British Virgin Islands: Investment Fund Managers "Brexit" To The BVI

In the post-recession economy, investment managers are looking for increased flexibility and ways to maximise investor returns by minimising set up costs, government fees, and other related functionary and advisory costs. That is why many are now "Brexiting" to the British Virgin Islands.

For years, the Cayman Islands has held the title of the world's largest offshore fund domicile. Being the most well-known, it was the safe choice for investment managers. Today, however, BVI, the world's second-largest offshore fund domicile with just under 2,000 active open-ended investment funds and many other unregulated closed-ended investment funds, is an increasingly attractive alternative for what may be a better future for investment managers and their investors.

And while both Cayman and BVI have emerged with new funds features and products over the past decade, with many similarities, the BVI has distinguished itself by focusing on legislative and regulatory reforms to benefit investment managers looking for flexibility and cost cutting. The primary legislation in the BVI that regulates its investment funds regime and makes the jurisdiction appealing is the Securities and Investment Business Act, 2010 (SIBA) and its accompanying regulations, the Mutual Funds Regulations, 2010. SIBA regulates both funds and fund functionaries operating in or from the BVI, and offers specific advantages.

Advantages of BVI investment funds

The BVI is the world's largest offshore corporate domicile with close to 500,000 active companies. Some of the recognised advantages of setting up an investment fund in the BVI include:

  • A stable political and economic jurisdiction which is committed to international compliance.
  • A tax neutral environment.
  • A recognised and respected legal system supported by English common law, modern local legislation, and a well-developed court system, including a dedicated commercial division.
  • No regulatory restrictions on investment policies or strategies or on performance and other fee arrangements.
  • No requirement to appoint local directors or local functionaries.
  • Various types of fund structures are facilitated, including single class funds, multi-class funds and master-feeder funds.
  • Statutory segregated portfolio ring-fencing.
  • Amendment of constitutional documents may be made by shareholders or directors, where so authorized.
  • Low start-up and ongoing fees and costs.
  • No requirement for a local auditor sign off on the fund's accounts.
  • Leading service providers, including lawyers, accountants and other fund professionals.

When considering the choice between BVI or Cayman, although they are similar on many levels, BVI has these key advantages:

  • No local auditor sign-off is required. (You can use an auditor once they are in a recognised jurisdiction, as described below.)
  • Directors or shareholders can amend the constitutional documents, which provides a degree of flexibility for restructuring.
  • Start up, ongoing fees, and legal fees are lower.

Together, these benefits can be significant for a fund in general, but especially for small to medium sized funds during start up.


Under SIBA, the term "mutual fund" or "fund" is defined as a company incorporated, a partnership formed, a unit trust organised, or other similar body formed or organised under the laws of the BVI or any other country or jurisdiction which:

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

(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, the partnership, the unit trust, or other similar body, as the case may be; and includes

(i)  an umbrella fund whose shares 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.

By definition, SIBA only regulates: (i) open-ended funds (whose equity interests are redeemable at the option of the investor) and their (ii) administrators, managers, and custodians. SIBA does not regulate closed-end funds, which are often referred to as private equity funds.

Categories of investment funds

Funds regulated by SIBA fall within five categories; private funds, professional funds, public funds, incubator funds, and approved funds, defined as follows:

  • Private fund – A fund whose constitutional documents specify that it will have no more than 50 investors, or that the making of an invitation to subscribe for or purchase shares is made on a private basis.
  • Professional fund – A fund in which shares are only made available to professional investors and the initial investment by all of the investors (excluding exempted investors) is not less than US$100,000 (or equivalent). Exempted investors include, the manager, administrator, promoter, or underwriter of the fund, or any employee of the fund manager.
  • Public fund – A fund that is neither a private fund nor a professional fund. This type of fund is the most regulated since it is open to a larger number of investors, most of whom might be unsophisticated.

Public funds must be registered before engaging in any business activity in or from within the BVI. Such funds must publish a prospectus including the information required by SIBA, and must also produce and distribute audited annual financial statements.

Under SIBA, a prospectus for a public fund shall provide "full and accurate disclosure of all such information as investors would reasonably require and expect to find for the purpose of making an informed investment decision." The prospectus must also contain a summary statement of investors' rights, including the right to claim for rescission of their purchase, or for recovery of damages in the event of any misrepresentation in the fund prospectus.

Public funds are subject to the Public Funds Code, 2010 (the Code). The Code sets out four principles by which a public fund must conduct its business: (i) integrity; (ii) management and control; (iii) investors' interests; and (iv) relationship with the BVI Financial Services Commission. Such funds are responsible for applying the principles to its particular circumstances which may require adopting higher standards than is set out in the remainder of the Code to avoid being in breach of the principles.

