Managing the various arrangements

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British Virgin Islands (“BVI”) company law usually takes pride in simplifying itself to try and keep the jurisdiction as “user-friendly” as possible for the users of offshore companies. Although in most instances the legislature has been successful in this regard, one area which perennially causes clients and their legal advisors confusion is the bewildering array of options which come under the broad umbrella of “arrangements” in the BVI.

Strictly speaking, there are three types of “arrangement” that a BVI incorporated company can enter into:

(1) a plan of arrangement, under section 177 of the BVI Business Companies Act, 2004 (the “BCA”);
(2) a creditors’ arrangement, under Part II of the Insolvency Act, 2003 (the “IA”); and
(3) a scheme of arrangement, under section 179A of the BCA.

In broad terms, plans of arrangement are intended to deal with restructuring equity interests, and creditor’s arrangements are intended to deal with restructuring debt, with schemes of arrangement sitting slightly in the middle. However, each of the three types of arrangement have varying degrees of flexibility but each has subtly different requirements for approval, and so legal advisors will often wish to consider whether it may be appropriate to use the “wrong” tool in certain instances to achieve the best outcomes for their clients...

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