US VIRGIN ISLANDS Law and Practice Contributed by: George H.T. Dudley, G. Hunter Logan, Kurt Petri and Anna Vlasova, Dudley Newman Feuerzeig LLP
There are major US title insurance companies doing business in the USVI, such as Fidelity National Title Insurance Company, First American Title Insurance Company and Stewart Title Insurance Company. Personal Property Tangible and intangible personal property may also be taken as collateral for a loan. A security agree- ment is given to grant the security interest (lien) on the collateral. The USVI has adopted the Uniform Com- mercial Code, including Articles 8 and 9. Depending on the type of personal property, the security interest may be perfected by filing a UCC financing statement, possession of the collateral, or “control” (as defined in the UCC). UCC financing statements are filed in a central filing system maintained by the Department of Corporations and Trademarks, within the Office of the Lieutenant Governor. Proper perfection is crucial to establishing and maintaining the priority of the secu- rity interest. 5.2 Floating Charges and/or Similar Security Interests Security interests are permitted which encumber assets owned at the time the security interest is grant- ed and assets acquired after the security interest is granted. 5.3 Downstream, Upstream and Cross- Stream Guarantees Downstream, upstream and/or cross-stream guaran- tees are permitted. Whenever an entity guarantees a loan to another per- son or entity, the lender needs to be concerned about whether the guarantor has received valuable consid- eration to support its guaranty of the loan. Considera- tion is the mutual exchange of promises or obligations between parties to a contract. It may take the form of monetary payments, services or other forms of value. For a contract to be enforceable, both parties must assume some obligation that binds them, rather than make a promise that is gratuitous. If the guarantor does not receive sufficient consid- eration to support its guarantee, the guaranty may be subject to attack by creditors of the guarantor company or a trustee in bankruptcy claiming that the
guaranty constitutes a fraudulent transfer. A guaranty can be considered to be a fraudulent transfer if the guarantor receives less than “reasonably equivalent value” for its guaranty and: (i) is insolvent or rendered insolvent by incurring the obligation; (ii) carries on a business or transaction for which its remaining prop- erty constitutes unreasonably small capital; or (iii) as a consequence of giving the guaranty, incurs debts that it will not be able to service. Downstream guarantees are usually supported by consideration, because the guarantor owns the entity whose loan is being guaranteed. Upstream and cross- stream guarantees may be more problematic, and the lender should verify the consideration being received by the guarantor. 5.4 Restrictions on the Target The target may grant guarantees and collateral for the acquisition of its own shares, but the issue of the target receiving consideration (described in 5.3 Down- stream, Upstream and Cross-Stream Guarantees ) applies in this context. 5.5 Other Restrictions In general, private entities do not require the con- sent of works council, labour unions or other similar organisations to grant a security interest or guarantee, unless the entity has entered into a contract with such organisation, such as a collective bargaining agree- ment, requiring such consent. 5.6 Release of Typical Forms of Security A mortgage recorded in the Recorder of Deeds Office is released by the holder of the mortgage signing and recording a release of the mortgage. A security inter- est granted under the UCC is released by the holder of the security interest filing the appropriate UCC form with the USVI Department of Corporations and Trade- marks. 5.7 Rules Governing the Priority of Competing Security Interests Real Property Mortgages encumbering real estate have priority based on when the document is recorded with the Recorder of Deeds. A mortgage recorded on day one has priority over a mortgage recorded after it.
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