Access to corporate information in the British Virgin Islands

                    September 19, 2014, 06:10

By Marcelo Ruiz Rodrigues dos Santos

In addition to the paradisiacal beaches bathed by the Caribbean sea and sophisticated marinas where hundreds of yachts and sailboats are anchored, the British Virgin Islands –overseas territory which is part of the United Kingdom– is also one of the largest centers for offshore companies in the world.

With the introduction of new and dynamic laws [1] starting in 1985, this English territory saw the number of offshore companies registration grow considerably, and approximately 900 thousand companies and investment funds are registered before its commercial registration office (Registry of Corporate Affairs), representing 25% of all offshore companies. Nowadays, the registration of companies is, along with tourism, the local economy’s pillar. Additionally, the territory adopted the American dollar to facilitate global financial transactions and there are no foreign exchange restrictions.

Opening an offshore company in the British Virgin Islands is a relatively simple process and can be done remotely through a registered agent, who once hired, becomes responsible for the incorporation, reporting changes in ownership and payment of government taxes and fees.  

One of the main characteristics of these companies is the confidentiality of their documents and information regarding ownership, management and finances.  According to local regulations, the company is only required to file some items and very little information and documents are available for public access.  A search of the Registry of Corporate Affairs only shows the name and address of the registered agent, place of business, certificate of incorporation, standard partnership agreement or bylaws, and whether its annual taxes have been paid.  This way, it is rarely known who its directors, shareholders and/or final beneficiaries are and what assets it holds.

Company information and documents held by third parties, such as the registered agent, financial institutions or brokers are confidential and cannot be divulged without the company’s consent.  However, if the company commits an unlawful act, the filing of judicial measures requesting third parties to produce documents and information about the company, which may be in their possession, may access the information and documents.  Therefore, court involvement is required.

The registered agent can be a particularly rich source of documents and information about the company, as he/she is the one who must keep copies of documents related to the company, including details about decisions and corporate meeting minutes, as well as email exchanges, correspondence and clients’ instructions. This information and documents may eventually expose the final beneficiaries of the company.

The British Virgin Islands adopted the Common Law system [2], with specific modifications and local rules. There is no local statutory regulations regarding the production of documents and information by third parties, but the English civil procedure rules and precedent are often adopted. The territory has a highly qualified business court that decides complex and technical issues with a high number of parties involved and transnational documents. This court’s decisions are becoming more and more substantial, especially in cases related to financial services and offshore corporations.

The House of Lords’ precedent decision regarding the case of Norwich Pharmacal[3] is frequently cited in the British Virgin Islands to obtain company documents and information held by third parties.

The understanding is that when a company is involved in unlawful acts, its registered agent for the incorporation and management of its business affairs is somehow involved in facilitating the committing of the unlawful act, even if innocently, and therefore has the obligation to produce the documents and information in his or her possession.

Each case has its own particularities, but generally, the plaintiff filing the lawsuit for the production of documents and information against a third party will have to show that: a) an unlawful act is being committed or has been committed by the company; b) a court order against the third party is necessary to allow a future lawsuit against the company; and c) the third party is involved in the unlawful act and is capable of providing the necessary information and documents for the filing of a lawsuit against the transgressing company.

Once the above requirements are met, plaintiff must show that the presentation of documents is necessary in the interest of justice and proportional in light of the circumstances, in other words, that the information and documents sought are relevant and necessary for the taking of any legal action against the company.

The court order for the disclosure is discretionary and can be granted by injunction without hearing of the other party (ex parte). The lawsuits against the company do not necessarily have to be filed in the British Virgin Islands as information and documents are used in connection to lawsuits in other countries.

Additionally, court orders [4] are being issued in assistance to foreign cases against registered agents with the purpose of revealing details about the companies’ assets; they are also being used for family law cases when one of the parties used the offshore company to divert community property and to obtain information about management and final beneficiaries of sophisticated corporate structuring.

It is important to highlight that this type of court order is not available against law firms because, according to local legislation, all communication between attorney and client is protected by professional confidentiality.

Further, it is possible to obtain a court order against financial institutions [5] to obtain information and documents about corporate bank accounts through which diverted funds have circulated, particularly in cases of asset recovery.  To obtain such order it is necessary that the plaintiff makes a prima facie showing that the assets are the product of fraud or diversion and were deposited in or circulated through the financial institution.

These court orders are granted accompanied by seal and gag orders so the defendants do not inform others of its existence with the exception of their attorneys and block the general public’s access to the case without the Court’s authorization. Failure to abide by the court’s seal and gag orders results in a finding of contempt which makes it very effective against resident defendants, especially registered agents in the British Virgin Islands.

Additionally, there is the possibility of requesting search and seizure court orders known as Anton Piller Orders, [6] which authorize the search to be extended to places that are legally protected such as private residences and commercial establishments.  This judicial order allows a plaintiff to personally search these places and seize any relevant documents or request that specific objects or papers be handed over. This judicial order is granted in extreme cases and when the information and documents cannot be obtained by any other means.

Therefore, the access to documents and detailed information about companies registered in the British Virgin Islands is possible with assistance of the court and as long as the company is involved in the practice of unlawful acts.

[1] Companies Act 1985, Banks and Trust Companies Act 1990 and Business Companies Act 2004.

[2] Common Law Act 1705.

[3] Norwich Pharmacal v. Customs and Excise Commissioners [1974] AC 13.

[4] Jeremy Outen et al v. Mukhtar Ablyazov, HCVAP 2011/30 and Injunctions and Disclosure Orders, CPR 17.

[5] Bankers Trust v. Shapira [1980] 1 WLR 1274 and Bankers Book (Evidence) Act, Section 7.

[6] Anton Piller KG v. Manufacturing Processes Ltda. and CPR Part 17.


Link to original Portuguese article here, published on Consultor Juridico: