Lennox Paton BVI Funds Guide
January 2012

There are a number of advantages to establishing an investment fund in the British Virgin Islands, these include:

  • a neutral tax/exchange control environment
  • political and economic stability
  • a legal system based on English Common Law
  • a dedicated Commercial Court with a specialist judge
  • no regulatory restrictions on investment policies or fee structures
  • no requirement to appoint local directors, local functionaries or local auditors
  • professional funds benefit from a "fast track" procedure (see below)
  • competitive start-up and ongoing fees

Vehicles for Investment Funds

Promotors and fund managers considering the establishment of an investment fund in the British Virgin Islands can use the following structures:

  • a BVI Business Company
  • an International Limited Partnership
  • a Unit Trust

The majority of British Virgin Islands investment funds are established as Business Companies limited by shares. For closed end funds an International Limited Partnership is a more popular vehicle.

BVI Business Companies

A BVI Business Company is a separate and distinct legal entity usually established with limited liability. Shareholders in a limited liability Business Company are not liable for its debts and obligations.

A Business Company can issue non-voting, participating, redeemable shares and voting, non-participating shares. Business Companies acting as funds can also be established with a segregated portfolio structure thereby ring fencing assets.

Except in limited circumstances, the Memorandum and Articles of Association of a Business Company can be amended without needing to obtain a resolution of the investing shareholders. Shares may be issued in multiple classes. Multiple series within each class may be created without the need to amend the Memorandum of Association meaning that a series accounting mechanism is easily established.

International Limited Partnerships

A British Virgin Islands international limited partnership is formed by a general partner and at least one limited partner executing Articles of Partnership and by the filing of a Memorandum of Partnership with the BVI Financial Services Commission ("FSC"). The Articles of Partnership govern the day to day operation of the partnership and do not have to be filed with the FSC.

An international limited partnership is not a legal entity and the general partner is liable for all the debts and obligations associated with the partnership. Provided they do not participate in the operation of the partnership, a limited partner will not be liable for the debts and obligations of the partnership.

Unit Trusts

Unit trusts are established by the execution a trust deed. A unit trust is not a legal entity. The Trustee holds the assets of the trust pursuant to the terms of the trust deed and is liable for all debts and obligations associated with the unit trust. Investors are the beneficial owners of the unit trust assets and are issued units to reflect this.

Fund Structures

Single class funds, multi-class or umbrella funds (including segregated portfolio companies), master/feeder structures and single investor funds can all be established and regulated in the British Virgin Islands using the vehicles outlined above.

Recognition or Registration under the Securities and Investment Business Act

The main legislation governing the investment funds industry in the British Virgin Islands is the Securities and Investment Business Act, 2010 ("SIBA").

SIBA only regulates open-ended funds (ie. those funds where interests are redeemable at the option of the investor). Closed-ended funds themselves are not subject to regulation.

SIBA defines a "fund" as a company or any other body, a partnership or a unit trust that is incorporated, formed or organised, whether under the laws of the British Virgin Islands or the laws of any other country, which:

a) collects and pools investor funds for the purpose of collective investment, and

b) issues fund interests that entitle the holder to receive on demand or within a specified period after demand 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 or other body, partnership or unit trust, as the case may be, and includes

i) an umbrella fund whose fund interests are split into a number of different class funds or sub-funds, and

ii) a fund which has a single investor which is a mutual fund not registered or recognised under SIBA.

Under SIBA and the associated Mutual Fund Regulations, 2010 ("MFR"), there are three categories of regulated funds: private funds, professional funds and public funds.

Private Funds

A private fund is a fund where the constitutional documents specify that (i) the fund is not authorised to have more than 50 investors; or (ii) an invitation to subscribe for, or purchase, fund interests issued by the fund shall be made on a private basis only.

"private basis" includes an invitation made to specified persons which is not calculated to result in fund interests becoming available to other persons or to a large number of persons or which is made by reason of a private or business connection between the person making the invitation and the investor.

