Practical approach welcomed from BVI Commercial Court following judgment against Carlos Ghosn, his wife and Beauty Yachts

Our Senior Barrister, Malcolm Arthurs, analyses the impact of a recent BVI Commercial Court decision to simultaneously consider and grant restoration application and insolvent liquidation application to manage BVI Business Companies Act requirements.

This follows our firm’s successful action on behalf of Nissan, which won a high-profile claim in August in the BVI High Court for recovery of a superyacht, as well as damages of US$32 million, against ex-Nissan CEO and Chairman Carlos Ghosn, his wife Carole Nahas Ghosn, and a BVI company Ms Ghosn controlled (Beauty Yachts).

————

By Malcolm Arthurs

Matters:

  • BVI HC COM 0416 of 2024 Nissan Motor Company v Registrar of Corporate Affairs
  • BVI HC COM 0417 of 2024 Nissan Motor Company and Nissan Middle East FZE v Beauty Yachts PTY Ltd

The BVI Business Companies Act (the “BC Act”) requires BVI business companies to have a licensed registered agent at all times (section 91(1)). The only exception to this requirement arises if the company is in liquidation within the meaning of section 160 of the BVI Insolvency Act (the “IA”) (section 91 (5)).

The requirement to have a registered agent is good regulatory practice and facilitates proper record keeping and adherence to BVI due diligence and AML requirements. The registered agent requirement may, however, present an issue for creditors in circumstances where business companies have been struck off the Corporate Register and then dissolved, without having first been voluntarily wound up. This is particularly applicable if the company has been used to facilitate, or become mixed up in a fraud.

Nissan Motor Company Ltd (“Nissan”) and Nissan Middle East FZE (“NME”) (the “Claimants”) were required to simultaneously file both a restoration application under the Act and a liquidation application under the IA, in order to pursue a US$32 million judgment against the BVI company Beauty Yachts PTY Ltd. (“Beauty Yachts”).

Judgment against Carlos Ghosn & others

On 9 August 2024, Mr Justice Wallbank handed down a judgment in BVIHCCOM 0121/2019 Nissan Motor Company and Anor v Carlos Ghson and Ors. Judgment was in favour of the Claimants against Nissan’s former CEO Carlos Ghosn, his wife Carole Ghosn and against Beauty Yachts.

The Court found, among other things, that Beauty Yachts had dishonestly assisted Mr Ghosn with a fraudulent scheme to steal US$32 million from a CEO-controlled fund maintained by Nissan and NME. The Court also found that a portion of the stolen funds was used to purchase a BVI-registered custom 37 metre Italian-manufactured yacht (the “Yacht”).

In preparation for taking post-judgment action, the Claimants became aware that Beauty Yachts’ registered agent had given notice of its intention to resign in August 2023, in accordance with section 93(2) of the BC Act. In keeping with the section, Beauty Yachts was struck off the Corporate Register and dissolved in October 2023 when the resignation took effect, and the company had not appointed a new registered agent as required by the Act.

At the handing down of the judgment, the Court agreed to extend certain injunctions against the Yacht and the shares in Beauty Yachts, on the Claimants’ undertaking to restore Beauty Yachts to the register.

However, as is often the case with BVI business companies credibly accused of fraud and malfeasance, registered agents may be unable, as required by section 213 (1) (3B) of the BC Act, to properly update the books and records of the company and confirm that these records are in good order.

Perhaps understandably, it appears that no registered agent was willing to act for Beauty Yachts in circumstances where its sole asset represented the proceeds of a fraud and its share register reflected a fraudulent conveyance of the company’s shares, designed to defeat creditors.

Restoration and liquidation proceedings

Martin Kenney & Co (MKS) was therefore required to simultaneously file restoration proceedings under the BC Act, as well as a liquidation application under the IA. Both sets of proceedings included a request for the matters to be heard together so that, upon restoration to the Register, Beauty Yachts would be immediately placed into insolvent liquidation under the IA.

The Court acknowledged the restrictions placed on creditors by the BC Act and the difficulty which locating a registered agent might present when issues of fraud arise.

Mr Justice Wallbank therefore simultaneously considered the Claimants’ restoration application along with the liquidation application and ordered that (i) Beauty Yachts be restored to the Register; and (ii) Ryan Jarvis and Elizabeth Cava of Deloitte Ltd BVI and Deloitte Ltd Bermuda, respectively, be appointed as liquidators of Beauty Yachts. The liquidators’ appointment will take effect on Beauty Yachts’ restoration.

The result obtained by MKS demonstrates the practical approach which the BVI Commercial Court is willing to adopt to ensure that justice will be achieved: particularly in circumstances where there are legislative anomalies which may not have been contemplated in the statutory drafting process.

The team at MKS was led by Malcolm Arthurs, who successfully moved the restoration and liquidation applications.

Malcolm Arthurs is Senior Barrister at Martin Kenney & Co (MKS) in the BVI