Offshore mutual funds
The British Virgin Islands is one of the leading mutual fund domiciles. Approximately 2,800 funds are registered or recognized under the Securities and Investment Business Act, 2010 (SIBA) with an estimated total of USD 100 billion worth of assets under management.
In May 2010 SIBA replaced the Mutual Funds Act, 1996 (the MFA) and has been welcomed by the industry due to the fact that SIBA has retained the well-established framework of public, professional and private funds established by the MFA but has updated the regime to bring it in line with best practice and international standards. Funds recognised or registered under SIBA are regulated by the Financial Services Commission (the Commission), the financial services regulator in the BVI.
The BVI is a well regulated jurisdiction with a proven track record and is a widely preferred and recognised choice for the incorporation of Mutual Funds. The BVI was amongst the first jurisdictions to implement specific anti-money laundering legislation in 1996 which has resulted in the BVI possessing some of the highest standards of KYC due diligence but within realistic and practical codes of conduct.
There are a number of major benefits to a BVI Offshore Mutual Fund, some of which are summarised below:
Benefits of a BVI Offshore Mutual Fund:
- Flexible regulation ensures ease of establishment and administration of the fund
- Relatively low formation and operating costs compared to other jurisdictions
- Wide choice of fund structure
- Fund assets can be anywhere in the world
- No restrictions on investors
- No requirement to appoint local directors, functionaries or auditors. Also there is no obligation of BVI residency of the key fund functionaries
- No substantial back office operation required
- Legal system based on English Common Law
- Exemplary legal and professional advisors resident in the BVI to assist where necessary
- BVI Funds are recognised and are capable of being listed on exchanges including NYSE, TSE, Dublin, Singapore, Luxembourg and Bermuda.
- The Local Currency is the USD and there are no exchange controls
- The BVI is a British Dependent Territory and is politically stable\
Sponsors and Fund Managers considering the establishment of an investment fund in the BVI may choose from the following range of vehicles:
- BVI Business Company
- Limited Partnership
- Unit Trust
The vast majority of British Virgin Islands investment funds are established as companies limited by shares under the BVI Companies Act, 2004 or as limited partnerships formed under the Partnership Act, 1996.
Categories of Fund:
There are three categories of mutual funds:
The Private Fund
A Private Fund is defined in SIBA as a mutual fund with the following:
- No more than 50 investors
- The making of an invitation to subscribe for, or purchase fund interests issued by the mutual fund, is to be made on a private basis only.
The Professional Fund
- Fund interests shall only be issued to professional investors
- The initial investment by each investor in the fund is not less than 100,000 USD.
The Public Fund
- Offers investment to the general public
Functionaries / Service Providers:
Under SIBA a fund applying to be recognised or registered must appoint the following functionaries:
- Investment Manager
Private or Professional funds may apply for an exemption to appoint an investment manager, a custodian or an auditor in certain circumstances, for example where the fund only has a very small number of investors.
An application for recognition or registration of a fund whose functionaries are domiciled in a Recognised Jurisdiction will usually be processed by the FSC without the need to assess the fit and proper status of the functionaries. The following countries have been designated by the FSC as “Recognised Jurisdictions”:
Argentina, Australia, Bahamas, Belgium, Bermuda, Brazil, Canada, Cayman Islands, Chile, China, Denmark, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hong Kong, Ireland, Isle of Man, Italy, Japan, Jersey, Luxembourg, Malta, Mexico, Netherlands, Netherlands Antilles, New Zealand, Norway, Panama, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, United Kingdom and the USA.
The FSC may, upon application, accept functionaries domiciled in jurisdictions that are not
Recognised jurisdictions if satisfied that the jurisdiction effectively regulates fund business.
On-going Requirements for Funds under SIBA:
Under SIBA Private and Professional Funds have certain continuing obligations some of which are listed below:
- A Fund must have at least two directors, one of whom must be an individual
- A Fund must file a copy of its offering document with the FSC which must contain a prescribed investment warning
- A Fund must have an Auditor at all times (the FSC may exempt certain funds from this requirement upon application). Audited Financial Statements for each financial year must be filed with the FSC within 6 months of the relevant year end.
- All Funds must appoint an authorised representative in the British Virgin Islands. This entity acts as a liaison between the Fund and the FSC.
- Notifying the FSC of any changes within 14 days to directors, amendment of constitutional documents or offering document or a change of address of the Funds place of business.
- Notifying the FSC at least 7 days prior to appointing a new Functionary.
Additionally Funds registered as Public Funds must comply with certain other requirements covering their operations as detailed in SIBA, the MFR and the PFC.
Summary of Requirements for a Private, Professional and Public Fund:
|Criteria||Restriction of maximum number of investors to 50.
All invitations to subscribe for the fund shares shall be made on a private basis.
These requirements must be specified in the constitutional documents of the fund.
|Shares are made available only to professional investors.
The initial investment is not less than 100,000 USD or equivalent.
|Offers investment in shares to the general public.|
|Functionaries||All mutual funds must have the following: ·
All must satisfy the Commissions fit and proper criteria.
The FSC requires that functionaries of Public Funds be independent of each other. The FSC may exempt certain
|Financial Statement Requirements:||Financial Statements for each financial year must be prepared and comply with IFRS, US, UK or Canadian GAAP.
All Mutual Funds are required to submit an annual return to the FSC containing summary prudential and governance information.
|Audit Requirement:||Financial Statements must be audited by an auditor meeting certain criteria unless the fund is exempted from the audit requirement by the FSC (no local sign off).||Financial statements must be audited by an auditor approved by the FCS (no local sign off)|
|Regulatory Approval Time:||5 business days from submission of complete application||3 weeks from submission of complete application|
|Approximate overall establishment time:||3 weeks||10 – 15 weeks|
|Cost of Regulatory Fees:||USD 1,000.00 per annum||USD 1,500.00 per annum|
|Approximate cost of fund establishment*:||From USD 14,000||From USD 25,000|
*an individual quotation will be provided upon request.
How Eltoma Corporate Services can assist:
Eltoma Corporate Services can offer comprehensive turnkey solutions for the establishment of a BVI Mutual Fund and for licensing of a BVI Fund Manager.
We provide a complete set of services necessary in order to register, license and launch a BVI Mutual
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