BRITISH VIRGIN ISLANDS Law and Practice Contributed by: Michael Gagie, Andrew Wood, Ruairi Bourke and Joanna Russell, Maples Group
Sweden, Switzerland, the United Kingdom and the United States. The Approved Manager Regime also permits an investment manager or adviser to provide services to a fund that is not from a recognised jurisdiction where such funds invest all or a substantial part of their assets in a qualifying fund based in the BVI or a recognised jurisdiction. The Approved Manager Regime is becoming an increasingly popular choice for smaller managers seeking a regime and regulation more aligned with their business model. It is also attractive to indus - try participants seeking to undertake discretionary investment management activities through a tax neutral jurisdiction without the resultant burden to demonstrate economic substance that would often arise from carrying out such activities in other similar jurisdictions (and indeed in the BVI as well for those managers that are instead fully licensed under SIBA). 3. Regulatory Framework 3.1 Primary Regulators and Regulatory Issues SIBA BVI closed-ended funds are subject to regulation under SIBA if they constitute “private investment funds”. A private investment fund is defined under SIBA as a company, partnership, unit trust or any other body that: • collects and pools investor funds for the purpose of collective investment and diversification of port - folio risk; and • issues fund interests that entitle the holder to receive 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, partnership, unit trust or other body. Accordingly, where there is no collective investment or diversification of portfolio risk, a fund will not techni - cally constitute a private investment fund and accord - ingly will not be subject to regulation under SIBA. This is a notable driver of the increased use of the BVI for single-investor funds, single-investment funds, club
deals and co-investment vehicles, as mentioned in the foregoing– particularly where time is of the essence in deal structuring and execution. SIBA imposes a general prohibition (with limited carve-outs) on the promotion of private investment funds and their carrying on of business unless and until recognised formally as such by the BVI FSC. To be eligible for recognition, the constitutional docu - ments of a private investment fund must: • specify that the offer of fund interests to investors must be made on a “private basis” only; • restrict the number of shareholders or investors to 50; or • restrict the offer to “professional investors” and a minimum initial investment of USD100,000 for each such investor. The application process for recognition requires the payment of application fees and the submission to the FSC of a completed application form together with a number of supporting documents, including the fund’s constitutional documents, offering docu - mentation (if any; if none, then an explanation for the lack of it must be provided) and valuation policy. The recognition process will typically take between five and seven working days following the submission of all required documents. Private investment funds are subject to various ongo - ing obligations following recognition, including the retention of: • a suitably qualified person – known as an “appoint - ed person” – to take responsibility for undertaking the management, valuation and safekeeping of fund property; • an auditor (although this need not be a local audi - tor based in the BVI), together with the submis - sion to the FSC of annual audited accounts unless exempted under certain limited circumstances; and • an authorised representative based in the BVI empowered to liaise with the FSC on a fund’s behalf.
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