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Industry Updates
Registered Agents and Rectification of Registers
21 Jan 2014
The BVI Business Companies Act, 2004 contains, at section 43, provision allowing any person who is aggrieved by an omission, inaccuracy or delay in the register of an issue or transfer of shares to apply to court for an order that the register be rectified. There has been a longstanding, albeit not universal, practice of adding the registered agent of the relevant company as a defendant to rectification proceedings brought under this section. The reason for this is that the directors and shareholders of British Virgin Islands ("BVI") business companies are typically outside the jurisdiction and obtaining an order against the registered agent within the jurisdiction has previously been seen as a useful shortcut, enabling the enforcement of any order for rectification without involving the company itself.
In a recent unreported decision, the Commercial Court Judge (Mr Justice Bannister QC) refused to make such an order and found that the registered agent should not have been made party to the rectification proceedings. In this case the claimant alleged that it held security over shares in the defendant company and that the security had become enforceable, entitling it to transfer the shares into its own name using the blank share transfer forms it held and (effectively, although the case was not put this way) become a mortgagee in possession. Before issuing proceedings the claimant had demanded that the registered agent give effect to the transfer. However, because there was a dispute between the company and its shareholder on the one hand, and the claimant on the other, about whether the security was enforceable, the company instructed the registered agent not to comply with the claimant's instruction.
Although the judge made a rectification order in the claimant's favour, he refused to make an order compelling the registered agent to update the register, and awarded the registered agent its costs of the proceedings.
The historic practice has been convenient for claimants but there is in truth no cause of action against the registered agent per se in a standard rectification action. If a company is ordered to rectify its register and then fails to comply with that order, the proper course is for the claimant to return to court for further relief against the company in order to enforce the order. Where an order that a document be executed has not been complied with, the West Indies Associated States Supreme Court Act allows the court to nominate a particular person to execute the document. This appears to be the most obvious way to enforce an order that a register of members be rectified. It remains to be seen who, practically speaking, the court would nominate and how the court's nominee would go about updating the register.
In a recent unreported decision, the Commercial Court Judge (Mr Justice Bannister QC) refused to make such an order and found that the registered agent should not have been made party to the rectification proceedings. In this case the claimant alleged that it held security over shares in the defendant company and that the security had become enforceable, entitling it to transfer the shares into its own name using the blank share transfer forms it held and (effectively, although the case was not put this way) become a mortgagee in possession. Before issuing proceedings the claimant had demanded that the registered agent give effect to the transfer. However, because there was a dispute between the company and its shareholder on the one hand, and the claimant on the other, about whether the security was enforceable, the company instructed the registered agent not to comply with the claimant's instruction.
Although the judge made a rectification order in the claimant's favour, he refused to make an order compelling the registered agent to update the register, and awarded the registered agent its costs of the proceedings.
The historic practice has been convenient for claimants but there is in truth no cause of action against the registered agent per se in a standard rectification action. If a company is ordered to rectify its register and then fails to comply with that order, the proper course is for the claimant to return to court for further relief against the company in order to enforce the order. Where an order that a document be executed has not been complied with, the West Indies Associated States Supreme Court Act allows the court to nominate a particular person to execute the document. This appears to be the most obvious way to enforce an order that a register of members be rectified. It remains to be seen who, practically speaking, the court would nominate and how the court's nominee would go about updating the register.
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