Directors and Their Responsibilities, User Guide No. 4

Summary

This is a BVI Financial Services Commission Registry of Corporate Affairs User Guide explaining the role and legal responsibilities of directors under the BVI Business Companies Act. It is aimed at directors of small companies (executive and non-executive) and sets out, in plain language, the standards of conduct, conflict of interest rules, insolvency considerations, and record keeping duties directors must understand. It is explanatory guidance, not a substitute for legal advice, and does not itself create new law beyond summarising the Act.

• Core statutory duties: A director must act honestly, in good faith, in what he considers the best interests of the company, exercise powers for a proper purpose, and not act in a way that contravenes the Act or the company's memorandum and articles.
• Standard of care: Directors must exercise the care, diligence and skill that a reasonable director would exercise in the same circumstances, considering the type of company, decision, and the director's position.
• Conflicts of interest: A director with an interest in a transaction the company has entered into or is considering must disclose that interest to the other directors, except for ordinary course transactions with the director on usual terms; failure to disclose is an offence.
• Insolvency awareness: Directors must ensure the company can pay its debts as they fall due and should seek advice from a licensed BVI insolvency practitioner if the company becomes or is likely to become insolvent.
• Record keeping: Directors are responsible for ensuring the company maintains proper records, including the memorandum and articles, registers of members and directors, filed documents from the previous ten years, meeting minutes, resolutions, and adequate financial records.
• Eligibility and appointment: A person under 18, disqualified under the Insolvency Act, an undischarged bankrupt, or disqualified by the memorandum/articles cannot be appointed director, and no one may be appointed without prior written consent.
• No recognised nominee directors: BVI law does not recognise nominee directors; anyone appointed as a director bears full statutory responsibilities regardless of any private arrangement to act on another's behalf.

The guide warns that failure to properly discharge director responsibilities can result in personal liability to the company or creditors, or criminal offences, and encourages directors with doubts to seek professional advice.

Key obligations

• The first director of a BVI business company must be appointed within 6 months of the company's incorporation.
• Directors must act honestly, in good faith, in the best interests of the company, for a proper purpose, and consistently with the Act and the memorandum and articles.
• Directors must exercise the care, diligence and skill of a reasonable director in the circumstances.
• A director with an actual or potential interest in a company transaction must disclose that interest to the other directors, except for ordinary course transactions on usual terms; failure to disclose is an offence punishable by a fine of up to $10,000.
• Directors must ensure the company is able to pay its debts as they become due and seek advice from a licensed insolvency practitioner if insolvency is likely.
• Directors must ensure proper company records are maintained at the registered agent's office, including the memorandum and articles, registers of members and directors, and documents filed in the previous ten years.
• A company must keep minutes of members' and directors' meetings, copies of resolutions, and financial records sufficient to determine its financial position with reasonable accuracy.
• A person must not be appointed as a director unless he has consented in writing to act as director.

Applies to

BVI business companies, directors (executive and non-executive), registered agents

Deadlines

• within 6 months of incorporation: The first director of a BVI business company must be appointed within this period.
• previous ten years: Copies of all notices and other documents filed by the company must be kept at the registered agent's office covering this retention period.