Approved Funds are a hedge fund vehicle with a lower start-up cost than other kinds of funds. It provides a way for fund managers to bring together a smaller number of investors in a cost-effective way. It also enjoys a minimal regulatory burden.
The maximum number of investors is 20 and assets are capped at $100 million. There is no term limit and the fund can continue indefinitely.
This category of fund was introduced in 2015, under the Securities and Investment Business Regulations. They can either be created as such or be converted from a BVI Incubator Fund, which can only operate for a maximum of three years.
These funds are created for smaller strategies as well as funds between families and friends. They must have a fund administrator but is not required to have a custodian or manager, nor is it required to conduct or submit audits.
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.
BVI Approved Fund Benefits
- Low cost set up when compared to other jurisdictions, which is great for small to midsize funds
- There are no requirements for authorised capital or share capital, and depending on the Memorandum and Articles of Association, shares can be issued without par value.
- In terms of the regulatory regime, private equity and venture capital managers are subject to a somewhat “lighter” touch
- Good level of corporate governance and an accommodating corporate statute through the provisions of the BVI Business Companies Act
- Legislation in line with EU legislation
BVI Approved Funds Requirements
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 on behalf of the fund.
There are no mandatory custody requirements and no requirement for an offering document to be issued. If one is not issued, the investor warnings can be included in a separate term sheet.
Required Documentation to set up Approved Funds in BVI
- Constitutional documents
- A written warning to investors
- Details of investment strategy
- An offering document may be required
- Payment of applicable fees
- Fill out an application form
- Each beneficial owner, shareholder or director must provide a professional reference
- Curriculum vitae for each director
- Each beneficial owner, shareholder or director must provide a police certificate
- Form A for each director
BVI Approved Funds Compliance Obligations
- Having two directors and certain other officials
- Appoint an authorized representative and keep the authorities up to date with their details
- Pay annual license fee to the Government before March 31st
- Filing an annual return with the BVI Financial Services Commission before 31 January
- File a financial statement before June 30th
- Filing a semi-annual return before 31 July
- Updating the authorities of any changes to the terms of the fund’s offering
- Comply with CRS Reporting and FATCA
BVI Approved Funds Application Process
Once all relevant documents have been submitted and approved, the Approved Fund can usually commence within two days. If you think a BVI Approved Fund is for you, these are the steps you need to take to set it up.
Engage Fast Offshore
To set up an Approved Fund or any other kind of fund in BVI, you need to engage a corporate service provider who has experience both in BVI and in the area of setting up funds. Fast Offshore has been active in the industry for over two decades and is well placed to guide you through the whole process, as well as to take care of any other business or personal considerations that you might have.
Appoint An Administrator
An approved fund is not required to have a manager, auditor, or custodian, but you are required to appoint an Administrator and an authorised representative.
Know The Requirements
Luckily, with a BVI Approved Fund, there is not much in the way of requirements. You do not need to create an offering memorandum as you do with other kinds of funds. Requirements include not exceeding 20 investors and ensuring the balance of the fund remains below $100 million. Should it go over this amount, you have seven days to remedy it, or change it to a more appropriate kind of fund.
You are then required to fill out an application form stating all information about the individuals and companies involved in setting up the fund as well as the name of the Authorised Representative, Directors, and Administrator. You should also include the CV of Directors involved in the Approved Fund, at the application stage. Also included, should be the constitutional document of the Fund, including a clear statement as to the fact it will be an Approved Fund.
Other documents to accompany the Application include the Certificate of Incorporation, Memorandum of Association, Articles of Association, investment warning, written description of investment strategy or an offering document, and an application fee.
Abide By Ongoing Requirements
Ongoing requirements including paying an annual fee before the 31 of March each year. You are also required to have at least two directors at all times, one of which must be an individual. Should there be any changes to the information that you submitted to the Commission upon application, you need to update them immediately. You are also required to file annual financial statements and bi-annual returns but you don’t need to have them independently audited. If this sounds like a bit of a headache, don’t worry because Fast Offshore can help you there as well!
Contact Fast Offshore
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.
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