Effective 31 December 2019, the British Virgin Islands (“BVI”), through the enactment of the Securities and Investment Business (Amendment) Act, 2019 (“SIBA Amendment”) and the accompanying Private Investment Funds Regulations, 2019 (“PIFR”), introduced a new regime for the regulation of close-ended funds.
A close-ended fund, or currently categorised as private investment fund under the SIBA Amendment, can be a company, a partnership, a unit trust or any other body that is incorporated, registered, formed or organised, whether under the laws of the BVI or of any other country, which:
- collects and pools investor funds for the purpose of collective investment and diversification of portfolio risk; and
- 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.
Regulatory requirements of the private investment fund include:
- to specify in its offering document the following: (i) it is not authorised to have more than 50 investors, (ii) invitation to subscribe must be made on a private basis only, (iii) minimum initial investment of professional investors set at US$100,000, (iv) investment objective, (v) a written statement that investors do not have the right to redeem or withdraw fund interests on demand, (vi) names and addresses of the appointed persons and (vii) any fees to be paid by the private investment fund.
- to have at all times an authorised representative in the BVI, two directors if it is structured as a company and a person, referred to in the SIBA Amendment as an appointed person, responsible for undertaking the management, valuation and safekeeping of fund property, including the segregation of fund property.
- to maintain a clear and comprehensive policy for the valuation of the fund property;
- to prepare and submit annual audited financial statements with the BVI Financial Services Commission (“FSC”) within 6 months from the financial year end (with up to 9 month filing extension request subject to approval of the BVI FSC);
- to notify the BVI FSC within 14 days of certain key changes in the management, operation and structure of the private investment fund; and
- to retain financial records described in PIFR for a period of at least 5 years after the completion of the transaction.
Existing close-ended funds which now fall within the definition of private investment fund of the SIBA Amendment but are currently licensed as either a private, professional, public, approved or incubator fund have been provided a six-month transition period to apply to the BVI FSC to be recognised as a private investment fund. All existing private investment funds must have submitted a completed application to or received approval from the BVI FSC no later than 30 June 2020. Breach of this legislation may result in penalties.
For more information on the above, please feel free to contact Nigel Macphail (email@example.com).