Both BVI Incubator Fund and Approved Fund vehicles provide a low-cost opportunity for new managers to build a name for themselves in the market. They can keep costs low while attracting capital that becomes viable over the long term. These funds are fast and straight forward, and the set-up and ongoing costs are lower than in other jurisdictions.
The British Virgin Islands is the world’s second-largest jurisdiction for regulated investment funds. Furthermore, regulators are both welcoming to investors and committed to remaining fully compliant with international financial best practices and regulations.
Why should you incorporate in BVI?
A company incorporated in BVI is generally an International Business Company (IBC), or offshore company. It is a private corporation and is popular because is exempt from many kinds of taxes as well as offering the beneficial owner a higher level of confidentiality and a flexible organisational structure.
The financial services sector in BVI accounts for over half of the territories’ GDP, in particular offshore companies and the provision of ancillary corporate services. In fact, some 45% of the world’s offshore companies are based here.
Without a doubt, The British Virgin Islands (BVI) is the preferred jurisdiction for new fund managers and start-up funds. The Incubator and Approved Fund products continue to grow in popularity, as they allow new fund managers to start building a track record and launch funds under much less stringent conditions.
BVI has a strong and stable political climate and its economy has gone from strength to strength. This, combined with its relatively low international profile makes it the perfect location for company incorporation and offshore business entities.
Its judicial system is based on the English common law and its currency is the US dollar.
Minimal red tape
Setting up a company in BVI is relatively easy and there are not too many requirements. The company needs to have one director and one shareholder who can be of any nationality and do not need to reside in the country. Annual meetings can take place in any location. You don’t have to travel to BVI to take part. Companies are not required to file any annual returns of account audits, although it is always good to keep them anyway.
BVI uses a territorial tax system with effectively zero corporate tax due on any companies incorporated in BVI that run their operations outside of the country. Types of tax that are exempt for these entities include income, customs duties, capital gains, sales, profits, inheritances, dividends, interests, and royalties. Tax is only payable on a BVI companies revenue when elements of the business are run in-country. There are also Tax Information Exchange Agreements in place and no withholding tax is payable.
Confidentiality levels for a BVI company are higher. Company ownership isonly permitted to be revealed under a lawful request from a TIEA jurisdiction.
Beneficial owners are not required to be made public but the registered agent must have access to that information and should have done suitable due diligence. Nominee shareholders and directors can also be used as an extra layer of privacy as long as a declaration of trust is in place.
BVI companies are great for holding assets or property and this is due to a high level of flexibility when it comes to disposing of the property. The BVI company can behave like a holding entity for another company and it can also be used to minimise other liabilities when it comes to trading companies.
Low fiscal liabilities
BVI offers foreign individuals and businesses low fiscal liabilities and shares little to no financial information with tax authorities. Because of this, many individuals or companies do not need to be physically present or even operate in the country to receive any of the benefits on offer.
“BVI is the best place for budding investment managers to set up. The light-touch regulatory environment and the cost-effective fees mean little financial burden. Furthermore, you can be up and running in a couple of days. We always recommend BVI to these kinds of clients.”
Types of BVI funds
There are five types of funds available in the BVI: professional funds, private funds, public funds, incubator funds, and approved funds. The first three must be registered with the authorities and are regulated by SIBA. On the other hand, Incubator and approved funds are supervised by the Securities and Investment Business Regulations 2015. Fast Offshore specializes in incubator and approved funds.
BVI Incubator Funds
Incubator funds are aimed at start-up managers who want quick to set up, cost-effective funds. These come with a low administrative and regulatory burden.
incubator funds don’t require mandatory functionaries such as administrators, investment managers, or auditors. They can exist for two years with the option to extend for one additional year. These funds will then convert into a Private, Approved or Professional Fund.
BVI Approved Funds
A BVI Approved Fund is a way for fund managers to collaborate with a smaller number of investors while keeping costs effective. Enjoying a minimal regulatory burden, it has lower start-up costs than some other kinds of funds.
Approved funds were introduced in 2015 under the Securities and Investment Business Regulations. Approved funds are ideal for funds between families and friends, or small-time strategies.
BVI Professional Funds
A professional fund is a mutual fund that is only available to professional investors. The initial investment or each investor should not be less than $100,000.
BVI Private Funds
A private fund is a mutual fund where the constitutional documents state that there will be less than 50 investors. Also, investors join by invitation only.
BVI Public Funds
Public funds are neither private nor professional, rather they target general investors. They are subject to a very high degree of regulation and scrutiny from the authorities.
Structuring BVI funds
The most popular way of structuring a fund is by incorporating a local company. These companies are authorized to issue shares that can be redeemed, subject to authorization. The maximum number of shares and the type, class, rights, privileges, and restrictions relating to them must be specified in the company’s Memorandum of Association.
BVI fund setup
As per the BVI Business Companies Act, funds are first incorporated as a company. This creates a structure that is very flexible because there are no requirements for share capital or authorized capital. Depending on the Memorandum and Articles of Association of the company, shares are issued without par value. It’s also possible to incorporate a segregated portfolio company that segregates assets and liabilities between portfolios established within the company.
Those establishing a fund can also choose to incorporate as an international limited partnership. This does not distinguish a separate legal personality from the partners, meaning they are liable for all debts and obligations.
Once incorporated, an application and fee for the fund must be submitted to the Financial Services Commission for approval. It should include the constitutional documents of the fund, details of the fund strategy, and a written warning to investors. It generally takes around two days to receive authorization to proceed with the operation of the fund. Both incubator fund and approved fund must submit annual financial statements and semi-annual returns to the BVI authorities.
How long does the Application Process take?
The entire process takes approximately two days from start to finish. If documents are submitted in order, a certificate evidencing the status of the fund will be issued and the activities of the fund can commence.
Requirements, Documentation and Compliance
The main requirements of both Approved and Incubator funds are:
- Having two directors, one of which is an individual who has filed their resume with the authorities, and one that can be a company or individual
- Submitting semi-annual returns to the authorities to confirm compliance with requirements
- Restricting the fund to a maximum of 20 investors, and applicable maximum net investments
Documents required to start both BVI incubator and approved funds include:
- Constitutional documents of the fund
- A description of the investment strategy
- A written warning to investors
- An offering document if required
- Proof of payment of applicable fees
- Application form
- Professional reference for each beneficial owner, shareholder or director
- CV for each director
- Police Certificate for each beneficial owner, shareholder or director
- Form A for each director
BVI incubator and approved funds have the following obligations when it comes to compliance:
- Filing an annual return with the BVI Financial Services Commission before 31 January
- Paying an annual license feeto the Government before 31 March
- Filing a financial statement before 30 June
- Filing a semi-annual return before 31 July
- Appointing an authorized representative and keeping the authorities updated with their details
- Having two directors and certain other officials
- Updating the authorities of any changes to the terms of the fund’s offering
- Comply with FATCA and CRS Reporting
Contact Fast Offshore
Fast Offshore has over 23 years of experience in BVI, assisting clients with the setup and ongoing maintenance of a variety of structures. We can provide comprehensive advice and guidance to those looking to set up any kind of offshore structure. To find out more, get in touch today!
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