The British Virgin Islands (BVI) has been a jurisdiction of choice for investment funds for many years. This is due to a number of factors including the stability and familiarity of the BVIs common law-based legal system, zero tax, and the business-friendly attitude of the authorities, judiciary, and regulatory institutions. Funds that are incorporated in the BVI are regulated by the countries Financial Services Commission (FSC).
Most BVI funds are first incorporated as a company as per the BVI Business Companies Act. This creates a flexible structure where there is no requirement for authorised capital or share capital, and depending on the Memorandum and Articles of Association, shares can be issued without par value. Segregated portfolio companies are also allowed with the statutory segregation of assets and liabilities between segregated portfolios established within the company. These are suitable for multi-class or umbrella funds where two or more segregated portfolios use different investment strategies.
An alternative to this is incorporating a fund as an international limited partnership which does not have a separate legal personality. This means that the general partner is responsible for all debts and obligations.
What kinds of funds are available?
Asides from the FSC recognising foreign incorporated funds, investors in BVI can also establish private funds, professional funds, public funds, Incubator Funds, or Approved Funds.
Approved Funds were introduced in 2015 by the Securities and Investment Business Regulations along with Incubator Funds. The regulations were created to offer investors a fast and cost-effective way for managers to start open-ended funds which can be approved under a lighter regulatory regime.
They can be created in original form, or converted to from a BVI incubator Fund which has similar requirements but can only operate for a maximum period of three years. After this time, it must wind up or convert into another kind of fund, such as the Approved Fund
These funds are created for smaller strategies as well as funds between families and friends. With a maximum number of investors capped at 20 and a limit of $100,000,000, or equivalent in another currency. The fund must have a fund administrator but is not required to have a custodian or manager, nor is it required to conduct or submit audits. It also has an indefinite lifespan and is valid for an unlimited amount of time.
In the case where an Approved Fund exceeds the permitted amount of investors or investments, the FSC can stipulate that the fund be changed into a private fund or a professional fund. It can also request that the fund is liquidated or stops all fund related business.
Approved Funds in the BVI are required to have an authorised representative who shall be a person or entity that is resident in the BVI and certified by the FSC. This representative is also responsible for submitting all documents and fees to the FSC, on behalf of the fund.
Fast Offshore have been assisting clients in setting up funds in the BVI and beyond for over 20 years. We can offer advice and help on incorporation, application for certifications and authorisations, licensing, bank account opening, fiscal considerations and more. To gain from our wealth of in-depth knowledge and experience in the area of investment funds, contact us today.