British Virgin Islands Funds Group
The British Virgin Islands is the second largest offshore jurisdiction for hedge fund formation. With the enactment of the Securities and Investment Business Act in 2010, the British Virgin Islands offers a solid legal platform for fund formation, at the forefront of international expectations for effective regulation both of hedge funds and entities carrying on investment business. With an English-based legal system and the benefit of a fast track court for commercial disputes, the British Virgin Islands is a natural jurisdiction for hedge fund formation at low cost.
Open-ended funds can be created as either companies, partnerships or unit trusts and are required to be recognised or registered by the British Virgin Islands Financial Services Commission as Private Funds, Professional Funds or Public Funds. Our British Virgin Islands Funds Group provides first-class advice on all types of fund structuring options, with members of the team sitting on various regulatory and industry advisory committees in the funds sector.
Our British Virgin Islands Funds Group, which is one of the longest established dedicated funds practices in the territory, services various household names and continues to advise on a significant percentage of new fund registrations. In addition to fund formation and registration, we advise on the several different licensing options available for fund managers, advisors, administrators and other entities that are involved in investment business and that wish to be licensed in the British Virgin Islands.
Setting up a hedge fund in the British Virgin Islands offers ...
...a number of advantages:
- Speed and simplicity of establishing British Virgin Islands entities
- Relatively low cost of doing so, particularly in the context of typical transaction sizes and government fees
- Flexible and practical business statutes
- British Virgin Islands insolvency law is simple and effective, and hence of great appeal to lenders
- Robust and healthy compliance culture
- English-based legal system, established judiciary and absence of political or sovereign concerns
- Professional infrastructure and reputation. The British Virgin Islands is well known for its established and experienced financial services sector and substantial capacity
- Compliance with international anti-money laundering, anti-terrorist financing and other financial regulatory standards
- Significant number of international tax information exchange agreements and OECD ‘white list’ status
- Tax and exchange control neutrality
- Service providers to the fund (investment managers, advisers, brokers, administrator, auditors etc.) may usually be located anywhere in the world
- No local audit or sign off requirment
There are three main fund structures:
Business Companies. Business companies are usually incorporated with limited liability, with open‑ended investment companies issuing redeemable shares. The limited liability company is widely used for hedge funds.
International Limited Partnerships. The international limited partnership concept is typically used in closed‑ended structures and for master funds in master/feeder structures.
Unit trusts. The unit trust is also used in the British Virgin Islands and essentially follows English trust law whereby unit trusts are established under a trust deed giving unit holders undivided beneficial interests in the trust property. Unit trusts are often used (in place of companies) for investors in jurisdictions where participation in a unit trust is more acceptable or attractive than shares in a company.
Types of funds include:
Private Funds. A private fund may have no more than fifty investors or must be offered on a private basis only and is therefore ideal for family office and other smaller fund structures. A private fund is, however, still classed as a mutual fund and therefore benefits from being certified as a recognised mutual fund by the British Virgin Islands Financial Services Commission.
Professional Funds. Professional funds make up the majority of open-ended funds in the British Virgin Islands and are aimed at typical professional investors or investors who are high net worth investors. Typically the minimum initial investment requirement for an investor in a professional fund is US$100,000.
Public Funds. Public funds have no minimum investment criteria, but are subject to more extensive regulation than private or professional funds, as they are not only subject to regulation under the Securities and Investment Business Act, but also the British Virgin Islands Public Funds Code. This mixture of accessibility for smaller investors, but with the benefit of more extensive regulation and oversight, makes public funds an ideal investment vehicle for retail investors.
Clients gain an undeniable advantage from our strength in depth of experience in British Virgin Islands investment funds law. We provide cutting edge advice from our offices around the globe that is clear, consistent and delivered promptly to meet client needs.