The British Virgin Islands ("BVI") has a long history as a domicile for asset holding vehicles and it is particularly popular amongst Chinese clients. The latest figures show that there are approximately 366,000 active BVI business companies. Notwithstanding the popularity of BVI companies, clients often fail to consider the succession aspects of BVI share ownership. How easy is it to access the shares once a shareholder passes away?
This briefing will consider the process for obtaining grants of probate and letters of administration upon the death of a shareholder and the tools available to clients in order to avoid a potentially long and costly probate process.
As a matter of BVI law, shares in a BVI company are BVI "situs" assets and are deemed, under the BVI Business Companies Act s245, to be located in the BVI. The effect of this deeming language is that where a shareholder of a BVI company dies, his or her shares cannot validly be transferred to his or her heirs until a grant of probate (in the case of a will - 'testate') or grant of letters of administration (in the case of no will - 'intestate') has been obtained from the BVI court (a "Grant").
If a person deals with shares in a BVI company without the authority of a Grant, he or she may be liable for "intermeddling" without authority or as an executor de son tort (i.e. acting as executor without authority). Registered agents of BVI companies will refuse to register the transfer of a share from the name of a deceased holder without a Grant and, pursuant to section 42 of the BVI Business Companies Act (Revised), the entry of the name of a person in the register of members as the holder of a share is prima facie evidence that legal title to the share vests in that person. In other words, until a Grant is obtained, it is not possible to transfer a share of a deceased person.
There are three types of Grant in the BVI:
- Grant of probate – this applies where the deceased has executed a valid will.
- Grant of letters of administration with will annexed – this applies where the deceased leaves a will which does not name a surviving executor.
- Grant of letters of administration – this applies where the deceased has not executed a valid will, and therefore has died intestate.
In limited cases a foreign grant of probate or letters of administration can be re-sealed by the BVI court. China is not one of the jurisdictions where re-sealing of probates and letters of administration is possible, although grants from Hong Kong may now be re-sealed in BVI. This means that it would be necessary to apply for a new Grant in respect of the BVI shares in the BVI courts. The process for obtaining such Grant can vary depending on whether the deceased had a valid will and whether the will covers BVI assets. The grant of probate is important as it provides the requisite authority for the directors of the BVI company to transfer the shares from the name of the deceased into the name of the executor/administrator or the heirs.
Grant of probate
This applies where the deceased shareholder left a valid will in respect of the BVI assets. In this case, the executors of the will can make an application to the BVI High Court Probate Registry (the "Registry") for it to issue a grant of probate. Where the deceased is not domiciled in the BVI at the time of his death, the application for probate must be accompanied by an affidavit by a lawyer from the country of the deceased's domicile confirming that the will is valid under the foreign law.
Grant of letters of administration
This applies where the deceased shareholder dies without leaving a valid will or where the will does not expressly appoint executors. In this case, the personal representative of the deceased's estate in his or her country of domicile or persons interested in the deceased shareholder's estate can make an application to the Registry for a grant of letters of administration to deal with the deceased's BVI assets. If the deceased were domiciled in China, the intestacy rules in China would apply to determine who would have the right to make the application to the Registry.
These applications are similar to an application for probate. However, they tend to take more time and require more supporting documentation. An affidavit of foreign law from a lawyer based in the domicile of the deceased is required to support these applications and sets out who is entitled to make the application for the letters of administration and who is entitled to the assets under the laws of the foreign country. We have considerable experience in drafting these affidavits and liaising with foreign counsel in relation to having them prepared and can advise on execution requirements.
Timing of grant application
The Registry expects that a Grant should be obtained within three years from the date of death of the shareholder and if the application is made outside that period, an affidavit explaining the delay is needed to support the application.
The following documents are required in support of an application for probate or letters of administration. The content of the documents will differ slightly depending on whether probate or letters of administration is requested:
- an oath in standard form to support the application and an undertaking to administer the estate;
- an original death certificate;
- a certificate of search confirming that no other Grant has been issued, no other application for a Grant has been made and no caveats have been filed;
- an affidavit of foreign law;
- two newspaper notices;
- an affidavit of delay (if applicable);
- an affidavit of translation (if applicable);
- any other affidavit (if applicable);
- a declaration of value; and
- a draft order and Grant.
In the case of a probate application, the original will or a court certified copy and an affidavit as to execution of the will must also be filed.
Certain other documents may be required depending on the nature of the application; most commonly, an affidavit of delay in the case of a delay of more than three years between the time of death and the application. In the case of intestacy, it is often necessary to get those who are entitled to make an application for letters of administration to renounce their right.
Where a document is not in the English language, it must be translated either (i) by a national translation agency or official sworn translator, certified by a government body or court, or (ii) by any other person, in which case the translation must be supported by an affidavit of translation by the translator evidencing his or her qualifications.
From the time a completed application is filed with the Registry it can take three to six months for the Grant to be issued, although it may be longer where the estate is contested or where the deceased is from a country in respect of which the Registry is not so familiar.
The applicant is required to advertise the application for a grant of probate or letters of administration on no fewer than two occasions in two weeks in a local BVI newspaper. The information to be included in such an advert is limited to the name, address and date of death of the deceased, the name and address of the applicant, and the relationship between the applicant and the deceased. No other information such as beneficiary and estate value is required to be disclosed.
Declaration of estate value
It is necessary for the applicant to declare the gross value of the BVI estate in the Grant application. Gross value means the value or valuation range of the estate without deducting for debts, encumbrances, funeral expenses or death duties. The gross value of the estate determines the filing fee of the declaration and account of the estate.
Filing fee and taxes
There are filing fees associated with the application. The fees will depend on the value of the BVI estate and can be upwards of US $6,000.
There are no taxes, including inheritance tax, in the BVI.
Issue of Grant
A grant will, once issued, be a document of public record. Therefore, the ownership of the shares by the deceased and potentially the beneficiary will be available publicly.
What should I do?
The process of obtaining a Grant is not something to be feared. The process is straightforward and our experience with the BVI Probate Registry has been excellent. Certainly, there are planning options that can circumvent the probate process but many of these come with an annual cost that can often exceed the cost associated with obtaining a Grant in the BVI. While one should consider all options, often the most effective solution is a straightforward BVI will.
If you would like any further information, please get in touch with your usual Bedell Cristin contact or one of the contacts listed.
Authored by Nancy Chien, Kristian Wilson and Fraser Allister.