Now, we don’t cheat, so that narrows down one’s options! In the iconic scene from the movie Margin Call, it was said, “it sure is a hell of a lot easier to just be first.” That advice remains as relevant today as it was in the early days of the global financial crisis.
As trillions of dollars in value are being wiped from financial markets before our very eyes due to the seismic shift in US trade policy and its “beautiful” tariffs, investors, financial institutions, PE firms, and alternative investment managers are certainly sitting up and taking notice. Inevitably, loan to value ratios on secured debt will tank, which will give rise to technical defaults under loan instruments. Many BVI companies have raised debt via loan instruments or by issuing notes, many of which are secured against their valuable assets, including equity in down structure entities that conduct undertakings all over the world. Many of those entities are having value wiped off their balance sheets daily due to the ongoing economic earthquake centered in Washington, D.C.
In turbulent times, long experience has shown that the squeaky wheel really does get the oil. Therefore, creditors will be well advised to be first in demanding repayment of debt or provision of additional security. But how to get a debtor’s attention quickly? In the BVI, there is no better way to impose maximum pressure on debtors than by issuing a simple statutory demand for payment of the debt.
For those who might be unfamiliar with a statutory demand, it is a simple out-of-court notice issued by a creditor to its debtor written under s. 155 of the BVI Insolvency Act. Provided that 1) the debt is due and 2) there is no genuine dispute about the debt, a statutory demand requires the debtor to either pay the debt or reach a compromise about it with their creditor within 21 days of the statutory demand having been served at the BVI company’s registered agent in the BVI. If the debtor misses this deadline, then the BVI Insolvency Act provides that a presumption of insolvency arises. This statutory presumption can then be relied upon in a court application by the creditor to liquidate the BVI company and appoint insolvency practitioners to conduct the winding up and final liquidation. It is advisable that this follows genuine, less formal demands for payment.
Importantly, if the debtor disputes that the debt is due, then it only has 14 days to file an application in the BVI Commercial Court to set aside the statutory demand. This places an enormous amount of pressure on debtor companies to meet their obligations to their creditors, or to negotiate a mutually acceptable compromise and avoid being wound up in insolvency under the BVI Insolvency Act.
History has shown us that fast-moving creditors who move first have recoveries that far exceed those that delay. We are experienced BVI Legal Practitioners in all aspects of insolvency law, commercial and company disputes, and debt recovery. We are standing by to help first movers maximize their recoveries in these turbulent times!
Tortola, BVI