Professional Funds

A professional fund is a fund where the fund interests will only be available to "professional investors" and the initial investment by each professional investor, unless they are an exempted investor, is not less than US$100,000 (or equivalent in another currency).

A "professional investor" means a person (i) whose ordinary business involves, whether for that person's own account or the account of others, the acquisition or disposal of property of the same kind as the property, or a substantial part of the property, of the fund; or (ii) who has signed a declaration that he, whether individually or jointly with his spouse, has a net worth in excess of US$1,000,000 (or equivalent in another currency) and that he consents to being treated as a professional investor.

A professional fund benefits from a "fast track" procedure in that it may carry on its business for a period of up to 21 days without being recognised under SIBA but must file an application to be recognised within 14 days of commencing its business.

The following are "exempted investors" pursuant to the MFR:

i) the manager, administrator, promoter or underwriter of the fund; or

ii) any employee of the manager or promoter of the fund.

Public Funds

If a fund, as defined by SIBA, is neither a private fund nor a professional fund then it is deemed a public fund. As its interests can potentially be offered to an unlimited number of unsophisticated investors it is naturally subject to a higher level of regulation.

Public funds must become registered by the FSC before they can commence business. A written prospectus must be published in compliance with SIBA and the Public Funds Code ("PFC") before any offer is made to the public. The prospectus must be signed on behalf of the fund's directors, in the case of a company, or by the trustee or manager, in the case of a unit trust. A public fund cannot be established as an international limited partnership. The prospectus must be registered with the FSC.

The directors (or members of an equivalent body) of a public fund may be potentially liable for any misrepresentation made in a prospectus and upon which an investor has relied if the directors were aware or should reasonably have been aware of the misrepresentation.

Fund Functionaries

Under SIBA, a fund applying to be recognised or registered must appoint the following functionaries:

  • investment manager
  • administrator
  • custodian
  • auditor

Private or professional funds may apply to the FSC for an exemption to appoint an investment manager, a custodian or an auditor in certain circumstances, for example where the fund has only a very small number of investors.

An application for recognition or registration of a fund whose functionaries are domiciled in a Recognised Jurisdiction will usually be processed by the FSC without the need to further assess the fit and proper status of the functionaries.

The following countries have been designated by the FSC as "Recognised Jurisdictions":

Argentina, Australia, Bahamas, Belgium, Bermuda, Brazil, Canada, Cayman Islands, Chile China, Denmark, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hong Kong, Ireland, Isle of Man, Italy, Japan, Jersey, Luxembourg, Malta, Mexico, Netherlands, Netherlands Antilles, New Zealand, Norway, Panama, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, United Kingdom and the United States of America.

The FSC may, upon application, accept functionaries domiciled in jurisdictions that are not Recognised Jurisdictions if satisfied the jurisdiction in question effectively regulates fund business.

Ongoing Requirements for Funds under SIBA

Under SIBA, private or professional funds have certain continuing obligations including but not limited to:

  • a fund must at all times have at least two directors, one of whom must be an individual.
  • a fund must file a copy of its offering document with the FSC, which must contain a prescribed investment warning.
  • a fund must at all times have an auditor (the FSC may exempt certain funds from this requirement upon application). Audited financial statements for each financial year must be filed with the FSC within 6 months of the relevant year end.
  • all funds must appoint an authorised representative in the British Virgin Islands. This entity acts as liaison between the fund and the FSC.
  • notifying the FSC within 14 days of certain events such as the appointment or removal of a director, an amendment to its constitutional documents or offering document or a change in the address of the fund's place of business.
  • notifying the FSC at least 7 days prior to the appointment of a new functionary.

Additionally, funds registered as public funds must comply with certain other requirements covering their operation as detailed in SIBA, the MFR and the PFC.


A private or professional fund will pay a US$700 recognition application fee and an annual recognition fee of US$1,000. A public fund will pay a US$1,000 registration application fee and an annual registration fee of US$1,500.

For more information on the establishment and regulation of investment funds in the British Virgin Islands please contact Rob McIntyre, Head of BVI Funds and Corporate.

January 2012

Rob McIntyre
+44 (0)20 7743 6490

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