The perils of making a declaration of solvency by company directors, without reasonable grounds.

Summary

Since The Insolvency Act 2003 (the Act) was enacted, there has been some confusion as to whether it provided a basis for liquidators to draw fees on account before having formal approval from either a creditors' committee or the Court. On 20 September 2016, the BVI Commercial Court clarified the position and specifically provided that newly appointed liquidators could draw payments of up to 80% on account of their reasonable remuneration and expenses on an interim basis without the need to obtain prior approval from the creditors' committee or the Court.

JPLs play an unheralded but crucial mediating role in Bermuda

This is a short guide to solvent voluntary liquidations of companies incorporated in the British Virgin Islands. It is not intended as a substitute for full legal advice but more as an aide memoire to the procedures involved.

1. Why is the company being put into solvent voluntary liquidation/being "wound up"?

A BVI company generally has no limit on its duration. However, like all good things, a company may come to the end of its useful life. This may be because the assets it held have been transferred out or sold.

On 25 July 2016, Insurance Ireland published a statement opposing the Department of Finance's recent recommendation that liabilities of any insolvent motor insurer should be assumed by the Insurance Compensation Fund. Insurance Ireland states this would and pose a systemic risk to the Irish motor insurance market.

The Office of the Director of Corporate Enforcement (ODCE) has published its Annual Report for 2015.

Key Developments from the Report: 

This case¹ concerned a challenge to a High Court judgment which was entered against Mr Hanley for failure to repay monies borrowed pursuant to a loan agreement. Mr Hanley asserted that he had never received a letter of demand for repayment of the loan monies borrowed. The Court noted that the notice of demand went, in error, to another Mr Hanley that had no connection to the Defendant.

In Leahy v Doyle & anor [2016] IEHC 177, the High Court issued orders of restriction in respect of directors of two companies (Gingersnap and Scappa), under Section 150 of the Companies Act 1990 (now Section 819 of the Companies Act 2014). While the companies were different, the liquidator and the directors were the same.

Background 

In McAteer & anor v McBrien & ors [2016] IEHC 229, the High Court made an order restricting three directors pursuant to Section 150 of the Companies Act 1990 (now Section 819 of the Companies Act 2014).  The first named respondent (A) was the husband of the second named respondent (B) and father of the third named respondent (C) and all were directors of the Company on the date of the liquidation.

Background

The High Court (Binchy J), has recently made restriction orders in respect of directors in two separate applications before it.