Legal update on the introduction of regulation of BVI closed end funds
Regulation of BVI Closed End Funds
As part of the British Virgin Islands (BVI) commitment to maintaining the highest international standards in relation to the regulation of collective investment schemes, the BVI has introduced a flexible, light touch regulatory regime for closed end funds.
The Securities and Investment Business (Amendment) Act, 2019 (Amendment Act) came into force on 31 December 2019 and amends the Securities and Investment Business Act, 2010 to:
- regulate “private investment funds”; and
- create a new category of investment manager – the licensed private investment fund manager.
A “private investment fund” is defined as a company, partnership, unit trust or any other body that is incorporated, registered, formed or organised, whether under the laws of the Virgin Islands or the laws of any other country, which:
(a) collects and pools investor funds for the purpose of collective investment and diversification of portfolio risk; and
(b) issues fund interests, which entitle the holder to receive 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, partnership, unit trust or other body.
Most BVI closed end funds, whether structured as companies, limited partnerships or unit trusts, are likely to fall with the definition of “private investment fund” and will need to submit an application for recognition to the BVI Financial Services Commission (FSC) by 1 July 2020.
Key features of new regime
Private Investment Funds must:
- have two or more directors one of whom must be an individual;
- have “appointed persons” designated as responsible for the management, valuation and safe keeping of the fund’s assets;
- have certain specified statements in their constitutional documents;
- have an offering document or term sheet setting out certain specified information (unless there is a good reason not to);
- have a valuation policy;
- have an auditor, audit its financial statements and file those annually with the FSC;
Key features of new regime
Private Investment Funds must:
- notify the FSC of changes to directors, authorised representatives, auditors, appointed persons, constitutional documents, offering documents and valuation policy;
- pay an annual recognition fee of US$1,000;
- have an authorised representative.
What BVI closed end funds/ managers of closed end funds need to do now
- take legal advice on the fund’s status;
- apply for recognition as a private investment fund by 1 July 2020;
- consider other options if recognition is not desirable.
How can Forbes Hare help you?
- We can advise you on whether your closed end fund is a private investment fund.
- We can advise and assist on the application process for recognition of your closed end fund as a private investment fund.
- We can advise you on the closed end fund’s ongoing obligations under the new regime.
This legal update is intended to be for the general information of the clients and professional contacts of Forbes Hare. It is not intended to be comprehensive and should not be relied on as a substitute for independent legal advice in any circumstances.
Key contacts
Catherine Ross
Partner and Head of Investment Funds
Singapore
T: +65 6823 1540 catherine.ross@forbeshare.com
Jose Santos
Partner and Head of Corporate
BVI and Cayman Islands
T: +1 284 852 1899 jose.santos@forbeshare.com
Patrick Colegrave
Partner Investment Funds and Corporate
London
T: +44 (0) 27 7014 3220 patrick.colegrave@forbeshare.com
Michael Doyle
Senior Associate Investment Funds and Corporate
London
T: +44 (0) 27 7014 3220 micheal.doyle@forbeshare.com