Most Read Contributor in British Virgin Islands, March 2017
The BVI offers two lightly regulated open-ended fund products,
the incubator fund and the approved fund, and an investment
management product, the approved manager, which are all
specifically targeted at emerging or smaller managers.
Harneys has a wealth of experience in assisting smaller and
start-up fund managers and can guide you through every step of the
The incubator fund
The incubator fund allows emerging managers a two-year
incubation or 'validity' period to test a strategy and
establish a track record. During that period, the fund can operate
with light regulation, no mandatory service providers and without
carrying out an audit, provided it remains within the following
no more than 20 investors
each investor must be a
'sophisticated private investor', which means that they
were invited to invest and have made a minimum initial investment
the net assets of the fund must not
at any time exceed US$20million
If the incubator fund is successful, it can simply convert
before the end of the incubation period into a private,
professional or approved fund. If it is not viable, the fund must
either wind up operations or convert to a simple BVI business
The approved fund
The approved fund allows managers to establish a fund with a
private offering to a small group of investors on a longer term
basis. Like the incubator fund, approved funds can operate with no
manager or custodian and without carrying out an audit. To qualify
as an approved fund, the fund must have a maximum of 20 investors
and its net assets must not at any time exceed US$100 million. The
approved fund is required to appoint an administrator to ensure
suitable oversight of its operations.
The approved manager
The approved manager is an investment management vehicle for
smaller managers which is regulated by the BVI Financial Services
Commission (FSC), but subject to minimal
ongoing obligations. It is extremely flexible and can be used to
manage open ended funds in the BVI, closed end funds in the BVI
with certain characteristics, open and closed end funds in other
jurisdictions with certain characteristics, managed accounts, and
other types of investments approved by the FSC on a case-by-case
How long would it take to get a fund and a management vehicle
up and running?
Harneys works with managers to produce the necessary
documentation and manage the application process. Once the
application is filed, an approved fund or incubator fund can begin
operating after two days, provided the FSC does not raise any
questions within that period, and an approved manager can commence
business after seven days.
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.
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Now that the United Kingdom has served notice to leave the European Union under Article 50 of the Lisbon Treaty, managers of offshore funds have a clearer timetable for when Brexit will happen, with the UK scheduled to leave the EU in March 2019.
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