The reform-minded jurisdiction, the British Virgin Islands (BVI), recognized a need for a sensitively directed fund model in the Fund Setup Market in 2015.
Guidelines were subsequently passed, considering the establishment in the BVI of two new mutual fund structures, Incubator Funds, and Approved Funds.
Before 2015, setting up a (non-authorized) Closed-End Fund, in which the investor had to secure his assets for a predetermined investment time, was the primary option for a successful dealer or potential fund director looking to dip their toe into the fund management market.
This constraint frequently caused advertisers difficulty raising money because most investors tended to favour an instrument allowing them to withdraw their money.
The new British Virgin Island Regulations empower the hedge fund Incubator and Approved Funds to be set up and dispatched on a most optimized plan of track, low-cost basis with limited administrative oversight by the British Virgin Islands Financial Services Commission.
Incubator Investment Fund Requirements
An incubator fund can only accept 20 investors and has a minimum investment requirement of US$20,000 and a maximum cap on net assets of US$20M. In addition, an incubator fund is not required to appoint an auditor, administrator, custodian, investment manager, or auditor.
An approved fund is limited to 20 investors and has a net asset cap of US$100 million.
There is no base investment requirement. An authorized fund must designate an Administrator but need not assign a Custodian, Investment Manager, or Auditor.
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An application for approval as an Approved Fund or an Incubator Fund must be launched with the Commission and be accompanied by the following:
- the constitutional records;
- details of the investment system;
- a prescribed type of investor notice; and
- an application expense (US$1,500).
An Incubator Fund or Approved Fund can start business two days after the Commission receives a finished application.
Duration of an Incubator Fund
A limited life period of two years, which may be extended for up to a year, applies to incubator funds. There are no, however, cut-off parameters for an Approved Fund.
A fund designated as an incubator may become an approved fund, a private fund, or a professional fund, or it may be terminated near the end of its existence. By lodging the necessary application with the Commission, an incubator fund can transform into a private, professional, or approved fund.
Part of what keeps the arrangement and administrator costs low is that specialist co-op necessities are minimal. Each Fund is just needed to name an Authorized Representative in the BVI, and an Approved Fund must have an Administrator consistently.
Pleasingly, there are no obligatory authority prerequisites, and there is no necessity for issuing an Offering Document. If the Fund chooses not to give an Offering Document, the necessary investor warnings can be gone ahead in a different term sheet.
The vital administrative necessities for an Incubator Fund and Approved Fund are:
- A yearly charge of US$1,000 is payable to the Commission before 31 March of every year
- Must have at least two directors consistently, one of whom must be a person
- The Fund Entity must tell the Commission of any change to any data submitted in the set-up application.
- Plan and record yearly financial proclamations with the Commission (note there is no necessity for an independent review)
- Two times per year, you should record a get back with the Commission
The documents mentioned below are required for the application:
- Guidance Sheet
- FSC application form
- Legally approved passport and confirmation of address for every director, investor, and practical proprietor
- Bank Reference for every director, investor, and proper proprietor
- Proficient reference for every director, investor, and helpful proprietor
- Police Certificate for every director, investor, and beneficial proprietor
- Resume for every director
- Structure an application for the Directors (2 minimum)
- Offer report, i.e., if you have arranged your own.
The application procedure can take anywhere from eight to sixteen weeks, depending on the complexity.
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What is the maximum number of investors needed for an incubator fund opening in BVI?
For how long the incubator fund in BVI is limited?
For two years.
Can an incubator fund in BVI be extended?
For another year.