Harneys Practically Speaking: Episode one - The impact of Covid-19 on Economic Substance compliance and directors duties
Apr 16, 2020
Transactional Partner Rachel Graham and Director of Client Services Amy Roost host the first episode of our new podcast series: Practically Speaking. This series was launched to provide our listeners with practical advice and insights on issues applicable to stakeholders in BVI. We hope that the series will be of interest to directors, shareholders, trustees and others concerned with BVI entities.
In this episode, Rachel Graham and Amy Roost discuss two topics: the implications of COVID-19 on economic substance compliance and reporting, and matters directors should be considering if they find their company is moving towards financial difficulties. Take a listen below.
- Travel restrictions due to COVID-19 and how directors of BVI entities can still comply with their economic substance obligations.
- Directors duties in turbulent times.
- The BVI ITA released some temporary guidance on the 27 March 2020, outlining that they do expect the economic substance requirements to be met.
- Decisions involving Core Income Generating Activities (CIGA) require meetings to be held in the BVI.
- BVI ITA has provided alternative ways for entities to meet their economic substance requirements.
- Documentation is key; directors are responsible for recording when they are unable to meet requirements and the steps they have taken to attempt to meet these requirements.
- Directors are expected to use virtual board meetings and/or alternate directors when they are unable to travel to the BVI.
- Directors are required to be aware of the financial position of their company at all times, but this obligation is even more pertinent in times of worldwide economic disruption.
- Directors need to monitor their relationships with their bankers, insurance providers, and other external creditors and take legal advice at an early stage.
- Directors are advised to consider and action those steps which allow them to make prudent and reasonable decisions in the circumstances and to keep supporting documents relating to those decisions.
- Directors should be mindful of the fact that when a company becomes insolvent or is at risk of insolvency, their duties shift from being owed to the company and its shareholders to being owed to creditors.
Stay tuned for more episodes of Practically Speaking.