As the sole shareholder and sole director of your company, have you given thought to what will happen to your company down the line?
Speaking about the end of life is often uncomfortable, and because of that, we understandably avoid it. As 2020 has unfortunately shown us, we are not always in as much control as we may perceive.
Fortunately, what we can certainly control is how we can plan for the future and how we can ensure wealth preservation for our families.
Many BVI companies with a sole shareholder and sole director are in a particularly vulnerable situation if they have not given careful consideration to future control and succession. Without proper measures taken, there is a risk of loss of power and authority to manage the companies, the assets and the associated wealth of the sole director/sole shareholder, until such time as the probate process can be completed.
This doesn’t have to be your reality and there are measures that can be taken to ensure this does not occur.
Many BVI companies are used as private holding companies and have only one director/shareholder. While this has its benefits, when that individual dies, the company can be left in limbo because it will not be possible to appoint a new director, as there will be no one with power and authority to do so. The company’s functions will have to come to a standstill until probate has been granted and the shares previously held by the sole director/shareholder have been transferred to the new shareholder(s), and a new director can be appointed. The probate process is public and can sometimes take a long time to complete.
In order to avoid your company’s business from being frozen for what may be a significant period of time, Section 113(7) of the BVI Business Companies Act provides for a reserve director to act in the event of the death of the sole director.
The sole director/shareholder may nominate another person as a reserve director to act in their place in the event of and only upon his/her death. Where a reserve director is nominated, their role as a full director automatically takes effect upon the death of the sole director, allowing them to immediately take on the operation and management of the company.
The reserve director will have no duties or responsibilities until the death of the sole director/shareholder and the appointment of the reserve director can be revoked or amended at any time.
We strongly recommend the appointment of a reserve director for any company with a sole director/shareholder. It is a cost-effective means of ensuring that the BVI company continues to operate immediately and without the delays of the probate process to determine who will gain control.
We can assist with the drafting of the relevant nomination documents and statutory recordings. We can also help provide a professional director to act as a reserve director. This ensures the wishes of the sole director/shareholder will be carried out and that the fiduciary obligations are undertaken by trusted professionals.
If you would like to know more, please contact your usual Intertrust BVI contact.