The British Virgin Islands evolve trust and fund offering to attract investors

A worldwide favourite when it comes to international finance centre funds, the British Virgin Islands (BVI) continue to grow and create new, more accessible ways to establish a fund at a reasonable cost.

Two new products offered by the BVI Financial Services Commission (FSC) are aimed at the start-up and family office markets.

Who uses this type of fund?

Given the relative simplicity and accessibility of the BVI, the market has long been favoured by family offices, groups of friends or family investors who wish to pool investments in more cost efficient ways. It’s also been a go-to market for start-up managers wanting to develop a track record at a reasonable cost. It is predominately for these target groups that the new light-touch regulation funds products have been introduced; however, they also offer the established investment manager with a low cost alternative to more traditional structures.

How it works: Incubator Fund

This is a start-up fund product with easy set-up, and a cost-efficient solution for implementing an investment strategy with low up-front costs and limited ongoing obligations.

 Maximum of 20 investors, each of whom must invest a minimum initial amount of US$20,000

 Fund cannot exceed the cap of US$20 million in relation to the aggregate net asset value of its investments

 For as long as it stays within the “20-20-20” criteria above, the Incubator Fund can operate for a period of two years - which can be extended by one additional year- before it needs to either convert to a more sophisticated product, a private or professional fund, or wind up its operations

 No requirements to appoint functionaries (e.g. administrator, custodian or manager) or to have an auditor

 No requirement for an offering memorandum

 Fast approval process – can commence two business days following receipt of the application by the FSC.

How it works: Approved Fund

This fund structure is subject to less regulation, has no requirement for an auditor, has lower ongoing costs and targets the family office / friends and family market.

 Maximum of 20 investors with no minimum initial investment thresholds

 Maximum cap of US$100 million in relation to the aggregate net asset value of the fund’s investments

 No maximum period of operation - however if it exceeds its number of investors or maximum cap on aggregate investors for a period of more than two consecutive months and has no plans to remedy this breach within seven days, it needs to either convert to a more sophisticated product or wind up its operations

 Must appoint an administrator, but is not required to have a custodian, manager or an auditor

 No requirement for an offering memorandum
 Fast approval process – can commence two business days following receipt of the application by the FSC.

What are the ongoing obligations?

There are limited ongoing obligations involved for Incubator Funds and Approved Funds.

 Each fund must submit unaudited financial statements on an annual basis to the FSC.

 Returns must also be submitted either annually (Approved Funds, by 31 January) or semi-annually (Incubator Funds, by 31 January and 31 July) summarising the fund’s status – that is, the number of investors, total investments, aggregate subscriptions and redemptions, NAV and details of any significant investor complaints. The directors or general partner will also need to confirm that the relevant fund is not in breach of the New Fund Regulations.

 Both the Incubator Fund and the Approved Fund are required to appoint an Authorised Representative.

 Similar to other BVI funds, both the Incubator Fund and the Approved Fund must have at least two directors. If the fund is a corporate entity then one director must be an individual.

 The fund needs to notify the FSC within 14 days of any changes to the information provided in the approval application or in relation to any matter which is likely to have a material impact on the fund.

Why use TMF Group?

Our BVI team has been leading the field since 1988, and were a pioneer in the local financial services industry. Our qualified, knowledgeable staff have many years’ international experience in the international finance centres industry, and our operations are regulated and licensed by the Financial Services Commission.

We can provide legal, compliance, trust and estate planning, accounting, mutual fund, company management and company administration support for complex structures or family operations.

In short, we build trusted, long-term relationships with our clients and their advisors; experience, expertise, integrity, discipline and prudence underpin our success. Our knowledge, skills, experience and dedication to excellence provide clients with the comfort that they are partnering with a global leader in quality and service.

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