BVI Company Liquidation vs. Strike-Off: Making the Right Decision

Closing a BVI company requires a careful decision between company liquidation or strike-off. In the British Virgin Islands (BVI), companies often serve various purposes, such as special purpose entities or operational vehicles. However, a time may come when a BVI company is no longer needed. At this stage, understanding the most suitable method for dissolution is essential to avoid future legal or financial liabilities.

There are a few primary ways to close a BVI company:

1. Strike-off and dissolution due to non-payment of license fees;
2. Request to strike off from the BVI Companies Registrar;
3. Voluntary liquidation, if the company is solvent, meaning it can pay its debts, or it has no liabilities or assets.

BVI company liquidation is widely considered the safest and most formal way to close a BVI company, offering enhanced legal protection. Although strike-off and dissolution are commonly seen, they come with specific risks, as detailed below.

Understanding Strike-Off and Dissolution

Before 2023, BVI companies that failed to pay license fees were kept on the register in a “suspended state” for up to seven years. During this period, the BVI company could not conduct any business or defend itself in legal proceedings. After the seven-year term, the company would automatically dissolve, similar to the process of formal liquidation.

As of January 1, 2023, the rules have changed. If a BVI company does not pay its license fees, it can be struck off and dissolved after a 90-day Registry notice period. This change has significantly shortened the waiting time for dissolution.

If a BVI company is dissolved due to non-payment, it can only be restored through:

• Application by an interested party (such as a director, member, or creditor) within five years if the company was actively trading at the time of dissolution;
• A court application within five years if the BVI company was dormant.

Importantly, any assets held by the BVI company at the time of dissolution may vest in the BVI government. This means that the company must apply to the court within five years to recover its assets, or they may be lost. To better understand how to avoid this scenario, consider reading more about voluntary liquidation.

The Benefits of BVI Company Liquidation

Under BVI law, BVI company liquidation is a formal process reserved for solvent companies, ensuring a structured and compliant closure. Typically, BVI company liquidation takes 8 to 12 weeks to complete, with the help of a qualified liquidator who must be independent of the company.

The steps to BVI company liquidation include:

1. The company directors must make a declaration of solvency, ensuring the company can meet its financial obligations.
2. Approval of a liquidation plan by the company’s directors.
3. Appointment of a liquidator who will oversee the process.
4. Filing of the company’s financial records for the past five years with the Registrar.

Once the liquidator is appointed, a notice is published in the BVI Official Gazette as well as in a newspaper in the company’s principal jurisdiction. Upon completion of the BVI company liquidation, a certificate of dissolution is issued, formally closing the company.

For detailed guidelines on the liquidation process, you may refer to the BVI Financial Services Commission’s official website.

Why Choose Liquidation Over Strike-Off?

BVI company liquidation offers several key advantages compared to strike-off and dissolution:

• Complete debt resolution: The BVI company liquidation process ensures that all outstanding debts are fully addressed, protecting the company and its directors from future creditor claims.
• Legal closure: Once the BVI company liquidation is finalized, the company ceases to exist and cannot be sued or pursued by creditors.
• Corporate governance: A structured liquidation process promotes good governance practices and ensures compliance with BVI regulations.

On the other hand, strike-off may seem easier but comes with serious risks:

• Extended liability: Directors and company officers may still be held liable for actions taken before the BVI company was struck off, for up to five years after dissolution.
• Risk of asset forfeiture: Any assets held by the BVI company at the time of dissolution may be forfeited to the BVI government.

For those considering their options, Fionza Global can provide expert advice on BVI company liquidation, helping clients navigate the complexities of the process while ensuring compliance with local regulations.

Conclusion

When closing a BVI company, BVI company liquidation is the most secure and compliant method, ensuring that all legal and financial obligations are met. While strike-off may appear convenient, the risks involved can outweigh the benefits, particularly for companies with valuable assets or significant operational history. If you’re unsure which option is right for you, the experienced team at Фионса can guide you through the process, offering tailored solutions for your business.