Bitcoin). The assets were then fraudulently transferred into third-party accounts at a massive undervalue, which had incurred losses of over US$2.6 million. Judge Pelling QC (at paragraph 9), in granting the orders sought, stated that “I am satisfied that the assets credited to the first applicant’s accounts on the Binance Exchange are to be regarded as property…They are…a chose in action, and a chose in action, as a matter of English law, is generally regarded as property.” This demonstrates that crypto assets are a chose in action and that the English courts will grant proprietary remedies to victims of crypto asset fraud.

In recent cases which have involved cryptocurrency fraud, the courts have been willing to grant the claimant’s application for disclosure orders, including Norwich Pharmacal orders (“NPO”) and Bankers Trust orders.

An NPO is a court order which seeks disclosure of documents or information against a third party which has been innocently mixed up in wrongdoing in order to assist in bringing legal proceedings against the wrongdoers or seek redress for the wrong. The BVI court’s jurisdiction to grant a NPO is well-established – they “are an every-day feature of the legal and corporate service landscape in the BVI.”^[5] The requirements for granting an NPO are:

1. 1. a wrong must have been carried out (or arguably carried out) by an ultimate wrongdoer;
   2. there must be the need for an order to enable action / legitimate redress to be brought against the ultimate wrongdoer; and
   3. the person against whom the order is sought must:
      1. 1. be mixed up in so as to have enabled the wrongdoing; and
         2. be able (or likely to be able) to provide the information necessary to enable the ultimate wrongdoer to be sued.

A Bankers Trust order is a court order against a bank (or another financial institution) which holds misappropriated funds (or through which such funds have been passed through). They compel the entity subject to the order to disclose information which concerns third party bank accounts and are therefore a useful tool to assist the claimant to trace misappropriated assets and protect them from dissipation. This is notwithstanding the fact that the order may be contrary to what would otherwise be confidential customer information.

Certain requirements need to be satisfied in order for a Bankers Trust order to be granted. This includes there being a real prospect that the information which is sought will lead to the location or preservation of the assets as well as the applicant’s interests in obtaining the order being balanced against the possible detriment to the respondent in complying with the order.

It should be noted that there is some overlap between an NPO and a Bankers Trust order (although the two remain distinct from each other). The former assists in identifying wrongdoers (or evidence of the wrongdoing) whilst the latter is used to protect the claimant’s proprietary interest. Many recent cases which involve digital assets have seen both NPOs and Bankers Trust orders being sought. The court has been ready to find that the respondent crypto exchange is required to give disclosure to the claimant. For example, in the English case of Mr Dollar Bill Ltd v Persons Unknown And Others^[6], the claimant had been the victim of an alleged cryptocurrency fraud. To assist in tracing the missing Bitcoins, an NPO and a Bankers Trust order against two cryptocurrency exchanges were granted. The claimant was also granted a proprietary injunction to prevent further dissipation of the Bitcoins.

A third-party debt order (“TPDO”) is a method of enforcement which enables a judgment creditor to recover sums a party owes them directly from third parties who hold monies on the party’s behalf, including, for example, a bank.

The English High Court in the case of Ion Science Ltd v Persons Unknown^[7] (“Ion Science”) granted what is thought to be the first TPDO in proceedings arising from cryptocurrency fraud relating to a cryptocurrency initial coin offering. The claimants claimed that they had been induced by unknown persons to invest significant sums in what they understood to be real cryptocurrency products. The claimants sought to recover the misappropriated sums, which had been transferred to certain accounts held by the two cryptocurrency exchanges, Binance and Kraken (“Crypto Exchanges”). The claimants successfully applied for, among other things:

1. 1. a worldwide freezing order against the persons unknown who had committed the fraud; and
   2. disclosure orders pursuant to the Bankers Trust jurisdiction and/or English Civil Procedure Rules r 25.1(g)^[8] against the Crypto Exchanges (the “Disclosure Orders”).

Following a tracing investigation which used the information which arose from the Disclosure Orders, it emerged that an entity named Mirriam Corp LP (“Mirriam Corp”) was the owner of the now-frozen account which had been used to execute the fraud. Information which was obtained indicated that Mirriam Corp’s account retained both cryptocurrency and cash. The claimants subsequently claimed against Mirriam Corp, seeking the recovery of the misappropriated sums. Mirriam Corp failed to respond to the claim. The claimants successfully sought a TPDO to enforce their judgment debt.

Ion Science means that, similar to other more traditional classes of assets, crypto assets are now capable of being traced and enforced against.

The cases and remedies set out above have demonstrated the pragmatic and flexible approach which the common law courts have taken. Existing legal principles have been applied to the digital asset space in order to tackle the increasingly frequent cybercrime involving digital assets and to grant the appropriate (combination of) remedies. The courts have generally permitted the claimant(s) to commence action against the unidentified fraudsters/hackers (as “persons unknown”) and grant freezing and disclosure orders in their favour to assist in securing and recovering (to the extent possible) the proceeds of the fraud.

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[1] [2019] EWHC 3556 (Comm)
[2] BVIHC (COM) 0031 OF 2021
[3] BVIHC (COM) 2022/0031
[4] [2021] EWHC 2254 (Comm)
[5] CIF v DLG and GIY BVIHCM2023/0050 at [21]
[6] [2021] EWHC 2718 (Ch)
[7] [2020] EWHC 3688 (Comm)
[8] English Civil Procedure Rules r 25.1(g) states that interim remedies include “an order directing a party to provide information about relevant property or assets, including their location, which are or may be the subject of an application for a freezing injunction.”

This publication is not intended to be a substitute for specific legal advice or a legal opinion. If you require further advice relating to the matters discussed in this Legal Insight, please contact us. We would be delighted to assist.