Shares across shores

Background

The House of Thani is the ruling family of Qatar. The deceased was domiciled in Qatar at the time of his death on 9 November 2014 and left a will as to the inheritance his estate, including his shares in one or more BVI companies.

The parties in Al Thani fell into two camps:

• the named beneficiaries under the will, comprising the deceased's sister, niece and long-time friend, who was his ‘right-hand man’ (the Respondents); and
• those who stood to benefit if the will was deemed invalid and succession was instead governed by intestacy, comprising the deceased's widow, daughter and son (the Appellants).

This episode of the fight over the deceased's estate in the BVI started some years ago in 2015, when an application was filed by the Appellants in the Eastern Caribbean Supreme Court for the grant of letters of administration. What was unknown to the Eastern Caribbean Supreme Court then was that the deceased had made a will (by way of an oral decree) in Qatar and the Appellants had commenced proceedings there, seeking a declaration that such will had been revoked.

After the Qatar Court of Appeal's (the Court of Appeal) decision in 2018 confirming that the will had not been revoked, the Respondents commenced proceedings in the BVI seeking, among other things:

• revocation of the grant of the letters of administration to the Appellants;
• an order seeking probate of the Qatari will; and
• the grant of new letters of administration to an independent administrator.

The BVI proceedings involved a trial of a preliminary issue of whether the Appellants were estopped by the Qatari judgment from contending that the will was not valid and enforceable.

Both the first instance court and the appellant court in the BVI found against the Appellants and held that the Qatari judgment was conclusive as to the validity and enforceability of the will for the disposal of the deceased's movable property in the BVI. The Appellants nevertheless appealed to the Privy Council with the leave of the Court of Appeal.

The statutory provision at centre of dispute

The central question before the Privy Council was the proper interpretation of s.245 of the BVI Companies Act 2004 (Revised 2020), which provides:

"For purposes of determining matters relating to title and jurisdiction but not for purposes of taxation, the situs of the ownership of shares, debt obligations or other securities of a company is in the Virgin Islands."

The Appellants argued that s.245 has the effect that shares in a BVI registered company are to be treated as immovable property, with the result that the formal validity of a will transmitting such shares must meet the requirements of the BVI Wills Act.

It cannot be disputed that the deceased's will did not comply with the statutory formalities in respect of the execution of a will under BVI law. Therefore, if BVI law was to apply, the transmission of the shares would be made pursuant to BVI intestacy rules, which presumably benefited the Appellants.

On the other hand, if Qatari law was to apply, the will was already declared valid under Qatari law by the Court of Appeal and, therefore, the Respondents stood to be the beneficiaries of the shares under the will.

The judgment

For the purpose of interpreting s.245, the Privy Council considered its wording, the historical context leading to its enactment and inferences as to the purpose of the section.

Starting first from the language of s.245, the Privy Council observed that it stated that the situs of the shares was BVI for the purposes of determining title and jurisdiction but did not go further to state that shares are to be categorised as immovables for the purposes of private international law (PIL).

A survey of the legislative history also confirmed that the purpose of s.245 was to clarify that BVI was the situs of the shares of business companies, with the result that BVI courts had jurisdiction to make orders regarding title to those shares. This was intended to remove any uncertainty under common law where the situs of shares could either be the country of the company's incorporation or where the share register is kept.

Lastly, the Privy Council opined that a requirement to treat shares in a BVI company as immovable would be a radical change to the rules of PIL, which otherwise would apply in the BVI. Such approach would prevent owners of shares in a BVI company who are domiciled outside the BVI to rely on a testamentary instrument that was valid under the law of the domicile to transmit their shares on death. There are no clear words in s.245 that suggest it seeks to abrogate such long-standing rule of law.

Conclusion

This decision of the Privy Council is a helpful confirmation of the long-standing position of PIL: the transmission of a deceased person's movable estate (which includes BVI company shares) is governed by the law of the person's domicile at the date of the death.

As BVI companies remain popular vehicles in corporate structure and succession planning, this decision lends further certainty to the applicable law as to the transmission of BVI company shares upon the owner's death. Although it is possible to address the succession of BVI shares using a will made under the testator's country of domicile, there are often other practical considerations that may incentivise a testator to make a separate BVI will. These include the advantage of expediting the process by obtaining probates in difference jurisdictions simultaneously, in respect of separate wills.