If you are a trader, financial analyst or other financial technocrat and are thinking of setting up a fund, then the British Virgin Islands is probably your best bet.
In today’s financial environment, investor capital for a start up fund can be hard to come by. If you are a start up you want to keep costs low but get your fund up and running quickly; but you want to ensure you have flexibility to change your strategy, structure and offering to accommodate increased investment at a later stage. A British Virgin Islands (BVI) domiciled fund can meet all of these needs.
BVI funds can be structured for maximum flexibility. There are no restrictions on investment strategy or borrowing; there is no need for meetings of the board of directors or for members meetings to be held locally; there is no need for local directors; there is no need for local auditor sign off on financials and amendments to the fund’s constitutional documents can be approved by the directors without the need for members’ approval (though for amendments that directly and negatively impact on the rights of a member you will want to ensure the member has a say.)
What this means for a new fund manager is that you can essentially setup a new fund using service providers from just about anywhere in the world. You can therefore take advantage of lower costs or relationships you might have built up over the years. Service providers from jurisdictions on the approved list published by the BVI regulator – the BVI Financial Services Commission (the BVIFSC) – do not need any approval from the BVIFSC. The approved list includes well-established jurisdictions and the BVIFSC can also on a case by case basis exempt providers from other jurisdictions, provided those jurisdictions have a proper regulatory regime in place.
BVI Funds can also be structured in various ways whether as a fund of funds, an umbrella fund or as master-feeder funds. BVI law also permits funds to be established as segregated portfolio companies so that losses sustained by one portfolio of assets will not affect another portfolio of assets even though the portfolios are part of the same fund.
Another huge advantage enjoyed by BVI funds is cost. Not only are legal fees significantly lower than in other jurisdictions such as the Cayman Islands, but also, filing and licensing fees are also a fraction of the cost compared to jurisdictions like the Cayman Islands.
The BVI has also recently updated its funds and securities legislation to comply with IOSCO standards. This means that BVI funds are unlikely to face the same level of regulatory scrutiny that may be applied to funds in other jurisdictions without IOSCO compliant legislation; it also means that BVI funds are not likely to see any significant changes to the regulations that will require funds to change the way they are doing business or result in additional costs to meet new compliance standards.
All in all the BVI still presents the best choice for a start up fund; the combination of cost, flexibility and modern stable regulation cannot currently be beat.
This Guide is general in scope and is not intended to be comprehensive. It is not a substitute for legal advice.