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New BVI Fund Products

Internet Incorporate
03 June, 2015

In recognition of the needs of assisting start-up and small/mid-sized non-institutional investment managers to overcome some of the continued barriers to entry into the industry, the British Virgin Islands (BVI) has issued the Securities and Investment Business (Incubator and Approved Funds) Regulations, 2015, which came into force on 1 June 2015.

These new types of funds are two new lightly regulated funds products which are primarily aimed at start-up emerging managers and those managing funds for smaller groups of closely connected investors or family offices. They are offering them a cost effective regulated fund solution, which ought to therefore assist them in bringing their funds to market whilst managing their operational cost base.

Incubator Fund
The Incubator Fund is a start-up fund product which offers investment managers and easy to set up and cost-efficient solution for implementing an investment strategy with low up-front costs and limited ongoing obligations. The key features are:

  • Only suitable for "sophisticated private investors".  Such investors are defined in the Regulations as "a person who has been invited to invest in an incubator fund and the amount of his or her initial investment is not less than US$20,000."
  • The total number of investors is limited to 20
  • Net assets of the fund must not exceed US$20m
  • No manager, administrator or custodian is required to be appointed
  • No audit required
  • Can only be approved for a two year period.  It is possible to seek an extension from the Commission for an additional 12 month period.  Prior to the end of this period it will be necessary to make an application to the Commission for the fund to be recognised as either a private fund or a professional fund or to be approved as an approved fund
  • Offering document/prospectus not mandatory and if no offering document is prepared, the regulatory environment is that investors must each be given a written investment warning
  • Fast track time to market in that an incubator fund may commence business two business days following receipt by the FSC of the license application
  • On-going regulatory obligations limited to notification of changes within 14 days

Approved Fund
The approved fund is designed for smaller strategies and friends and family funds and has a higher net asset value threshold and no limit to the length of time if may qualify as an approved fund.  It also differs from the incubator fund in requiring an administrator.  Key differentiating criteria from other fund types include:

  • The total number of investors is limited to 20
  • Net assets of the fund must not exceed US$100m
  • Simplified licensing process
  • Fast track time to market in that an incubator fund may commence business two business days following receipt by the FSC of the license application
  • Offering document/prospectus not mandatory and if no offering document is prepared, the regulatory environment is that investors must each be given a written investment warning
  • On-going regulatory obligations limited to notification of changes within 14 days
  • Audit of financial statements not mandatory; and
  • The approved fund must have an administrator, but it is not required to have a manager or custodian.

Ongoing obligations
There are limited ongoing obligations involved once licensed:

  • Each must submit unaudited financial statements to the FSC on an annual basis
  • Incubator Funds must submit semi-annual returns by 31 January and 31 July, and Approved Funds must submit annual returns by 31 January
  • Similar to alternative BVI funds, Incubator and Approved Funds must have at least two directors, once of which must be an individual, if it is a corporate entity and a locally-based authorized representative
  • The fund must notify the FSC within 14 days of any changes to the information provided in the approval application or in relation to any matter which is likely to have a material impact on the fund

If you are interested in finding our more about the BVI's new fund products and how they could benefit your business needs please contact us.



About the Author


Internet Incorporate

At Internet Incorporate we have combined years of experience with the objective of client satisfaction and we have carefully designed an exclusive range of strictly personal approach services in order to offer to our clients those solutions needed to achieve their goals the best possible way. www.internetincorporate.com

 

 

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