British Virgin Islands Fund Formation

British Virgin Islands Funds Structures

The British Virgin Islands (BVI) provide a variety of options for establishing and structuring investment funds. Business companies are the most popular option, however, limited partnerships and unit trusts are also viable alternatives for managers. All of these structures offer a range of benefits, including tax advantages, legal flexibility and simpler setup processes.

The British Virgin Island’s law includes provisions for Segregated Portfolio Companies (SPC). This type of company allows distinct portfolios of assets and liabilities to be legally divided and separated from one another. Each portfolio will not be affected by the assets and liabilities of other portfolios, allowing for a greater level of control and flexibility for the company.

Regulation

The BVI Financial Services Commission (the FSC) is the local regulator.

The British Virgin Islands (BVI) is one of the world’s leading jurisdictions for investment funds due to its flexible regulatory environment, cost-efficiency, and tax neutrality. BVI funds are categorized into various types, including private and professional funds, approved and incubator funds, and private investment funds. The distinction between these fund types primarily revolves around investor eligibility, regulatory requirements, and redemption rights.

Categories of BVI Funds

BVI Incubator Fund
Designed for start-up managers testing their investment strategies, an incubator fund has minimal regulatory requirements. Key features include:

• No need for an administrator, investment manager, prime broker, or auditor.
• Restricted to a maximum of 20 investors.
• Total assets must not exceed US$20 million.
• Only sophisticated investors may participate.
• Limited licensing period of two years, with an optional 12-month extension.

BVI Approved Fund
This fund offers a more permanent but still lightly regulated option, with the following characteristics:

• Requires an administrator but no investment manager, prime broker, or auditor.
• Restricted to a maximum of 20 investors.
• Total assets must not exceed US$100 million.
• Can operate indefinitely.

BVI Private Investment Fund (Closed-Ended Fund)
A closed-ended fund, meaning investors cannot redeem their shares on demand. Key attributes include:

• • Requires an auditor but no administrator, investment manager, or prime broker.
  • Must adhere to one of the following criteria:
    • Limited to 50 investors, or
    • Each investor must invest at least US$100,000 and qualify as a professional investor.
  • An appointed person must be designated for management, valuation, and safekeeping of fund property.

BVI Professional Fund
The most common BVI fund type, designed for professional investors and institutions, offering greater flexibility:

• • • No limits on the number of investors or assets under management.
    • Must appoint an investment manager, custodian, auditor, and administrator.
    • Minimum investment of US$100,000 per investor (except for exempted parties such as fund managers and employees).
    • May commence operations immediately upon filing for recognition, provided an application is submitted to the BVI Financial Services Commission (BVI FSC) within 14 days of launch.

BVI Private Fund
A versatile fund with private placement restrictions:

• No limit on assets under management.
• No minimum subscription amount.
• Requires an investment manager, custodian, auditor, and administrator.
• Must either:
  • Be limited to 50 investors, or
  • Make no more than 300 investor invitations.

Formation Process & Regulatory Requirements

Fund Structuring
BVI funds can be established as:

• Companies (typically with two share classes: voting, non-participating shares for fund control, and non-voting, participating shares for investors).
• Limited partnerships.
• Unit trusts.

Service Providers & Compliance

• Investment Manager: Required for professional and private funds.
• Fund Administrator: Required for professional and approved funds.
• Auditor: Required for professional and private investment funds.
• Authorized Representative: Acts as an intermediary with the BVI FSC.
• Money Laundering Reporting Officer (MLRO): Compliance function required for all funds.