BVI directors must act honestly, in good faith and in what they believe is the company's best interests, use powers for proper purposes and meet an objective standard of care, diligence and skill under the BVI Business Companies Act. Conflicts must be disclosed to every director, resignation does not erase past exposure, and in a liquidation the Insolvency Act can lead to personal contribution orders.
Vassilev & Chisuse Law Firm · 2026-10-11 · Legal review: 11 October 2026
The directors manage a BVI business company. Section 109 of the BVI Business Companies Act provides that the business and affairs of a company are managed by, or under the direction or supervision of, its directors, subject to any modifications or limitations in the memorandum and articles.
The constitution therefore matters from the outset. The memorandum and articles may shape how board powers are exercised, which decisions require shareholder involvement and how authority is allocated, so any analysis of a particular director's position starts with the company's own documents.
Function can matter as well as title. Section 109(6) provides that where a company has no director, a person who manages, directs or supervises the management of the business and affairs of the company is deemed to be a director for the purposes of the Act. That is a specific statutory rule for the situation it describes. It should not be read as a general BVI shadow-director doctrine, but it shows that the Act looks at who is actually running the company when no director is in office.
A BVI director must act honestly and in good faith and in what the director believes to be in the best interests of the company. This is the central fiduciary duty in section 120 and it applies whenever a director exercises powers or performs duties.
The duty is owed by reference to the company itself, not to an individual shareholder, an appointing party or a wider corporate group. Section 120 contains three narrow exceptions, and each depends on specific conditions.
For a wholly-owned subsidiary, if expressly permitted by the memorandum or articles, a director may act in a manner which the director believes is in the best interests of the parent company, even though it may not be in the best interests of the subsidiary.
For a subsidiary that is not wholly owned, the same latitude requires two things: express permission in the memorandum or articles, and the prior agreement of the shareholders other than the parent company.
For a company carrying out a joint venture between shareholders, if expressly permitted by the memorandum or articles, a director may act in a manner which the director believes is in the best interests of a shareholder or shareholders in connection with the joint venture, even though it may not be in the best interests of the company.
These exceptions should not be collapsed into a general group-interest rule. Where the constitutional permission or required shareholder agreement is absent, the starting point remains the interests of the BVI company itself.
The best-interests inquiry under section 120 is largely, though not entirely, subjective. That is the position stated by the Judicial Committee of the Privy Council in Ma v Wong and others [2022] UKPC 14, an appeal from the BVI.
Where directors have genuinely considered the interests of the company, the courts are generally reluctant to second-guess their business judgment. The question is what the director honestly believed, not whether a court would have made the same commercial decision.
The position changes where a director failed to consider the separate interests of the company at all. In that situation the Board applied an objective test of the Charterbridge type: whether an intelligent and honest person in the position of a director of the company could, in the whole of the existing circumstances, reasonably have believed that the transaction was for the benefit of the company.
The judgment also reaffirms that each company in a group is a separate legal entity. The interests of the group do not automatically replace the interests of the particular BVI company whose directors are acting. For group structures, the practical lesson is that the board of each company should actually consider that company's own position, rather than assuming that a group benefit answers the question.
A director must exercise powers for a proper purpose. Section 121 also provides that a director must not act, or agree to the company acting, in a manner that contravenes the Act or the memorandum or articles.
This is a separate obligation from the section 120 duty. Acting honestly and in good faith does not by itself cure the use of a power for a purpose for which it was not conferred. A director may sincerely believe a decision helps the company and still breach section 121 if the power is used for an improper purpose, or if the action contravenes the Act or the company's constitution.
In practice, this makes it important to identify the source and purpose of a power before it is exercised, particularly for decisions affecting share issues, control, distributions or the rights of particular shareholders.
A BVI director must exercise the care, diligence and skill that a reasonable director would exercise in the same circumstances. Section 122 requires this to be assessed taking into account, but without limitation, the nature of the company, the nature of the decision and the position of the director and the nature of the responsibilities undertaken.
