US VIRGIN ISLANDS LAW AND PRACTICE Contributed by: Marjorie Roberts, Sean Foster, Renée Marie André, Lisa Wisehart, David Bornn, Duncan J. J. Kessler and Jessica McKenney, Marjorie Rawls Roberts PC
M&A Regulations The USVI further addresses mergers and acquisitions in different statutes. For instance, under the Virgin Islands Insurance Holding Company System Regula - tory Act, section 323, an acquisition or merger of a domestic insurer that results in control of the insurer may not occur without meeting certain requirements, including approval by the Commissioner of Insurance of the Virgin Islands. A statement to be submitted to the Commissioner – and copied to the insurer – for approval must be made under oath or affirmation and includes detailed information about the persons, including entities, that want to acquire or merge with the domestic insurer. These persons are also required to file a pre-acquisi - tion notification with the Commissioner and may be subject to penalties for failing to do so under Title 22, Section 324 of the VI Code. There are excep - tions in section 324, but a pre-acquisition notification must still be submitted. The pre-acquisition notifica - tion must contain the information and be in the form prescribed by the National Association of Insurance Commissioners. The Commissioner shall consider statutory factors to determine whether an acquisi - tion could substantially lessen competition in a line of insurance in the USVI, and, if so, may file an order regarding the acquisition. However, an order may not be entered by the Commissioner until after a hearing has been granted. Persons who do not file required filings may be fined at least USD25,000.00. Moreover, if the Commissioner’s order contains a cease-and- desist order and a person violates it, they could be subject to a USD1,000.00 daily penalty or license revocation after a hearing. Additionally, controlling persons of a domestic insurer wanting to divest their controlling interest must file with the Commissioner – and send a copy to the insurer – a confidential notice regarding the proposed divestiture. Finance Lenders and Franchise Law The Virgin Islands Finance Lenders Law in the USVI is designed to ensure an adequate supply of credit for borrowers, streamline the laws governing finance lenders, promote competition among lenders, and pro - tect borrowers from unfair lending practices. However,
under Title 9, Section 775 of the VI Code, the law does not apply to loans made by franchisors to franchisees for activities such as acquisitions and mergers, pro - vided certain statutory requirements are satisfied. For example, the loan must comply with legal federal and state registration and disclosure requirements and the Federal Trade Commission Franchise Rule: Disclosure Requirements and Prohibitions Concerning Franchis - ing and Business Opportunity Ventures 16 CFR 436, as amended. However, section 775 also states that this section is not intended to diminish the application of other laws that protect borrowers, including those that address unfair competition. Similarly, the USVI Franchised Businesses law in title 12A section 137 of the VI Code states that the fran - chise law does not supersede, modify, or repeal any provisions of the USVI antimonopoly laws, and instead is supplementary to, although not a part of, the USVI antimonopoly laws. The USVI recently surveyed almost 500 businesses and only about 2% were franchises. However, the USVI has goals to encourage the expansion of private businesses and employment. Additionally, the USVI has laws regarding mergers and consolidation under the General Corporation Law (13 V.I.C. §§ 251-256), regarding conversions and merg - ers under the Uniform Limited Liability Company Act (13 V.I.C. §§ 1901-1907) and regarding conversions and mergers under the Uniform Partnership Act (26 V.I.C.§§ 191-198). 4. Corporate Governance and Disclosure/Reporting 4.1 Corporate Governance Framework Types of Legal Entities in the USVI The USVI provides many options when choosing to form a legal entity within the jurisdiction, such as cor - porations, LLCs, and partnerships, including general partnerships, limited partnerships, limited liability lim - ited partnerships, and LLPs.
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