  • Incubator fund – This type of fund has the following key features:
  • a maximum of 20 investors;
  • a minimum initial investment of US$20,000 by each investor; and
  • a cap of US$20 million on the value of investments of the fund.

The incubator fund is ideal for new managers and start-ups. There are no functionary requirements. Accordingly, an incubator fund can be established and operated without an administrator, manager, custodian, or auditor. Also, the fund is not required to have an offering memorandum, but is required to file a description of its investment strategy and give appropriate investment warnings to investors.

An incubator fund is permitted to operate for two years (with the possibility of one additional year). This time period allows for the establishment of a track record without onerous regulatory obligations. Prior to the end of the two or three period (as applicable), or upon exceeding any of the specified thresholds, the fund must elect one of the following options:

  • convert to an approved fund;
  • convert to a private fund or professional fund; or
  • where it is not viable for the fund to continue at the end of the two or three-year period, wind up its operations.
  • Approved fund – This type of fund has the following key features:
  • a maximum of 20 investors at any one time; and,
  • a cap of US$100 million on the value of investments of the fund.

An approved fund has no minimum initial investment requirement, and is not required to appoint an auditor, manager, or custodian. The fund is, however, required to appoint an administrator to provide suitable oversight of its operations. No offering memorandum is required, but the fund is required to file a description of its investment strategy and give appropriate investment warnings to investors.

Unlike the incubator fund, the approved fund can continue to operate as an approved fund for an indefinite period, unless:

  • a decision is made to convert the fund to a private or professional fund;
  • it is required to convert into a private or professional fund by virtue of the fact that it has exceeded one of the relevant thresholds; or
  • it elects to wind up its operations.

Types of investment fund vehicles

Investment funds in the BVI are usually set up using either; (i) a BVI business company, (ii) a limited partnership, or (iii) a unit trust. The BVI business company is the most popular of the three vehicles.

  • BVI business company – A separate legal entity from the investing shareholders, a BVI business company would be structured as a limited liability company. They are regulated by the BVI Business Companies Act, 2004 (BCA), which allows for a great deal of flexibility in terms of structuring funds. The BCA also specifically provides for the structuring of segregated portfolio companies, which are very useful for certain types of investment fund structures.
  • BVI limited partnership – The limited partnership can be established pursuant to the Partnership Act, 1996. It is formed in the BVI by a general partner and at least one limited partner, executing Articles of Partnership, and by submitting a Memorandum of Partnership to the BVI Registry of Corporate Affairs.
  • Unit trust – A unit trust can be established pursuant to a deed of trust. The arrangement is not a separate legal entity. Rather, it is the trustee who has legal capacity and who holds the assets of the fund on the terms of the deed of trust for the investors in the unit trust scheme. Under BVI law, the holders of units in a unit trust scheme are the beneficial owners of the trust assets.

Set up of investment funds and acceptance of their functionaries

The BVI Financial Services Commission (FSC) requires a fund wishing to be recognised, registered, or approved to submit an application that must include evidence of the fund's status together with details of each of the fund's functionaries—the investment manager, administrator, custodian, and auditor.

In considering an application for recognition or registration, the FSC will require that the manager, administrator, and custodian of a BVI investment fund be incorporated in either the BVI, or a "recognised jurisdiction," which, for the purposes of the SIBA, include the following:

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

In addition, functionaries incorporated in other jurisdictions may be acceptable if the jurisdiction is regarded by the FSC as having a prudent system of regulation and supervision of investment business, including mutual funds business.

The above functionary requirements are primarily relevant for private, professional, and public funds since an incubator fund requires no functionaries and an approved fund only requires an administrator. 

BVI Approved Manager

The BVI also has a fast track "Approved Manager" regime which permits a BVI company or partnership to conduct business as an investment manager or investment advisor to certain funds without the need for a lengthy approval process. It creates a fast-track for the approval of fund managers and advisors, and also provides a lighter touch regulatory regime for such managers and advisors.

To be eligible as an Approved Manager, the manager must:

  • be a BVI company or partnership;
  • manage or intend to manage a BVI private or professional fund;
  • manage or intend to manage a BVI closed-ended fund;
  • manage or intend to manage a fund from any recognised jurisdiction that has equivalent characteristics to a BVI private or professional fund; and
  • have assets under management of not more than US$400 million in respect of open-ended funds, and of not more than U$1 billion for closed-ended funds.


The investment funds industry is rebounding from the difficult times of the recession period, allowing investment managers to seek creative options which not only enhance investment returns, but also provide regulatory oversight and flexibility for the benefit of investors and investment managers alike. As more investment managers, from large-to-small, consider their own Brexit, they are looking to the BVI. As the second largest funds domicile with a stable legal and regulatory environment, investment managers can be assured that the BVI will find ways to enhance its product for the benefit of users, and will continue to do so into the foreseeable future.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Collas Crill
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Collas Crill
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions