Investment fund in BVI: key aspects to get the license

Many investors choose the BVI (British Virgin Islands) to register an investment fund. The BVI strategy is focused on providing high level professional services rather than simply providing traditional offshore services. The BVI benefits enormously from the professional community of accountants, lawyers, auditors etc., yet still maintains relatively light legislation for typical closed-end hedge funds and other types of private collective investment vehicles. Below we will look at the main aspects that relate to the establishment and licensing of fund structures in the BVI and what professional assistance may be needed in this regard.

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Significance of Investment Funds in Financial Markets and Regulatory Environment in BVI

The BVI is in 2nd place in the world in terms of the number of investment funds created. Most BVI investment funds are established as public limited companies under the Business Companies Act 2004. Limited liability partnerships and unit trusts are created quite rarely. Funds may be structured as single-class funds, multiple-class (umbrella) funds, saving funds, or an investment fund of assets.

The new BVI stock products are more lightweight in nature; this was done to attract new investors. However, despite this, the fund has a number of ongoing obligations, which include that funds must pay an annual fee, and any changes to the information provided at the time of confirmation of the application. According to the Investment Business Act, any matter that may have a material impact on the fund must be reported to the BVI Financial Services Commission within 14 days.

Unlike many other countries, the investment policy of funds in the BVI itself is practically unregulated. Thanks to this, the fund can freely invest raised funds in both long-term and short-term assets, as well as in derivatives of the securities market (futures, options, etc.). This increases the potential return on investment, but, accordingly, the associated potential risks.

A mutual asset management fund can be public, private or professional. A public fund can offer its shares to an unlimited number of investors. Accordingly, it is subject to more stringent requirements than other types of funds.

1. The registration procedure is more complicated.
2. A detailed prospectus must be prepared that complies with island law. (False information in the prospectus is punishable.)
3. The financial statements of a public fund are audited annually.

A private fund is a fund where the number of investors is limited to fifty, or whose shares are offered on a private basis (i.e. to a certain circle of people). A professional fund is a fund whose shares are offered only to professional investors, with an initial contribution of at least 100 thousand dollars. Professional investors are understood as either persons who invest in similar assets professionally, or simply fairly wealthy individuals (capital of at least 1 million. dollars) who agreed to be considered professionals.

Main characteristics of both types of funds are next-mentioned.

1. Fast registration allows the fund to begin operating within two days of filing an application with the British Virgin Islands Financial Services Commission (“FSC”).
2. Light regulation and limited ongoing liabilities.
3. The prospectus may be in the form of a short list.
4. There are no audit requirements.

The incubator fund is intended for start-up fund managers seeking to get started, test their capabilities and achieve results during an incubation period of up to three years, at minimal cost and without the requirement of any official (i.e. administrator, manager, trustee). After the end of the incubation period, the fund may convert to a private, professional or qualified fund, or become an unregulated closed-end fund.

Operational Considerations, Documentation and Compliance Requirements

To register a fund in the BVI, individuals will need the following documentation:

• completed application indicating details of the preferred name of the foundation, description of activities, information about the founders of the organization (citizenship, country of residence, address, profession, etc.);
• notarized copy of a passport or other acceptable Identification Document (photo and signature page);
• know your customer (KYC) mechanisms;
• proof of residential address (utility bills). Notarized copy of a utility bill or bank/credit card statement to confirm your residential address;
• anti-money laundering (AML) policies;
• certificate from a bank that has known the client for more than 1 year;
• resume of the bank founder and all additional information requested by departments.

Main criteria for initiating licensing process is next-mentioned.

1. Up to 20 experienced private investors.
2. Minimum initial investment is $20,000 USA.
3. Net assets must not exceed $20,000,000 USA.

Registering and licensing a private or professional fund in the BVI is usually easier, while public funds, due to the fact that they offer their shares to the general public rather than institutional investors, tend to be subject to more scrutiny and stricter regulatory and legal requirements than private or professional funds.

The investment manager, administrator and custodian will need to obtain investment fund license in next-mentioned categories:

• Category 3 investment management, subcategory B: management of investment funds;
• Category 6 investment administration, subcategory B: investment administration (investment funds);
• Category 5, subcategory B: safekeeping of investments (investment funds), respectively.

An approved fund must meet a number of requirements:

• the presence of two permanently appointed directors, one of whom must be an individual;
• appointed authorized representative who is Financial Services Commission (FSC) certified;
• mandatory notification to FSC of any matter that has or may have a significant impact on the approved manager or his/her business;
• submit financial statements that do not require an audit to the FSC within six months of the end of the financial year and, in addition, submit the annual report (and renewal fee) by 31 January of each year.

So, an incubator fund is convenient for startups and can serve as a good springboard for accumulating investment experience and opening new projects. A permitted fund is designed to operate on a long-term basis and is aimed at small and closely related groups of investors, such as partnerships and families. In any case, this is a fairly profitable and promising niche that demonstrates constant and continuous growth.

Our team is ready to provide interested entrepreneurs with reliable advisory and practical assistance in establishing and licensing funds in the BVI. We work for your commercial benefit and the fastest possible profit. Contact us today and ensure a productive tomorrow.