Privy Council Clarifies Power To Rectify Share Registers Of BVI Companies

On 21 January 2015 the Privy Council handed down its decision in Nilon Limited v Royal Westminster Investments SA [2015] UKPC 2 clarifying the power of the courts to rectify the share register of a BVI company under section 43(1)(a) of the BVI Business Companies Act 2004. The background facts were quite complex, but in essence they revolved around an oral agreement which was entered into between Mr Varma on the one hand, and several members of the Mahtani family on the other. There was some dispute as to the terms of that oral agreement, but the Mahtani family alleged that Mr Varma had agreed to incorporate a company (Nilon Limited) in the British Virgin Islands and procure that shares were issued to members of the Mahtani family. The Mahtani family members paid money (which they said were subscription monies, and Mr Varma claimed were loans) to Nilon Limited, and received interim payments back (which they said were dividends, and Mr Varma claimed were interest payments) but no shares were in fact ever issued to the Mahtani family members. They brought claims against Mr Varma for breach of contract, and against Nilon Limited for rectification of the share register to show that they were holders of the shares which they claimed had been agreed in the oral contract. The issue which the Privy Council had to decide was whether the Mahtani family members had a “good arguable case” against Nilon Limited for rectification of the share register. If they did not, then the claim against Nilon would need to be struck out, and the claim against Mr Varma would also fail because Nilon was the “anchor defendant” in BVI upon which the claim against Mr Varma relied (Mr Varma was not resident in BVI, and so the BVI courts would not otherwise have had jurisdiction over him). The claim of the Mahtani family against Nilon relied heavily upon the decision of the English Court of Appeal in Re Hoicrest Ltd [2000] 1 WLR 414. At first instance Justice Bannister had ruled that Re Hoicrest was incorrectly...