Meaning
Provisions found in bvi business companies act s 43 grant a company the legal capacity to issue shares with or without par value and to determine the consideration for those shares. The governing legislation establishes that these actions remain valid provided the board of directors authorizes the issuance and the value assigned to the asset or service satisfies the requirements of the internal regulations. Directors bear the responsibility to ensure that the consideration received does not fall below the fair market value of the shares at the time of issuance.
This mechanism permits flexibility in capital structure while maintaining a standard for capital maintenance.
Director Responsibility
Officers must act in accordance with their fiduciary duties when setting the value of non-cash consideration for an issuance. The board records the determination of the value to protect the interests of existing shareholders against dilution through undervalued share allotments. Courts look to this documentation to verify that the directors arrived at their valuation through a reasoned process rather than arbitrary estimation.
If the directors fail to justify the assigned value, the company holds the right to initiate proceedings against them for breach of duty.
Share Classification
Different rights attach to shares depending on the designation provided in the articles of association or the specific resolution authorizing the issuance. The statute permits the creation of shares that carry unique voting rights, dividend entitlements or redemption features to facilitate customized investment arrangements. An issuance might result in shares that rank differently in priority during liquidation, which serves as a primary tool for establishing hierarchies within a capital stack.
These distinctions allow firms to separate management control from economic ownership effectively.
Issuance Procedure
Companies follow a formal sequence starting with a board resolution that defines the class and number of shares intended for distribution. The articles of association dictate any pre-emptive rights that current members possess, which the directors must honor before offering the instruments to outside parties. Once the directors authorize the issuance and receive the consideration, the company updates the register of members to reflect the new ownership interest.
The entry into this register functions as the definitive proof of ownership for the purposes of the law.
