Written in conjunction TMF Group.
Directors of businesses based in the British Virgin Islands (BVI) formerly relied on common law and case precedence with regards to their fiduciary duties. The passage of the BVI Business Companies Act 2004 (the Act) brought about further clarification on the matter, but it did not replace the common law tenants already in place. This resulted in some overlap between the common law and the Act.
The following summary, based on a guide produced by TMF Group and Harneys, outlines the key responsibilities of a BVI director and highlights the potential risks and penalties for failing to carry out these duties.
How is a BVI director defined?
Every company registered in the BVI is required to have a minimum of one director, a key operational leader running the business or company. There is no requirement for residency or citizenship. In the case where an individual is acting in the role of a director in practice, but is not officially appointed as director, the individual can still face liability in the event of a breach of duty.
What are the duties and responsibilities of a BVI director?
A BVI director is expected to carry out the following statutory duties:
- Act honestly and in good faith in the best interests of the company while in the capacity as director.
- Carry out director’s duties with diligence, skill and reasonable care, taking into account, but not limited to, the following: the nature of the company; the nature of the issue or decision faced; and the director’s established role and responsibilities (“reasonable skill duty”).
- Exercise his or her powers for a proper purpose, in accordance to the Act, and in agreement with the company’s memorandum and association of the company (“proper purpose duty”).
- Disclose any interest in a transaction entered into or to be entered by the company (“disclosure duty”).
What happens in the event of a breach of duty?
As a general rule, the director is not liable in many cases for obligation, default, or debt of the company. But, the director may be held personally liable if the director or the company has overused their powers, as well as in instances of negligence, fraud, or breach of duties.
Failure to disclose an interest in a transaction which the company is entering into carries a fine of $10,000 upon summary conviction, and can result in the transaction becoming void. Other breaches could include compensating for losses, returning property belonging to the company and paying the company over any profit improperly made by the director.
The importance of keeping compliant
BVI directors should be familiar with their legal responsibilities and institute the proper corporate governance protocols in order to ensure legal compliance and brand protection.
To learn more about how CT can help you better manage your global compliance needs, contact a CT representative at 844-318-1457 (toll-free US).
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