For the purposes of this article, the offshore company is hereinafter referred to as the Company and is established and registered in the British Virgin Islands (BVI). The Company has assets (real estate) in Aruba and the owner of the assets and shareholder of the Company resides in Aruba and is referred to as the Shareholder.
Company with assets in Aruba
For estate and/or tax planning purposes, assets located in Aruba are placed in a BVI Company. The Company has to pay certain fees, most notably the fees payable to its legally required registered agent for maintaining its records and ensuring that it complies with laws and regulations, and the annual government license fees ranging between $250 and $16,000 (1).
Death of the Shareholder, non-payment of fees and dissolution of the Company
Issues arise when government and agent fees are no longer paid by the Company due to, e.g., death of the Shareholder. The agent desists due to non-payment of fees. As a consequence, the Company is struck off the company register by the Registrar of Corporate Affairs (Registrar) and dissolved automatically on the date that the Registrar publishes a notice of the striking-off in the Gazette (Section 213 BVI Business Companies Act). The struck-off and dissolved Company cannot carry on company affairs, conduct legal proceedings or deal with its assets (Section 215 BCA).
The struck-off and dissolved Company can be restored. The application for restoration of the Company must be made within 5 years of the date of the notice of strike-off published in the Gazette (Section 217 BCA).
The successors cannot apply for restoration or pay the outstanding fees and penalties
The successors of the deceased Shareholder would want to gain access to the assets but may be unable to do. They may not have “standing” to make the application to restore the Company (Article 218 BCA). Probate proceedings should be conducted at the BVI High Court Probate Registry in order for the shares in the Company to be transferred to them. Moreover, the successors with “standing” may not be able to pay the outstanding fees and penalties.
BVI law: The assets of the dissolved Company become ownership of the Crown (Bona Vacantia)
The assets of the dissolved Company become the ownership of the Crown (the BVI government). The latter is based on the common law principle of “Bona Vacantia” that avoids a situation where property has no clear owner (Article 220 (1) BCA). The assets are returned to the Company upon its restoration (Article 220 (2) BCA).
Aruba law: the assets are owned/held by the dissolved Company
The Company would be deemed dissolved under Aruba law. In a similar manner to the BVI Registrar, the Chamber of Commerce of Aruba can dissolve an unmanaged and delinquent company registered in the company registry (Article 2:25 Aruba Civil Code).
Regarding the ownership of the assets. Aruba law is unfamiliar with the Bona Vacantia principle. According to Aruba law, the dissolved Company owns/holds the assets.
Which law prevails? There is no treaty between Aruba and the BVI regarding (the ownership of) real estate. The ownership of the assets should be determined on the basis of Aruba international private law. Aruba law is applicable if there is a closer connection with the Aruba legal system than the BVI legal system (beginsel van nauwste verbondenheid). In this case, Aruba law should be deemed applicable on the basis of the following factors (among others):
- The Company is a tax/estate planning vehicle without activities in the BVI. (brievenbusmaatschappij).
- The deceased Shareholder resided in, and effectively managed the Company from Aruba.
- The assets are located in Aruba.
The Aruba Court declares the Company bankrupt
There may be a bypass to gain access to the (proceeds from the) assets of the Company by filing a bankruptcy request for the Company at the Court in First Instance of Aruba. A dissolved company with assets can be declared bankrupt under Aruba law.
Under Aruba bankruptcy law, a company without statutory residence in Aruba may be declared bankrupt by the Aruba Court if i) it conducts business in Aruba and ii) is in a situation where it has ceased to pay its due and claimable debts (Articles 1 jo. 2 Aruba Bankruptcy Ordinance).
The Company is deemed to do business in Aruba on the grounds that it holds real estate in Aruba and (was) effectively managed by its Shareholder with residence in Aruba (ECLI:NL:OGEAA:2023:53). Furthermore, the dissolved Company has unpaid debts to the BVI government and the registered agent (and may have unpaid debts to creditors in Aruba). The Aruba Court should have sufficient grounds to declare the company bankrupt.
The bankrupt estate is liquidated by the Court appointed curator and the fees and penalties are paid from the sale proceeds
The Aruba Court appoints a curator entrusted with the liquidation of the bankrupt estate. The liquidation is done in conformity with Aruba Bankruptcy law. The assets are sold publicly or privately, and the debts to creditors, including the outstanding (BVI government) fees and penalties, are paid from the sale proceeds. The bankruptcy ends and the remainder of the sale proceeds remain in the Company.
Probate proceedings and application for restoration of the Company
Subsequently, the successors may make an application for a Grant of Probate (or Grant of Letters of Administration) to the BVI High Court Probate Registry to have the shares in the Company transferred to them as the lawful heirs of the deceased Shareholder.
Once they have “standing” they may make the application for restoration of the Company to the BVI High Court, which – provided it is made timely – would be granted as the Company is penalty-free (Article 218A BCA).