New Regime for BVI Closed-End Funds Brings Major Changes

The British Virgin Islands government recently passed new legislation affecting the funds industry. In particular, the new BVI Securities and Investment Business (Amendment) Act, 2019 institutes a supervisory regime for closed-ended funds, with the following major changes.

  • Most closed-ended funds will be regulated under the new legislation as “private investment funds” and need approval from the BVI Financial Services Commission (FSC) for valid operation.
  • New rules relating to the valuation of fund assets now apply to approved, incubator, and private investment funds.
  • The legislation creates an “appointed persons” regime for private investment funds.
  • Miscellaneous changes are also in force, such as the application of AML/Anti-Terrorist Financing legislation, specifically regarding private investment funds.

Recognition of Private Investment Funds

Previously, the FSC did not regulate closed-ended funds, such as private equity funds and other funds that do not permit their investors to redeem their fund interest at their own option. Once incorporated or formed, a BVI company, partnership, or unit trust could operate as a closed-ended fund without the need for any additional regulatory approval.

But, with the advent of the Securities and Investment Business (Amendment) Act, 2019, and the accompanying Private Investment Funds Regulations, 2019, closed-ended funds must apply to the FSC to be “recognized” as private investment funds (PIFs). 

A PIF is formally defined as:

  • “… a company, a partnership, a unit trust or any other body that is incorporated, registered, formed or organised, whether under the laws of the Virgin Islands or the laws of any other country, which
  • (a) collects and pools investor funds for the purpose of collective investment and diversification of portfolio risk; and
  • (b) issues fund interests, which 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.”

The requirements for PIF recognition are similar to those of professional and private BVI funds. As such, a PIF comes in three flavors: 

  • (a) a PIF limited to only 50 investors; 
  • (b) a PIF that is limited to marketing investment in the fund on a private basis; and 
  • (c) a fund whose investors are limited to professional investors, i.e., persons whose net worth is at least US $1M, and certain institutional investors.

Like professional and private funds, a closed-ended fund that otherwise meets the criteria for approval can begin operating prior to applying for recognition, provided it does, in fact, submit the application within 14 days of commencing operations. The fund has 21 days to operate without FSC approval. The FSC has indicated that it expects to be able to process applications within 2 to 3 business days, but if there is a deficiency, to let the applicant know within 48 hours during business days.

Appointed Persons and Valuation Policy

One departure from the position with regards to professional and private funds is the introduction of the “appointed person.” An appointed person is responsible for managing fund property, valuing fund property, or safekeeping of fund property. Each PIF is required to have and notify the FSC of details of appointed persons. 

Note that the appointed person responsible for managing fund property should not have responsibility for valuing that fund property. However, the PIF regulations do permit the same person to carry out both roles, but only if the fund is able to identify and monitor potential conflicts and make certain disclosures surrounding such conflicts to its investors.

A corollary to the requirement for appointed persons is the requirement for each PIF to have a valuation policy. The specifics of the valuation policy are set out in the PIF regulations. In particular, the regulations require that valuations be undertaken at least once annually and that the policy must set out how valuations will be conducted and how valuation information will be provided to investors.

Note that the valuation policy requirement now applies to BVI approved, incubator, professional, and private funds. Also, incubator and approved funds must have arrangements in place for the safekeeping of fund property and the segregation of that property in appropriate circumstances.

Additional Changes


PIFs are required to prepare audited financial statements and to submit those financial statements to the FSC within six months after the end of the fund’s financial year—bringing PIFs in line with their professional and private fund counterparts.


The BVI Anti-Money Laundering and Anti-Terrorist Financing Regime also applies to PIFs, although it is expected that existing PIFs would already be operating with AML and ATF rules and procedures in place.

Authorised Representatives

Under the updated legislation, PIFs are required to have an authorised representative who will act as a liaison between the PIF and the FSC. Again, this change brings PIFs in line with professional and private funds.

It should also be noted that exemptions available to private and professional funds, such as the exemption from filing audited financials in certain circumstances, also apply to PIFs. 

Retention of Records

Each PIF is required to maintain records sufficient to show and explain its transactions, enable its financial position to be determined with reasonable accuracy, and enable it to prepare financial statements. This requirement is not new and already applies to BVI companies and partnerships. These records are now required to be maintained by the fund for at least five years after the completion of the transactions to which they relate.

Transitional provisions

While the underlying legislation is generally in force currently, a transitional date of July 1, 2020, has been set by which all PIFs are required to apply for recognition. In the interim, and until such applications are determined, currently operating closed-ended funds will not be in breach of the new legislation and can continue to operate, validly.

British Virgin Islands funds are favored for being flexible and nimble. They can be adapted to a variety of needs and customized to suit a particular investment style, strategy, or target investor class. Further, BVI funds are attractive as they not limited in the type of assets they may hold or in which they may invest.

Please contact the authors of this update for more information on fund formation or compliance with the new the Securities and Investment Business (Amendment) Act, 2019, and the accompanying Private Investment Funds Regulations, 2019. Reach Kerry Anderson at, (New York) 914-200-3596, or (BVI) +1 284-393-5800. Reach Christopher Simpson at or +1 (284) 393-5800 in the BVI.

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