The standard is therefore contextual. What is reasonable for a director of a regulated fund or a trading group may differ from what is reasonable for a director of a simple holding vehicle, and a decision with significant financial consequences may call for more attention than a routine administrative matter.
The statute does not prescribe a fixed checklist that guarantees compliance. Its practical implication is that a director should engage with the company and the decision in a way that a reasonable director in that role would, given the responsibilities actually undertaken.
A BVI director may rely on information and advice from others, but only on conditions. Section 123 permits a director, when exercising powers or performing duties, to rely on the register of members and the books, records, financial statements and other financial data of the company, and on information, reports, statements, professional or expert advice prepared or supplied by specified persons.
Those persons are an employee whom the director believes on reasonable grounds to be reliable and competent in the matter concerned, a professional adviser or expert in relation to matters which the director believes on reasonable grounds to be within that person's professional or expert competence, and any other director or committee of directors upon which the director did not serve in relation to matters within its designated authority.
The protection applies only where the director acts in good faith, makes proper inquiry where the need for inquiry is indicated by the circumstances, and has no knowledge that the reliance is unwarranted. Reliance is therefore a structured defence, not a substitute for engagement. A director who ignores warning signs or relies on advice known to be unreliable is outside its protection.
Delegation works in a similar way. Under section 110(4), where the directors delegate powers to a committee of directors, they remain responsible for the exercise of that power by the committee, unless they believed on reasonable grounds at all times before the exercise of the power that the committee would exercise it in conformity with the duties imposed on directors by the Act. Delegation is not a complete transfer of responsibility.
A BVI director must disclose an interest in a transaction entered into or to be entered into by the company to the board forthwith after becoming aware of it. That is the core rule in section 124.
The disclosure requirement does not apply where the transaction is between the director and the company and it is entered into in the ordinary course of the company's business and on usual terms and conditions. The Act also provides that disclosure to the board is not made unless it is made or brought to the attention of every director on the board. A comment to one colleague is not enough.
The current law on sanctions needs particular care. The Revised 2020 consolidation of the Act, and older guidance based on it, show a summary offence and a USD 10,000 fine for failing to disclose under section 124. Section 26 of the BVI Business Companies (Amendment) Act, 2024 repealed section 124(7), and the amendment came into force on 2 January 2025 under Commencement Notice S.I. No. 75 of 2024. Older material showing that penalty must be read together with the 2024 amendment.
The civil consequences sit in section 125. A transaction in which a director is interested is voidable by the company unless the interest was disclosed under section 124 before the company entered into it, or disclosure was not required because of the ordinary-course exception.
Even where those conditions are not met, the transaction is not voidable if the material facts of the interest are known to the members entitled to vote at a meeting of members and the transaction is approved or ratified by a resolution of members, or if the company received fair value for the transaction.
Subject to the memorandum or articles, an interested director may vote on a matter relating to the transaction, attend a meeting at which it arises and be included for quorum purposes, and sign documents or do any other thing in their capacity as a director relating to the transaction. A conflict therefore does not automatically invalidate a transaction, but undisclosed interests can leave it open to challenge and expose the director to scrutiny under the duties in sections 120 to 122.
Appointment as a nominee director does not create a separate or lower statutory standard. Sections 120 to 125 apply to every director of a BVI company, however the appointment came about and whatever arrangement exists with the person who nominated them.
A nominee may take account of the nominator's views, but cannot simply follow instructions regardless of the duty to act in what the director believes is the company's best interests, the proper-purpose rule, the standard of care and the disclosure rules. The limited constitutional exceptions in section 120 for subsidiaries and joint ventures remain the only statutory routes for acting in another party's interests. Our separate article on nominee directors and shareholders in the BVI explains how nominee arrangements are structured in practice.
Resignation does not erase liability for past conduct. Section 116 provides that a person who ceases to be a director remains liable under any provisions of the Act that impose liabilities on directors in respect of acts, omissions or decisions made while that person was a director.
