Incubator funds are geared towards emerging managers and start-ups 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.
They are a great way to start a verifiable track record and to demonstrate fund managers capabilities going forward. It also serves as a good way to attract meaningful capital sums in the future. If structured properly, an incubator fund can provide a wealth of opportunities for hedge fund managers.
When we incubate something, we keep it safe and in a suitable environment for a period of time which allows it to grow. This means creating a fund with structured conditions that allow the development of investment strategies over time.
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, you need to present an audit to the Commission indicating its current financial standing and as well as compliance with BVI regulation. Alternatively, it can wind up its operations and cease to exist as an entity altogether.
Benefits of BVI Incubator Funds
- High level of corporate governance combined with a flexible corporate statute
- A ‘lighter-touch’ regulatory regime that is more welcoming to venture capital managers and private equity managers
- Suitable for smaller fund managers and those looking to build a track record
- A robust and efficient commercial court
- Competitive incorporation and running fees
- No need for a custodian
- No need for an offering document, only investor warnings, and investment strategy information
- Legislation in line with EU legislation
“A BVI incubator fund was the obvious choice. I wanted to start small and prove my track record but without having to jump through hoops and lots of red tape. The BVI set-up process was fast and cost-effective and I was up and running in just over two days!”
BVI Incubator Fund Requirements
Incubator funds have limited functionary requirements, especially when compared to other jurisdiction. This means it doesn’t have to have a manager, administrator, custodian or auditor and it does not need to provide an operating memorandum. Instead, a description of the investment strategy and appropriate warnings to investors are all that is required.
BVI Incubator Funds must have a minimum of two directors at all times. One must be a person, the second can be a person or a corporate structure. To be approved as a Director, they are required to submit their resume to the Commission to check suitability and compliance with standards.
Required Documentation to set up Incubator Funds in BVI
- Constitutional documents of the fund
- Written warnings to investors
- A description of the 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 Incubator 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
There is no requirement to have an audit of the BVI incubator fund, as long as the entity meets and obliges by certain conditions. These include having a maximum of 20 investors each with a minimum investment of $20,000 and a market cap of $20 million for the total value of the fund.
The fund must prepare and submit annual financial statements. Additionally, submit semi-annual returns to the Commission regarding its eligibility to retain its fund class.
Application Process Time Frame
The entire process takes approximately two days from start to finish once the application has been lodged with the BVI Financial Services Commission. 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.
Contact Fast Offshore
For over 22 years, Fast Offshore has 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 can advise clients on what is the best kind of fund for them, manage the entire application process, ensure that the documentation is correct, 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!
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