What is a BVI incubator fund and why would you use it?

Located in the middle of the Carribean, the British Virgin Islands (BV) is a British Overseas Territory. Comprising over 50 islands and with a population of 36,000, this English-speaking archipelago has become a hub for financial services.

Accounting for over half of the territories GDP, financial services, particularly the licensing of offshore companies and provision of ancillary corporate services has made BVI a key player in the global market. In fact, 45% of the world’s offshore companies are registered here. Benefits of business in BVI include high levels of confidentiality, flexible organisational structures, and a favourable fiscal climate.

But did you know that it is also a popular jurisdiction for start-up funds and new fund managers?

BVI Incubator Fund

Incubator Funds are aimed towards start-up managers who are looking for a fund with minimal start-up times, few regulatory obligations, and no need for mandatory functionaries such as auditors, administrators, or investment managers. It is also suitable for managers who do not have access to seed investor capital but that want to set up and build a track record without a lot of fuss. It is also an attractive option for those that want to grow assets in a cost-efficient way.

The incubator fund can exist and operate as such for up to two years with the option to extend for an additional year. If after that time it is considered as viable it is required to change to a Private, Approved, or Professional Fund. To do this, an audit must be presented to the Commission that clearly shows its current financial standing and levels of compliance. Alternatively, it can wind up its operations and cease to exist as an entity altogether.

In terms of compliance, the BVI incubator fund has four annual obligations including filing an annual return with the BVI Financial Services Commission prior to 31 January, paying an annual license fee to the BVI government before 31 March, filing a financial statement before 30 June along with a directors certificate, and filing a semi-annual return before 31st July.

Those operating a BVI incubator fund are not required to appoint an auditor, as long as they meet and oblige by certain conditions. These include having a maximum of 20 investors, each with a minimum initial investment of $20,000, and having a market cap of $20 million on the value of the investments within the fund.

In terms of authorised representatives and directors, Incubator Funds are required to have a minimum of two directors at all times, one of which must be a person. In order to be approved as a Director, they are required to submit their resume to the Commission to check suitability and compliance with standards.

The application process for a BVI incubator fund takes around two days from the submission of completed documents and if all documents are in order, a certificate evidencing the status of the fund will be issued. At this time, business as an Incubator Fund can commence.

Documents required to submit an application include the constitutional documents of the fund, a description of the investment strategy, and a written warning to investors. These can be included within the offering document, or in the case where an offering document is not included they must be presented to investors and the Commission as separate documents. All applications must be accompanied by the applicable fee, else they cannot be processed.

Fast Offshore

For over 21 years, Fast Offshore have been working with clients in the British Virgin Islands. In addition to this we have a vast experience in setting up a range of Alternative Investment Funds as well as advising our clients on what is the best kind of fund for them. We are on hand to provide our expertise to ensure that all documents and applications are prepared correctly and in line with BVI law. As well as managing the application process, we can also liaise with the Commission on your behalf and take on all of the stress and time-consuming paperwork, leaving you to take care of other matters. 
To find out whether a BVI Incubator Fund is for you, or whether you should consider other options, contact us today to find out more!