Insolvency Act (Revised 2020)

Summary

The Insolvency Act (Revised 2020) is the principal BVI statute governing corporate and personal insolvency. It sets out the full regime for company creditors' arrangements, administration, receivership, liquidation, bankruptcy of individuals, voidable transactions, director disqualification, and the licensing and conduct of insolvency practitioners.

• Creditors' arrangements: Establishes procedures for company and individual creditors' arrangements, including proposals, interim supervisors, creditors' meetings and court applications.
• Administration and receivership: Sets out how administration orders and receiverships are obtained, the powers and duties of administrators and receivers, moratoriums, and reporting obligations to the Financial Services Commission and the Registrar.
• Liquidation: Governs appointment and duties of liquidators, effect of liquidation on creditors and members, claims priority, disclaimer of onerous property, and termination and dissolution of companies.
• Bankruptcy: Provides the framework for bankruptcy orders against individuals, the bankrupt's estate, duties of bankruptcy trustees, and bankruptcy offences (such as fraudulent disposal of assets, absconding, and obtaining credit while bankrupt).
• Voidable transactions and malpractice: Allows office holders and the Court to unwind unfair preferences, undervalue transactions, voidable floating charges and extortionate credit transactions, and creates remedies for fraudulent or insolvent trading by officers.
• Disqualification: Empowers the Court to make disqualification orders or accept disqualification undertakings against unfit directors, with offences for breaching a disqualification.
• Insolvency practitioners: Requires persons acting as insolvency practitioners to hold a licence; it is an offence to act as an unlicensed insolvency practitioner, to fail to produce accounts and records on request, or to appoint an overseas insolvency practitioner contrary to the Act.

The Act carries a detailed schedule of criminal offences and penalties (fines up to $10,000 and imprisonment up to three years for individuals, with separate corporate penalties) attaching to breaches such as false statements in insolvency proceedings, fraudulent dealing with assets, and unlicensed practice as an insolvency practitioner. It also modifies how parts of the Financial Services Commission Act apply to the Official Receiver and licensed insolvency practitioners.

Key obligations

• Persons acting as insolvency practitioners must hold a licence that is not suspended, and acting without one is an offence.
• Licensed insolvency practitioners must produce accounts and records on request under section 478; failure is an offence.
• Office holders (administrators, receivers, liquidators, trustees) must prepare and deliver statements of affairs and keep proper accounting records.
• Receivers must file receivership accounts with the Registrar and administrators, receivers and liquidators must report to the Commission where the company is a regulated person.
• Directors and officers must not engage in fraudulent trading, insolvent trading, or fraudulent disposal or concealment of assets, on pain of criminal penalties.
• A person must not appoint an overseas insolvency practitioner to act as an insolvency practitioner contrary to section 484(3).
• Restricted persons subject to a disqualification order or undertaking must not engage in prohibited activity.

Applies to

companies (including foreign companies), insurance companies, individuals (bankrupts and debtors), directors and officers of companies, insolvency practitioners (including licensed and overseas practitioners), liquidators, administrators, receivers and bankruptcy trustees, creditors and secured creditors, the Official Receiver

Related documents

• Insolvency (Amendment) Act, 2022 amends this document
• Insolvency (Amendment) Act, 2024 amends this document