BVI Business Companies are known for their ubiquitous flexibility across multiple jurisdictions. The Restricted Purpose Company (RPC) is a bit different. For those transacting, or doing business with a BVI company generally, it is quite well known that the BVI companies’ legislation gives wide corporate powers to corporate entities to enter into transactions.
As the name states, an innovative corporate vehicle introduced by the BVI Business Companies Act 2004, the Restricted Purpose Company (“RPC”), was designed to cater for slightly different circumstances where it makes sense to limit corporate capacity and for instances where it is important for the purpose of the company to be strictly limited to only engaging in specific activities.
Used mostly as special purpose vehicles, for structured finance and transactions where an insolvency-remote company is required, the RPC, through its Memorandum of Association, sets out the specific transactions the company can lawfully enter into.
Fundamental to an RPC, therefore, is setting out its purposes in the company’s Memorandum of Association, and importantly also a statement that the company is a restricted purposes company.
Key to parties entering into a transaction with an RPC is that any transaction that is not within the restricted purposes of the company is invalid. In a typical company where a breach (even in a company with restrictions on its activities) would usually result in a default and/or claim for damages against the company, with an RCP, any transaction not within its specified purposes will be void and unenforceable.
To ensure that those entering into transactions with a RPC know that they are, it is a requirement to have an “(SPV) Limited” or “(SPV) Ltd” at the end of the company’s name. In setting a standard for a more exclusive class of corporate vehicle, annual government fees for an RCP are significantly higher, approximately USD 5,000, as opposed to USD 350 (minimum fee).
We anticipate that this niche corporate vehicle will prove very attractive to those involved in sophisticated lending transactions. This will enable lenders to set up vehicles which are transaction specific and to protect themselves from any risks outside of the risks that they are proposing to accept.
We welcome the introduction of the RPC as another sophisticated addition to what is already a very modern corporate suite of legislation.