The statutory list
For finance and leasing business, the Act identifies these core income-generating activities: agreeing funding terms; identifying and acquiring assets to be leased; setting the terms and duration of any financing or leasing; monitoring and revising agreements; and managing any risks. The requirement is that the CIGA are conducted in the BVI. The question a board should ask is: what does each of these look like as a decision we take and can evidence?
Agreeing funding terms
Principal and drawdown mechanics. Pricing — fixed or floating, margin, fees. Maturity and any extension options. Security and collateral, and its valuation. Covenants and reporting undertakings. Repayment profile. Counterparty identity and credit assessment. Each of these is a board consideration, recorded in minutes that demonstrate the terms were understood and decided in the BVI rather than received from elsewhere and signed.
Monitoring and revising agreements
Borrower financial performance against the covenant package. Payment history and arrears. Defaults, waivers and cure periods. Approaching maturities and rollover decisions. Requests for amendment, extension or repricing. Material events at the borrower. A quarterly board that reviews a monitoring report and takes decisions on it is performing this CIGA; one that receives a signature page is not.
Managing risks
Credit and counterparty risk on each facility. Concentration by borrower, sector or geography. Collateral adequacy and enforceability. Liquidity and refinancing risk on the entity’s own funding. Currency and interest-rate exposure. Default and recovery scenarios. Boards should have enough information to consider these, and directors with enough background to know when the information is insufficient.
Directors who can do this
The value of a resident director on a financing company is proportional to their ability to engage with credit. Directors with banking and investment experience can read a facility agreement, question a covenant package and understand what a material credit event implies, rather than relying entirely on advisers to explain the underlying transaction. That is the standard Mount Sage sets for these appointments; see Finance & Leasing Economic Substance.