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Creation of open-ended funds in the BVI. Service offer

The primary legislation in the BVI which regulates the investment funds industry is the Securities and Investment Business Act, 2010 (“SIBA”). SIBA regulates both funds and fund functionaries operating in or from the territory of the BVI. SIBA came into effect on the 17th of May 2010 and along with the accompanying Mutual Funds Regulations, 2010 replaced the Mutual Funds Act, 1996.

Under SIBA, the term “mutual fund” or “fund” is defined as a company incorporated, a partnership formed, a unit trust organized or other similar body formed or organized under the laws of the BVI or of any other country or jurisdiction which:

collects and pools investor funds for the purpose of collective investment; and

issues fund interests that entitle the holder to receive on demand or within a specified period after demand an amount computed by reference to the value of a proportionate interest in the whole or in a part of the net assets of the company, the partnership, the unit trust or other similar body, as the case may be.

SIBA only regulates:

  • open-ended funds (whose equity interests are redeemable at the option of the investor), and
  • administrators, managers and custodians of such open-ended funds.
SIBA does not regulate closed-end funds.

Types of funds regulated under SIBA:

1. Private fund – this is a fund whose constitutional documents specify that it will have no more than 50 investors or that the making of an invitation to subscribe for or purchase shares is made on a private basis.

2. Professional fund – this is a fund in which shares are only made available to professional investors and the initial investment by all of the investors (excluding exempted investors) is not less than USD 100,000 (or equivalent). Exempted investors include the manager, administrator, promoter or underwriter of the fund; or any employee of the manager of the fund.

3. Public fund – this is a fund that is neither a private fund nor a professional fund. All private and professional funds must be recognized under SIBA, whilst all public funds must be registered under the SIBA.

Private or professional funds are generally easier to register and obtain licenses for in the BVI, whilst public funds, given their offering of investments to the non-institutional, general public, are generally more scrutinized and have stiffer regulatory and legal requirements than private or professional funds.

Although it is anticipated that the number of investors at some point may exceed 50, it may be an option to first become licensed as a private fund and then subsequently change fund categorization as required.

Also in one of the Policy Guidelines, it is stated, in particular, that "the making of invitations to as many as 300 persons might be considered an offering on a "private basis" if it can be demonstrated that the person made the invitations to specified persons and had no deliberate intention of making invitations to other persons.

The making of invitations to a significantly greater number of persons than 300 would cast doubt upon compliance with the spirit of "private basis" which is embodied in the Act, on the grounds that a large number of persons is not consistent with what is commonly understood to be "private".

New Opportunities – Incubator Fund and Approved Fund

The Securities and Investment Business (Incubator and Approved Funds) Regulations 2015 that came into force on 1 June 2015 has introduced two lightly regulated funds products - Incubator and Approved Funds.

4. Incubator Fund is a fund whose constitutional documents provide for a maximum of 20 investors, with initial investment of at least USD 20,000 by each investor, and whose NAV cannot exceed USD 20 000 000.

Such funds are not required to appoint administrator, custodian, manager or auditor, which helps keep fund setup and administration costs to a minimum and makes Incubator Funds a good instrument for start-ups.

However, an Incubator Fund can only continue for 2 years (extended to 3 years on approval from the FSC), following which the fund must either file for voluntary liquidation or convert into an approved, professional or private fund. To form an Incubator Fund, it is necessary to submit to the FSC a detailed description of the fund’s investment strategy and a written warning to investors of the risks associated with investment business.

5. Approved Fund is a fund whose constitutional documents provide for a maximum of 20 investors, and whose NAV cannot exceed USD 100 000 000. An Approved Fund is not required to appoint custodian, auditor or manager, but must have an administrator.

Documents to be filed with the FSC for the formation of such fund are similar to those for an Incubator Fund.

FEES*

*The fees are valid as of January 2022 and may be changed without prior notice.

PRIVATE INVESTMENT FUNDS

Service
Fee
Formation (including drafting of non-standard articles reflecting the specific activity of the fund)
from 5000 USD (if the authorized number of shares is less than 50 000), or from 5450 USD (if the authorized number of shares is more than 50 000)
Fee for review of an Application + Initial Recognition fee
1700 USD
Authorized representative in the BVI
2 800 USD (plus fees for the time spent on the negotiation with FSC during the next year if such necessity arises)
Legal fees for the preparation of all legal documents required for obtaining of the fund license
from 27 500 USD
Annual renewal
from 2300 USD (if the authorized number of shares is less than 50 000), or from 3500 USD (if the authorized number of shares is more than 50 000)
Annual Recognition fee
1000 USD

INCUBATOR/APPROVED FUNDS

Service
Fee
Formation (including drafting of non-standard articles reflecting the specific activity of the fund)
from 5000 USD (if the authorized number of shares is less than 50 000), or from 5450 USD (if the authorized number of shares is more than 50 000)
Fee for review of an Application + Initial license fee
2500 USD
Authorized representative in the BVI
2 800 USD (plus fees for the time spent on the negotiation with FSC during the next year if such necessity arises)
Legal fees for the preparation of all legal documents required for obtaining of the fund license
from 17 000 USD

FUND MANAGERS

Obtaining of a license in the BVI (except Approved Investment Manager application)

Service
Fee
Formation (including drafting of non-standard articles reflecting the specific activity of the IM)
from 5000 USD (if the authorized number of shares is less than 50 000), or from 5450 USD (if the authorized number of shares is more than 50 000)
Initial license fee
2500 USD
Authorized representative in the BVI
2 800 USD (plus fees for the time spent on the negotiation with FSC during the next year if such necessity arises)
Legal fees for the preparation of all legal documents required for obtaining of investment management license
from 25 500 USD
Annual renewal
from 2300 USD (if the authorized number of shares is less than 50 000), or from 3500 USD (if the authorized number of shares is more than 50 000)

FUND ADMINISTRATOR (OUTSORCED)

Service
Fee
Annual fees
USD 0-30m – from 0.15% of net asset value; USD 30-50m – from 0.12 % of net asset value; over USD 50m – from 0.01 % of net asset value
Annual minimum fee per portfolio
from 15 000 USD

CUSTODIAN (OUTSORCED)

Service
Fee
Annual fees
From 0.20% of the value of the Fund
NOTE! This offer does not cover tax issues of the operational company, investors or investment manager. If you require such tax advice, we would need to receive terms of reference with detailed description of the proposed operational structure, as well as the geography of business.
Are you interested in the offer?
32350 USD
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