British Virgin Islands
Companies Limited by Guarantee
BVI Foundations – Non-Profit Organisations
In the British Virgin Islands (BVI), Foundations are most commonly established either as Companies Limited by Guarantee (typically for charitable purposes).
Pursuant to section 5 of the BVI Business Companies Act (as amended) (the “Act”), a company may be incorporated or continued under the Act as either:
- A Company Limited by Guarantee without authorisation to issue shares; or
- A Company Limited by Guarantee with authorisation to issue shares.
Companies Limited by Guarantee—particularly those not authorised to issue shares—are frequently used for non-profit organisations.
Companies Limited by Guarantee
Not Authorised to Issue Shares
Companies limited by guarantee that are not authorised to issue shares do not have share capital, and their members are referred to as “guarantee members.”
The company’s Memorandum of Association (the “Memorandum”) must specify that it is a Company Limited by Guarantee and that it is not authorised to issue shares.
Guarantee Members
A Company Limited by Guarantee must always have at least one guarantee member, except during the period between its incorporation and the appointment of its first directors. Unless otherwise specified in the company’s memorandum or articles of association (“Articles”), each guarantee member is entitled to one vote on any resolution on which they are eligible to vote.
According to section 9(1)(f) of the Act, a guarantee member is obligated to contribute to the company’s assets if it enters voluntary liquidation under the Act or insolvent liquidation under the Insolvency Act 2003 while they are a member. However, the liability of a guarantee member is limited to:
- The amount specified in the memorandum;
- Any additional liability expressly stated in the memorandum or Articles; and
- Any obligation to repay a distribution if the company did not meet the solvency test at the time the distribution was made.
Guarantee members are not personally responsible for the company’s debts or obligations, except to the extent of their guaranteed contribution if the company undergoes insolvent liquidation.
Companies Limited by Guarantee
Authorised to Issue Shares
A Company Limited by Guarantee, authorized to issue shares, is a hybrid structure combining elements of both a company limited by guarantee and a company limited by shares. The memorandum of association must include provisions relevant to both types of companies.
Specifically, the memorandum must include the following:
The amount each guarantee member is liable to contribute to the company’s assets in the event of a voluntary liquidation or insolvency liquidation.
The maximum number of shares the company is authorized to issue, or alternatively, that the company is authorized to issue an unlimited number of shares.
The classes of shares the company is authorized to issue. If multiple classes of shares are authorized, the memorandum must specify the rights, privileges, restrictions, and conditions attached to each class.
At least one member of the company must be a guarantee member, who may also be a shareholder. The liability of the guarantee member will be as outlined in the second point above. As with a typical company limited by shares, shareholders will not be personally liable for the company’s debts and obligations, unless otherwise specified in the company’s memorandum or articles of association. Shareholders will have voting rights according to the number of shares they hold, while a guarantee member will have one vote on any resolution they are entitled to vote on, unless the memorandum or articles provide otherwise.
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