REGISTRATION OF THE INVESTMENT FUND ON THE BRITISH VIRGIN ISLANDS (BVI)
Offshore jurisdictions are still attracting the attention of owners of different types of business with their loyal attitude to tax issues and almost complete lack of regulation.
Nevertheless, in the world of finance the British Virgin Islands (BVI) is one of the most popular jurisdictions for the registration of investment funds. In this article, we will review the main types of funds, as well as the advantages and disadvantages of each.
Without doubts with a question of choosing a jurisdiction for the establishing a fund it is better to apply to experienced professionals for legal assistance.
According to the BVI legislation that regulates the process of registration and licensing of funds, four main types of funds can be distinguished:
1) BVI Incubator Fund, for which no administrator, investment manager, prime broker/depositary or auditor is required. For an incubation fund, the number of investors is limited (no more than twenty, which must be qualified), and the maximum amount of assets that may be in the management of the fund should not exceed 20,000,000 USD. The term of the license cannot exceed two years, while the license can be renewed for a maximum of 12 months.
2) BVI Approved Fund. This type of fund also does not require an investment manager, prime broker/depositary or auditor, but there is a requirement for the availability of a licensed administrator. Investors do not necessarily need to be qualified, but their total amount should not exceed twenty, and the total amount of assets that the fund can manage should not exceed 100,000,000 USD.
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3) BVI professional fund can manage an unlimited amount of assets, for this type of fund there are no restrictions on the amount of investors. However, such a fund should appoint an investment manager (except for the cases of obtaining exemption), prime broker/depositary, as well as auditor and administrator. The minimum investment size should be at least USD 100,000. In addition, investors must sign declarations confirming their qualifications as “professional investors” (that their net annual income is 1 000 000 USD or more).
4) A private fund can manage an unlimited amount of assets, there are no requirements for a minimum subscription size (minimal investment), but as well as in a professional fund, it is required to appoint an investment manager (except for the cases of getting a release); prime broker/depositary, as well as auditor and administrator. For a private fund, the following restrictions are provided: the total number of shareholders cannot exceed 50 or the number of invitations to investors who are invited to invest in the fund cannot exceed three hundred. In this case, the directors of the fund will have to confirm that such invitations were made exclusively in private order.
ORGANIZATIONAL AND LEGAL FORM OF THE PRIVATE AND PROFESSIONAL BVI FUND
The most common fund in the BVI is a professional fund, which can count an unlimited number of investors and enjoy a special exemption from authorization, i.e. the fund may start its activity before the permission from the BVI Financial Services Regulatory Commission (hereinafter the Commission) is received, provided that the application for authorization is submitted to the Commission within 14 days fromstart of its activity.
The fund can be registered in the form of a company, partnership or unit trust. The general requirement is the presence of a minimum of two directors, who must be individuals. At the same time, there are no requirements for the residency of directors, which meaning that a resident of any statecan becomea director of the fund, with the exception of those with which the BWO does not cooperate, for example, countries from the FATF list.
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Usually the fund issues two types of shares: voting, preferred shares, that do not entitle to a share of profits, but presuppose the receipt of fixed dividends (voting, non-participating share class), and non-voting, participating (participating class). Voting shares are issued in the name of the investment manager to ensure control over shareholders, which also impliesthe appointment of directors, payment of dividends (if applicable), voluntary liquidation. Non-voting shares are issued to investors and participate in the company’s assets upon redemption, distribution (if applicable) or liquidation.
It should also be noted that when organizing a fund for the BVI there is no need to open a physical office, it will be sufficient to appoint an official representative who will act as an intermediary in the communication between the fund and the BVI Financial Services Regulatory Commission and will be authorized to receive documents and notifications on behalf of the fund.
The fund must submit financial statements to the Commission annually not later than 6 months from the end of the fiscal year. Tax reporting is filed annually by January 31 of each year.
In addition, the fund is obliged to notify the Commission about any changes in the structure of directors, shareholders, etc. within 14 days.
FEATURES OF THE AUTHORIZED FUND AND INCUBATOR FUND
The main advantage of the incubator fund is a significant savings on its organization and maintenance, since, unlike private or professional funds, there are no requirements for appointing an auditor and administrator. A possible disadvantage of the fund is the restriction on the number of investors, which must be no more than twenty, and the minimum investment for each investor should be 20,000 USD.
Another drawback of this type of fund is its limited duration. As mentioned above, the incubator fund can operate for no more than three years (subject to the extension of the permit after two years). At the end of this period, the incubator fund must either be transformed into an authorized fund, a private or professional fund, or cease its activities.
As for the authorized fund, the term of its activity is not limited, but there is requirement to appoint an administrator, and it is limited to twenty investors and the total assets of the fund should not exceed 100,000,000 USD. Nevertheless, an authorized fund represents a savings compared to private and professional funds, since it does not require an auditor and an easier closing procedure is provided for the authorized fund.
Both an authorized fund and an incubator fund can be transformed into a private or professional fund after exceeding the established limits on assets. For these types of funds, it is also not necessary to draw up a proposal for the placement of securities, and in the event of its absence, a written investment warning must be sent to each investor.
In addition, there are no requirements for the filing of tax reports for the incubator fund and the authorized fund. Nevertheless, they are required to maintain and submit unaudited financial statements. Such funds are required only to notify the Commission about the changes that occur in the structure of the fund itself.
Just like private and professional funds, authorized funds and incubator funds should appoint a local representative to the BVI.
FEES AND TERMS OF ESTABLISHING A FUND ON THE BVI
The terms of registration of the fund in the BVI can vary quite a lot depending on many factors. On average, the procedure can take from 3 to 10 months.
If you want to establish a fund on BVI, please feel free to contact our specialists via phone numbers, listed on a web-page, or send a request on email@example.com
Our specialists consider each request individually and will be able to provide qualified advice on your individual requests.
We will offer you a large selection of countries where we have experience: Bahamas, Cayman Islands, British Virgin Islands, Jersey, Malta, Luxembourg.
For over five years we have been consulting our clients, CIS residents, in the field of corporate law, international tax planning, finance, international licensing and integrated business support in more than 40 countries.
Call us on +38 (044) 379-30-62
Write us info@sb-sb-com