Key takeaways
- It's always wise to hope for the best but plan for the worst, and, with global rates of dementia on the increase, planning for incapacity should be part of everyone's wealth and succession strategy.
- Where the assets held include shares in a British Virgin Islands (BVI) company, there are many options available to tailor a bespoke wealth and succession plan which can cater for all eventualities.
- However, all is not lost where no plans have been made and mental incapacity intervenes: the BVI Court offers a dependable safety net to ensure that assets can be protected and managed for the benefit of the individual and his or her family and dependents.
Securing BVI assets against the event of mental incapacity
The United Nations Reports1 that, globally, the population aged 65 and over is growing faster than all other age groups. Whilst minor memory impairment is considered to be a normal part of ageing, the World Health Organisation estimates that 5-8% of the population will live with dementia, including Alzheimers, at some point with the global population of rates of dementia expected to rise to 78 million in 2030 and 139 million in 20502. With dementia, symptoms, including memory loss, gradually worsen to the point where our abilities seriously deteriorate and we are no longer able to take care of ourselves. Inevitably, therefore, with a growing population of over 65s, we may only expect the numbers of those suffering with severe memory impairment to increase. Sadly, dementia is not the only cause of mental impairment: even young people can suffer catastrophic mental and functional impairment through stroke, or injury.
Guided by the principle that it is prudent to hope for the best but plan for the worst, a robust wealth and succession plan would include provision against the event of severe cognitive decline or mental impairment so that, in the event that a person becomes incapable of managing his or her affairs, those affairs may nevertheless be carried on by trusted others for the benefit of that person, his dependents and heirs.
Where the assets held include shares in a BVI company or companies, there are a number of available options. These range from the most obvious - for example, ensuring that there is more than one director3 and at least two shareholders of the company - to highly sophisticated options which may be included within a company's constitution involving separate classes of shares with certain rights passing automatically on the occurrence of particular triggers, which might include a diagnosis of dementia or the appointment of a guardian.
Walkers' BVI team often advises clients on estate planning options and can suggest and provide bespoke options, including specialist drafting of a company's constitutional documents, to cater for a variety of eventualities, including cognitive impairment as well as death and others.
Of course, human nature is such that often no plans are made to safeguard against eventualities that ultimately occur. In such a case, where the eventuality involves a cognitive impairment, and the assets held by the impaired individual include shares in a BVI company, the solution may require an application to the BVI Court.
For example, if arrangements have been made in the form of an appointment made under a lasting power of attorney outside the BVI, that appointment will not automatically be recognised by service providers within the BVI, such as a Registered Agent, as conferring authority to act on behalf of an individual shareholder or director. In such a case, a solution may be found in an application to the BVI Court which has the power to direct that the shares in the BVI company held in the name of the person suffering impairment, or the right to receive dividends, be transferred to the person holding the power of attorney or otherwise dealt with as requested by that person4. The Court may exercise that power where it is satisfied that a person has been appointed under the laws of a foreign country to exercise powers with respect to the property or affairs of another person on the grounds that the other person is incapable of managing his or her property and affairs by reason of a mental disorder The same applies, in principle, to a person appointed outside the BVI as the guardian or receiver of a person on mental health grounds. In a suitable case, these applications may be anonymised so as to protect the privacy of individuals.
However, in a case where there has been no such appointment, the BVI Court may still be able to assist: the Court has a broad power to do or ensure the doing of things with respect to the property and affairs of a person in respect of whom it is satisfied is incapable of managing and administering his or her property and affairs. In the exercise of this power, on an application to it, the BVI Court may make such orders and give such direction as appear to be necessary or expedient for the maintenance or other benefit of the incapacitated person, his or her spouse, child or other dependant, or other persons or purposes for whom or which the person might be expected to provide were they not suffering from the relevant impairment5. This power includes a power to appoint a receiver for the person under incapacity and to give directions to that receiver with respect to the management and administration of the person's affairs.
Persons whose loved ones do come to suffer from a severe mental impairment whilst holding assets in the BVI can therefore be confident that a solution can usually be found to ensure that those assets can be safeguarded and made available for the benefit of the individual and his or her family and dependents. Again, Walkers team has experience of both types of application and can advise and deal, sensitively and efficiently, with all aspects of the case
Footnotes
1 2022 United Nations Revision of World Population Prospects and key messages
2 WHO Fact Sheet – Dementia 2022
3 The useful provision contained in section 113(7) of the Business Companies Act which allows for the nomination by written instrument of a "reserve director" in circumstances where a company has only one member who is also the sole director, only allows the reserve director to act in the case of death
4 Mental Health Act 2014 s.38
5 Mental Health Act 2014 s.32
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