A director who becomes concerned about the company's conduct should therefore consider their position on the basis of what happened while they were in office, not only on what happens after they step down.
The BVI Insolvency Act does not create a broad standalone duty owed by directors to creditors in the terms sometimes suggested in general commentary. It does, however, give the Court specific powers in a liquidation that can lead to personal exposure for directors and others. These are insolvency-specific remedies, not an automatic finding of personal liability whenever a company becomes insolvent.
Under section 254, on the application of a liquidator, the Court may examine the conduct of a person who has misapplied or retained company assets, been guilty of misfeasance, or committed a breach of fiduciary or other duty in relation to the company. The Court may order repayment or restoration of assets, an accounting, or compensation, with interest as applicable.
Section 255 deals with fraudulent trading. Where, before the commencement of the liquidation, any business of the company was carried on with intent to defraud creditors or for any fraudulent purpose, the Court may order a person who was knowingly a party to the carrying on of the business in that manner to make a contribution to the company's assets.
Section 256 deals with insolvent trading. The Court may order a person who is or has been a director to contribute to the company's assets where, at a time before the commencement of the liquidation, that director knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation.
No order is made under section 256 if the Court is satisfied that, after that time, the director took every step reasonably open to them to minimise the loss to the company's creditors. The standard combines objective and subjective elements: the facts a director ought to know, the conclusions they ought to reach and the steps they ought to take are those of a reasonably diligent person carrying out the same functions, who also has the general knowledge, skill and experience that the particular director actually has.
Part X of the Insolvency Act also allows, where applicable, a disqualification order for a period not exceeding 10 years. Matters relevant to unfitness include misfeasance or breach of duty and the director's responsibility for failings connected with the company's insolvency.
A BVI company may indemnify its directors and buy insurance for them, but neither removes the underlying duties. Under section 132, subject to section 132(2) and the memorandum or articles, a company may indemnify a director or former director against expenses, including legal fees, and against judgments, fines and amounts paid in settlement reasonably incurred in connection with specified legal, administrative or investigative proceedings.
The indemnity is available only where the person acted honestly and in good faith and in what they believed to be in the best interests of the company, and, in the case of criminal proceedings, had no reasonable cause to believe their conduct was unlawful. An indemnity given in breach of section 132(2) is void.
Section 133 permits the company to purchase and maintain insurance in relation to a director or former director against liability asserted against them in that capacity, whether or not the company has or would have had power to indemnify them under section 132. Insurance can be an important part of risk management, but its value depends on the policy terms, and neither an indemnity nor insurance changes what the duties require.
The duties in sections 120 to 125 have direct practical consequences for how a board works. The points below are practical governance derived from those duties and from the BVI FSC guidance on directors and their responsibilities, not an additional statutory checklist.
A director is better placed to meet the care and best-interests duties if they understand the company's business, its financial position and the constitutional limits on the board's powers. Reading board materials before meetings and asking questions when the circumstances call for inquiry also matters, because the reliance protection in section 123 depends on proper inquiry where it is indicated.
Board records that show the separate interests of the company were actually considered can be important in light of Ma v Wong, particularly in group transactions. Recording conflict disclosures made to every director supports the section 124 and 125 analysis. Checking decisions against the memorandum and articles and against current law, including the 2024 amendments, helps keep the board within section 121.
Our team works with specialized professionals on BVI corporate governance and director questions, including board decision-making, conflicts and constitutional review through our corporate and commercial law work, director and fiduciary arrangements through nominee and fiduciary services, and structuring through company incorporation and corporate structuring. Where a director faces a claim or a liquidator's inquiry, we can coordinate support through our dispute resolution practice.
This article is for general information only and is not individual BVI legal advice. The position of any director depends on the company's memorandum and articles, the specific facts and the law in force at the relevant time, and BVI-qualified advice should be obtained where appropriate. The legal framework described here was reviewed as of 11 October 2026.