Answer ... Most alternative investment fund managers and advisers are structured as BVI business companies, although limited partnerships can also be used.

Answer ... BVI business companies are generally preferred, as:

• the liability of the shareholders is limited;
• only one entity is required; and
• the same people can act as the directors of the company and as the shareholders.

Limited partnerships require a general partner, separate from the limited partners, to ensure that the limited partners do not lose the benefit of their limited liability.

Answer ... Yes, there are two regimes for the authorisation or licensing of fund managers in the British Virgin Islands.

The Securities and Investment Business Act (SIBA) provides for the licensing of fund managers and applications can be made for a licence under Section 5 of SIBL under either:

• Category 3, Sub-category B: Managing Mutual Funds, which is appropriate for managers managing open-ended funds; or
• Category 3, Sub-category E: Managing Other Types of Investment, which is appropriate for managers managing closed-ended funds, including a BVI private investment fund.

The full SIBA licence is well established and popular with institutional managers. However, obtaining the licence can be a time-consuming process and licensees are subject to significant regulation.

Recognising that such comprehensive regulation is not necessary in all circumstances, the British Virgin Islands introduced the approved manager regime, which allows certain fund managers to operate cost efficiently, with lighter regulation. The speed and simplicity of the approval process and the relatively low set-up costs mean that the approved manager is by far the preferred option for start-up managers; but it is also popular with well-established investment managers that fall within the restrictions.

Answer ... The approved manager is subject to a cap on the aggregate assets under management of $400 million for open-ended funds or aggregate capital commitments of $1 billion for closed-ended funds. There are no capital adequacy requirements.

Answer ... For the approved manager, the process is fast and straightforward. An application must be submitted to the FSC, together with the application fee of $1,000. Key information that must be provided includes:

• details and CVs of each person who will be a director or person carrying out the day-to-day investment business of the applicant;
• details of all persons holding a significant interest in the manager;
• a written declaration by the applicant that each director, general partner, senior officer and each person who holds at least a 10% interest in the applicant is ‘fit and proper’, in accordance with the Regulatory Code, 2009;
• details of each fund or person to which management services will be provided;
• the investment management agreement between the manager and each of the funds or persons for which it will act; and
• details of any relevant business functions which will be delegated, the person to whom they will be delegated and copies of the agreements delegating such relevant business functions.

An applicant for approval as an approved manager may commence operations seven days after submitting a completed application.

Obtaining a full SIBA licence is a more detailed and time-consuming process, and involves submitting a detailed business plan for approval by the FSC.

Answer ... Other than the cap on assets under management, an approved manager may only carry on approved business, which includes any of the following investment business functions:

• acting as an investment adviser or investment manager to a private fund or professional fund;
• acting as an investment adviser or an investment manager to a closed-ended fund that is incorporated as a company, formed as a partnership or organised as a trust, under the laws of the British Virgin Islands and has the characteristics of a private or professional fund (following the enactment of the Securities and Investment Business (Amendment) Act, 2019 and the adoption of the Private Investment Fund Regulations, this will now be any private investment fund);
• acting as an investment adviser or investment manager to a person who is affiliated to a fund structure falling within the first two points above;
• acting as an investment adviser or investment manager to such other person as the FSC may approve on a case-by-case basis (this is commonly used for managed accounts, but the FSC will also generally approve applications to act for incubator and approved funds); and
• acting as an investment adviser or investment manager to a fund in a recognised jurisdiction with characteristics of a private, professional or private investment fund that invests substantially all its assets in a private, professional or private investment fund.

The FSC may impose restrictions on the licence of any SIBA licensed fund manager.

Answer ... The manager of a BVI alternative investment fund can generally involve itself in the running of a fund to the extent that powers have been delegated to it by the fund. However, its activities are always subject to the overall oversight and control of the fund’s board or general partner.

Answer ... Significant owners of a fully licensed SIBA licensee must satisfy the FSC’s fit and proper criterion. Although information must be submitted to the FSC to enable it to make an assessment as to whether an owner satisfies the fit and proper criterion, it is expected that the applicant will conduct its own due diligence on a regular basis.

Applicants for approval as an approved manager must self-certify that the significant owners satisfy the fit and proper criterion.

Answer ... Yes, an approved manager must provide details of the person that will be providing such services to the FSC and copies of the delegation agreements.

Full SIBA licensees are subject to greater regulation in relation to delegation and must comply with the provisions contained in the Regulatory Code which are concerned with managing outsourcing risk and ensuring that any delegation will not interfere with the FSC’s ability to regulate the activities of the manager.

Answer ... Yes. If applying for a full SIBA licence, the applicant will also need to apply for a licence under Category 3, Sub-category E: Managing Other Types of Investment.

An approved manager can act for persons approved by the FSC on a case-by-case basis, the most common being managed accounts. The certificate of approval will list all persons that the approved manager is approved to act for and must be updated if the manager takes on additional clients.