Offering Legal, Tax, Business & Banking Services to Hedge Funds & Fund Managers Worldwide
BVI Private Funds
Why the British Virgin Islands? The British Virgin Islands (BVI) is an attractive and affordable country for hedge funds. The BVI is a zero tax country and has no capital gains or capital transfer taxes, no inheritance tax, and no sales tax or VAT. BVI is committed to remaining fully compliant with international financial regulatory norms and regulations. There are no regulatory restrictions on investment policies or strategies and there is no requirement to appoint local directors, administrators or auditors. It boasts a full range of professional service providers and very low start-up and ongoing fees and costs.The British Virgin Islands (BVI) is one of the best countries in the world to set up a hedge fund and a licensed investment management business. Presently, it offers start up fund managers more fund options than any other country. In the BVI regulated funds are categorized as either Incubator Funds, Approved Funds, Private Funds, Professional Funds, or Public Funds. Another option also exists in the BVI--the Closed-Ended Company
BVI Private Funds Private Funds must have no more than 50 investors or only make invitations to subscribe for or purchase fund interests on a private basis. "Private basis" means that the making of an invitation to subscribe for interests is made (i) to specified persons (however described) and is not calculated to result in shares becoming available to other persons or to a large number of investors, or (ii) by reason of a private or business connection between the person making the invitation and the investor. BVI guidelines suggest that the making of invitations to as many as 300 persons might be considered as 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 guidelines also suggest that 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 law on the grounds that a large number of persons is not consistent with what is commonly understood to be “private”.
BVI Private Fund Advantages Unlike BVI Professional Funds there are no minimum investment or investor suitability requirements for BVI Private Funds. The best part about the BVI is that your hedge fund's service providers (i.e., investment managers, advisers, brokers, administrator, auditors etc.) maybe located anywhere in the world. There is no local audit or sign off requirement in the BVI. Creating BVI a hedge fund business can be done quickly and readily. BVI government fees are low. BVI has a strong and reputable compliance culture, professional infrastructure and reputation. BVI has an English-based legal system and an established judiciary that has pro-business reputation similar to that of Delaware in the United States. Contact Us for Assistance
BVI Fund Structure Sponsors and fund managers considering a BVI fund may choose to structure the fund as one of the following: a BVI business company, a limited partnership or a unit trust. The majority of BVI investment funds are established as companies limited by shares under the Business Companies Act (2004). Limited partnerships are also a common form of investment fund, while unit trusts are relatively rare. Business companies are usually incorporated with limited liability, with open-ended investment companies issuing redeemable shares. The limited liability company is widely used for hedge funds. The unit trust is also used in the British Virgin Islands and essentially follows English trust law whereby unit trusts are established under a trust deed giving unit holders undivided beneficial interests in the trust property. Unit trusts are often used, in place of companies, for investors in jurisdictions where participation in a unit trust is more acceptable or attractive. All assets of a trust are vested in trustees under a trust deed which divides the beneficial ownership of the fund into a number of units which generally are transferrable and redeemable. The trust deed sets forth the rights and obligations of the trustee and unit holders. In the BVI, if a trust company serves as the trustee, it would be required to be licensed under the Banks and Trust Companies Act.
BVI Private Fund Requirements BVI Private Funds recognized under the Securities and Investment Business Act, 2010 (SIBA) are generally required to appoint an auditor and to file their audited financial statements with the FSC not more than six months after the end of each financial year. SIBA requires that a fund wishing to be recognized or registered must appoint the following functionaries: an investment manager, an administrator, a custodian, and an auditor. However, Private Funds may apply for an exemption from appointing an investment manager, custodian, or auditor. In considering an application for recognition or registration, SIBA requires that the investment manager, administrator and/or custodian of a BVI mutual fund satisfy the FSC’s fit and proper criteria. Private Funds are also required to have two 2 directors (but they need not be resident in the BVI) and appoint a local authorised representative who will accept service on behalf of the fund in the BVI.
Private Fund Maintenance Continuing requirements for Private Funds include: notice to the FSC within 14 days of any change to the composition of the board, change in place of business and amendment of constitutional documents and new or amended offering documents; notice to the FSC at least 7 days prior to the appointment of any new functionary (including custodians, administrators, prime brokers and managers) and, in the case of a functionary ceasing to act, notice within 7 days of the cessation or resignation;filing audited accounts within 6 months of the financial year end;filing annual returns by 30 June each year;notice to the FSC of any material change to the nature and scope of business as soon as reasonably practicable; and payment of annual fees.
