By Thalia Myers, In-House Legal Counsel at MMG Trust (BVI) Corp. and Morgan & Morgan Barristers & Solicitors
What is Joint Tenancy?
A joint tenancy is a type of co-ownership or concurrent estate in which co-owners have a right of survivorship. The applicable law governing right of survivorship by way of joint tenancy is common law. In the eyes of the law, joint tenants do not own any portion or individual share in the property. The interest is not divisible and joint tenants are regarded together as making up a single legal entity, i.e. a sole owner. They are together wholly entitled, but individually they own nothing.
The main feature of the joint tenancy is the right of survivorship – a survivor automatically becomes the owner of the property on the other person’s death. Therefore, where property are owned jointly as joint tenants for example, shares in a BVI Business Company, then all the assets will pass automatically to the survivor by the right of survivorship. The surviving joint owner(s) can simply inform the company’s directors of the death of the joint owner concerned and provide the directors with the original death certificate or a notarized copy.
Is Joint Tenancy Permissible under BVI Law?
Yes. The right of survivorship by way of joint tenancy exists in the BVI and note that the only reference to joint tenancy in the BVI Business Companies Act 2004, as amended, (the “BC Act”) is section 82(6) which deals with voting where shares are jointly held.
Creation of Joint Tenancy
Usually the Memorandum & Articles of Association of a company will not include any wording in relation to the Joint Tenancy. The inclusion of such wording in the Memorandum & Articles of Association will be completely optional to the Company. The practice is for language to be included in the Register of Members of the BVI Business Company and also the Share Certificates to the effect that the share(s) is/are jointly held. A statement such as “to X and Y as joint tenants with right of survivorship” is sufficient to create joint tenancy. Having said that, it is often prudent to use the following long form which is especially appropriate in those jurisdictions which use the phrase “joint tenancy” synonymous with “a tenancy in common”:
“to X and Y as joint tenants with right of survivorship, and not as tenants in common“.
As a matter of BVI law, shares in a BVI company are deemed to be located in the BVI. Where a shareholder of a BVI company dies, his shares cannot be validly transmitted to his heirs until a grant of probate or grant of letters of administration has been obtained from the BVI court or alternatively, his foreign grant of probate or letters of administration has been re-sealed by the BVI court (the “Grants”). There are a number of succession planning options which are effective and which avoid many of the pitfalls of the requirement to obtain Grants. One simple succession planning option is for the shares to be held by more than one person as joint tenants with rights of survivorship. It is the view in the BVI, although are no reported BVI cases, that joint tenancies are effective as a matter of BVI law in that the deceased’s joint owner’s interest does not form part of their estate for succession purposes. No grant of probate or grant of letters of administration with respect to the deceased is required – the property passes automatically without the need to obtain probate or letters of administration.
This form of ownership is common between husband and wife, and parent and child and in any other situation where parties want ownership to pass immediately and automatically to the survivor. It is one useful tool for proper planning to deal with succession in the event of death. One difficulty with this approach is that each of the joint owners has immediate and ongoing rights to the shares during their lifetimes and not just on death of one of the parties.