Landmark judgment on necessary formalities to become shareholder of a BVI company
On 30 May 2024, the BVI Commercial Court handed down its decision in ICM SPC on Behalf of Ancile Special Opportunity And Recovery Fund Segregated Portfolio (ASOR) v Jarvis dismissing the Cayman segregated portfolio company’s originating application against the Joint Liquidators (JLs) to remove it from the settled list of members of Phoenix BVI. The BVI Court found that ASOR remained a shareholder right up to the date of commencement of the liquidation.
ASOR argued that it did not enter into a written agreement with Phoenix BVI and therefore did not “agree in writing” to becoming a shareholder within the mearing of s49 of the BCA. Further, even if it did agree, its shareholding was subject to conditions precedent in a memorandum of understanding which were not satisfied, thus the shares were temporary or provisionally issued and had now lapsed.
The trial which took place over two weeks in September 2023 was vigorously contested with the JLs arguing that agreement could be evidenced by a sequence of emails or other industry specific documents and that the Court is entitled to look at all documents (which do not need to be condensed into one document) to determine the potential shareholder’s agreement. The JLs further argued that the requirement that a shareholder agree “in writing” does not require dating or for other ‘execution’ to take place.
Justice Mangatal agreed with the JLs that the words used in s49 of the BCA do not require a shareholder’s agreement (in the sense of a written contract) between a company and shareholder but only the agreement in writing of the prospective shareholder. The Court agreed that it is entitled to look at all the relevant documents to see whether ASOR agreed in writing. The Court also found that there is no state of provisional or temporary ownership of the shares or being a partial member known to BVI law. Therefore, ASOR’s shareholding could not lapse on the non-fulfilment of the alleged conditions precedent.
David Chivers KC of Erskine Chambers, Jeremy Child and Jhneil Stewart of Harneys acted for the Joint Liquidators.