BVI Fund Types In the BVI regulated funds are categorized as either Incubator Funds, Approved Funds, Private Funds, Professional Funds, or Public Funds. Another option also exists in the BVI as not all companies operating as pooled investment vehicles are subject to the Securities and Investment Business (Amendment) Act 2015 (amending the Securities and Investment Business Act 2010 (SIBA). SIBA regulates only open-ended funds (i.e., those whose equity interests are redeemable at the option of the investor). Consequently, closed-ended companies used as "funds" (i.e., whose equity interests are not redeemable at the option of the investor) are not subject to mutual fund regulation in the BVI because the investors do not have the right to demand a redemption of their interest. The redemption feature represents the key distinction between closed-ended companies operating as "funds", Incubator Funds, Approved Funds, Private Funds, Professional Fund and Public Funds. Learn More About Using a BVI Closed-Ended Company as a Hedge Fund
Our BVI Private Fund Services Include: • service and legal fees • FSC mutual fund application fee • FSC mutual fund recognition fee • BVI company license fee • authorized BVI mutual fund agent fee (upon appointment and annually thereafter) • registered agent/office (upon incorporation and annually thereafter) • communication/courier/company seal costs • name check • preparation of the company memorandum of association • preparation of the company articles of association • preparation of company registration forms • filing with the BVI registrar of companies • certificate of incorporation • share certificates • minutes of the first board meetings • register of directors • register of members • company seal • re-draft, filing and certifying memorandum & articles of association for the fund formation • preparation of offering documents and fund agreements • preparation of investment fund application for recognition and licensing with BVI FSC • filing the fund application with the BVI FSC • certifying documents for the FSC • payment of first year BVI Registered Agent/Office (annual) • payment of first year Authorized BVI Mutual Fund Agent Fee (annual) • payment of first year BVI Business Company License Fee (annual) • payment of first year FSC Mutual Fund Recognition Fee (annual) • courier service (1 time)
Annual Fees Include: • Authorized BVI mutual fund agent fee • registered agent/office for a mutual fund • BVI business company license fee • FSC mutual fund recognition fee
U.S. SEC Offshore AlertThe U.S. SEC's 134-page report published in 2003--The Implications of the Growth of Hedge Funds--presents the status of the hedge fund industry as viewed in the United States. What is interesting about this SEC Report is that articles and web content authored by our very own hedge fund attorney Hannah Terhune, JD, LLM (Taxation) (when she was the Chief and only Attorney at GreenCompany.com) on offshore hedge funds was cited on page 10 of the U.S. SEC Report as providing information the SEC Staff found to be valuable in its understanding of the hedge fund industry. For a decade, hedge fund attorney Hannah Terhune has been counted on by the U.S. government and hedge fund organizers worldwide as a source of cutting edge and practical information on hedge fund formations.
You will see from this web site that we supply more information about hedge funds than most books do on the subject. It's great to see that Hannah Terhune's expertise is appreciated by the SEC! This is quite a coup for Hannah, and provides one more piece of evidence as to how she can help you. You can reach her today at hterhune@capitalmanagementservicesgroup.com or at +1 (307) 413-2212 or on Skype at: CapitalManagementServicesGroup.
Call Us First We are experts in international hedge funds and tax. Click on any reference below to our leading articles:
Strategic Hedge Fund Planning by Hannah Terhune. Wilmott Magazine Ltd. (Volume 2013, Issue 63, pages 8-11 January 2013).
Trading Foreign Index Contracts? Know the Tax Rules Before You Trade by Hannah M. Terhune and Roger D. Lorence. Stocks, Futures and Options (June 2005).
Capital Management Services Group, Inc. is an authority in the hedge fund industry. It is a forward-thinking law firm focused on creating long-term collaborative relationships with a select group of clients interested in the same. It strives to provide “high touch” service and perform a defined set of legal and other services with impeccable efficiency. We offer professional tax advice, state and federal SEC advice, business planning services, international tax, and tax return preparation.
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