Privy Council Clarifies Statutory Power To Rectify Register Of Members

Under British Virgin Islands ("BVI") law, ownership of shares in a BVI company is at first instance established not by share certificates or instruments of transfer but by the appearance of the shareholder's name and other details on the register of members of the company.

Section 43(1) of the BVI Business Companies Act 2004 (the "Act") provides that where information that is required to be entered in the register of members is omitted or inaccurately entered or where there is an unreasonable delay in entering such information, a member of the company or any person aggrieved by the omission, inaccuracy or delay, may apply for an order that the register be rectified. Section 43(2) of the Act permits the BVI court in any rectification proceedings to determine any question relating to the right of a person who is party to the proceedings to have his name entered in or omitted from the register of members, whether the question arises between two or more members or alleged members or between members or alleged members and the company itself. Section 43(2) of the Act also permits the BVI court to determine in the proceedings "any question that may be necessary or expedient to be determined for the rectification of the register of members".

Rectification proceedings under section 43 of the Act are a summary procedure and, until this recent decision of the Privy Council, had been used by applicants in order to summarily determine disputes concerning the beneficial interest in shares in BVI companies.

Nilon Limited ("Nilon") and another v Royal Westminster Investments SA and others1 as one such case where the applicants sought to rectify the register of members of Nilon, a BVI company, claiming to be the legal and/or beneficial owners of shares in Nilon pursuant to an oral agreement allegedly made between the applicants and a Mr Varma, who, according to the register of members, was the sole registered shareholder of all of the issued shares in Nilon. As well as the rectification claim against Nilon, the applicants claimed against Mr Varma for breach of contract for failing to procure the issue of shares to the applicants.

The applicants applied for permission to serve Mr Varma out of the jurisdiction on the grounds that he was a necessary and proper party to the dispute between the applicants and Nilon. This application was refused at first instance by Mr Justice Bannister on the basis that the applicants could not establish an arguable claim...