BVI Hedge Funds
As defined in the 1996's BVI Mutual Funds Act (as amended), mutual funds or hedge fund means "a company incorporated and organized in accordance with the laws of the territory, or any other country or jurisdiction that":
A) Collects and integrates investor funds for the purpose of collective investment, and
B) Issue shares, which allow their holders to receive on demand or within a certain period of time, the amount calculated based on the cost of particular interest to the whole or part of a property (less the liabilities) of the company.
If your company is in compliance with the above specifications, then the creation of hedge fund is necessary.
BVI has three types of mutual funds: public, private and professional. By definition, a private foundation created for a limited number of investors.
Public fund allows an unlimited number of investors.
Professional fund are available only to wealthy investors with a minimum initial capital of US $ 100 000.
PUBLIC HEDGE FUND
It is a public fund, which offers its investment shares to the general public. This type of fund attracts the highest level of regulation.
Public funds should be registered (or get permission to register in accordance with the procedure of pre-registration), before engaging in any business activity in the British Virgin Islands. A public fund must publish a prospectus, which includes the information required under the Act as well as shall make and distribute audited annual financial statements.
The application for registration includes information regarding all directors, managers, administrators, and other persons who are actively involved in the management of the fund. There are very strict "approval process" that must be met in respect to all persons involved in the promotion and management of the fund. Mutual Funds Act requires that the prospectus of public mutual funds shall provide "full and accurate disclosure of any information that investors would reasonably require and expect to find in order to make an informed investment decision." The prospectus must also contain a summary of the rights of investors.
The prospectus must also be accompanied by (or have reference to) fund's financial statements for the last financial year and the auditor's report.
PRIVATE AND PROFESSIONAL FUNDS
BVI Mutual Funds Act defines Private Fund as a Mutual Fund, which according to its constitutional documents limits the maximum number of investors to fifty, or which indicated that all invitations to subscribe for funds or shares will occur on a private basis. When submitting the application, the alleged Private Fund will have to show "private foundation" of offering its shares to potential investors and to explain what criteria will allow a particular investor to be considered as "private". Registrar of Mutual Funds keeps the right to accept or reject any such explanation. One of the guiding principles of the policy states, in particular, that an invitation to 300 people can be considered as a "private" offer if it can be demonstrated that the invitations are intended for these individuals only and there is no intention of making invitations to other persons. Providing invitations to a much greater number of persons than 300 call into question the compliance with the spirit of "private", as described in the Act on the grounds that a large number of individuals do not correspond to what is usually meant by "private."
The official definition of a professional fund suggests that a Mutual Fund is a type of Fund, which offers shares only to professional investors and the initial investment for the majority of investors, is not less than US $100 000 or equivalent. Hence, the "professional investor" means any person who falls under any of the two potential criteria: professional investor, whose ordinary business generally involves investment business and is similar to the activity of the Fund (more complex definitions provided in the Act) or professional investor, who declared his net worth in excess of one million US dollars, and has consented in writing to be treated as a professional investor. In simple terms, "professional investors" is a person who is either a professional investor (and, therefore, should know what he's doing), or a person who explicitly stated that he knows what he's doing, in addition to the statement that his net worth is high enough (so that the possible loss of investment will not leave this person bankrupt).
In contrast to the "registration" of Public Funds, required by law, the procedures established for Professional and Private Funds, called "recognition". It is much easier than established for public funds. Recognition of Private or Professional fund BVI requires to complete the application, provide evidence or documents that qualify Fund as a Private or Professional, provide details on the Fund itself, as well as details of its manager, administrator or other professionals involved (depending on the case) and place(s) of doing business. The application must be accompanied by payment of the required fees.
In the process of the recognition of a Private or Professional fund, Registrar will mostly focus on the information related to the managers, administrators, and other professional parties involved in the Fund. Requirements for such specialists are sufficiently strict and detailed.
Security and Investment Code does not specify capital requirements. However, the applicants must ensure that it maintains capital resources at a level which is enough to support their business.
If all documents are in order, the Financial Services Commission will require four to six weeks to approve an application for Private or Professional fund. For a Public fund it will take longer due to the more thorough consideration.
To obtain a license, the following documents are required for submission:
- First of all, the Mutual Fund must be registered. For this purpose, a standard memorandum (standard new Business Companies M & A) should be modified to suit your specific requirements.
Provisions related to your choice of methods and procedures for applying, payouts and calculation of net asset value should be included in the M & A. It is important to note that, in accordance with the new Companies Act, the concept of authorized capital no longer exists. Now the company has ordinary shares authorized for issue, instead of the authorized share capital. After completion of the modification, we will send M&A to our lawyers in the BVI for consideration and confirmation that M&A is written correctly and does not infringes any of BVI mutual funds law. After confirmation the fund will be registered. Our special registration fee will cost you only 1600 euro.
After registration, we will continue the licensing process. Completed application together with all documents, including information on directors and shareholders, and various formal agreements will be sent to the State Financial Commission.
Necessary requirements for each director:
A) CV (full names and addresses of companies in which directors have worked or work at the moment);
B) two recommendations for each director;
B) a reference letter from the bank;
D) A certificate from the police;
D) Notarized copies of passports;
E) A copy of a detailed resume.
Necessary requirements for each shareholder:
- To fill in your personal profile (will be provided);
- To provide a certified copy of a photo ID;
- To provide a reference letter from the bank and a letter of recommendation from a legal or accounting services.
For corporate shareholders:
- Certified or notarized copies of the certificate of incorporation, certificate of shareholders (or equivalent document) and certificate of the registered address;
- A copy of the latest annual report (if issued);
- All the information on the beneficial owners requested in the above paragraphs relating to the individual shareholders.
LEGAL DOCUMENTS AND AGREEMENTS
- A copy of the memorandum. In the case of hedge fund sponsor or promoter will be required to specify in the proposed stock memorandum, what methods of hedging (insurance techniques) will be used.
- Administration, control and management of contracts.
- A certified certificate of incorporation in the BVI - we ask for it after the registration of the company stock.
- A copy of the Registration Agreement.
Successful registration of the Fund will depend on how quickly and accurately you will be able to provide all the requested information and documentation, and on the officials (investment managers and advisors, banks, trustees and administrators) of recognized jurisdiction, such as
Belgium, Bermuda, France, Germany, Guernsey , Gibraltar, Hong Kong, Ireland, Isle of Man, Jersey, Luxembourg, Malta, Singapore, Spain, Switzerland, UK, USA and the Netherlands.
TARRIFS: our package of basic services costs GBP 1,000 for Private and Professional Funds (price list attached). The cost of registration is 1600 euro. Prices include different levels of legal services, in order to be able to check or order additional legal documents.
Depending on the type of order approval or verification of the license may take 4 - 6 weeks.
We hope that the above information is useful. Should you have any questions, do not hesitate to contact us for further information.