As the author of Nevis’ limited liability company law in 1995 it is gratifying that it has long been highly regarded as the standard among LLC laws, blazing new trails that other jurisdictions, even in the US, took years to follow. Even as the years have passed and other jurisdictions enacted similar laws, the Nevis LLC continued at the forefront. But with external legal developments, no law can go without a face lift to avoid looking old and irrelevant.
On May 27, 2015 the Nevis Assembly enacted the Nevis Limited Liability Company (Amendment) Ordinance, 2015, based on a draft I provided at the request of the Nevis government, with the help of Jan Dash, a lawyer in Nevis with Liburd & Dash. Along with several important as well as housekeeping provisions, principal among the provisions as enacted are updated judgment creditor, including charging order, provisions and a new fraudulent transfer section. It is effective July 1, 2015. An unofficial version appears at the top of this blog. This was one of three ordinances passed that day; the others are amendments to Nevis international corporation law and to its international trust law.
Section 43 contains the provisions addressing the rights of a judgment creditor. This is commonly referred to in the US as a charging order provision, although it goes further than simply charging orders. In 1995 this was a state-of-the-art provision limiting the ability of certain creditors of limited liability company members from obtaining rights to property of the limited liability company. The NLLCO is one of the few (and certainly one of the first) to provide that this charging order provision is the sole remedy available to the creditor. Over the years issues have developed concerning how this provision works in the context of foreclosure and other equitable remedies and single member LLCs, among others.
The section is completely revised; the changes are as follows:
New Section 43A deals with fraudulent conveyance issues as they relate to transfers to an LLC, i.e. the ability of creditors of a member to recover a claim against such member from property contributed to the company; this is derived from §24 of Nevis’ international trust law (the Nevis International Exempt Trust Ordinance). This essentially provides that the creditor must prove beyond a reasonable doubt that such transfer was intended to defraud the creditor and that the member was thereby rendered insolvent, considering all of his assets including the full fair market value of the LLC interest. The claim must be made within a two year window.
What is not in the amended law is as important as what is included. The draft amendments included provisions that would have permitted Nevis LLCs to have series, making what is already a primary offshore entity law even more formidable. In addition, the Nevis government has draft amendments to its insurance laws permitting cell captives. These series provisions were excluded as were the cell captive amendments to Nevis’ insurance laws at the same time as other jurisdictions have seen value in enacting such provisions.