The BVI funds industry: dynamic, robust and responsive
By Nadia Menezes, Senior Associate, Appleby – Since the introduction of the Mutual Funds Act, 1996, the British Virgin Islands (BVI) has grown from a fledgling jurisdiction to a strong and confident player at the frontline of the offshore funds industry.
The BVI's legislation artfully blends the best attributes from the United Kingdom, Delaware and other onshore and offshore jurisdictions resulting in a bespoke and dynamic framework of laws. BVI legislation uses concepts familiar to counsel on both sides of the Atlantic and are thus easier to relate to and work with in combination with onshore structures or in meeting the needs of onshore clients. Similarly, the stability of a jurisdiction with roots in UK common law, the introduction in 2009 of a specialised Commercial Court, and the comfort of having the ultimate court of appeal being the UK Privy Council further enhances the attractiveness of the BVI.
The BVI's willingness to operate as a transparent and credible jurisdiction has been further supplemented by the 23 tax information exchange agreements (TIEAs) entered into between the territory and other mainstream jurisdictions. This helps eliminate the perceived shroud of illegitimacy associated with some offshore jurisdictions and reveals the BVI to be an engaging and earnest jurisdiction.
The last decade, in particular, has seen the BVI implement a host of modern legislation for the financial services industry: the Insolvency Act, 2003, provided a bespoke, user-friendly and comprehensive regime to facilitate corporate restructuring and insolvency, whilst the enactment of the BVI Business Companies Act, 2004, introduced a more flexible and all-encompassing corporate framework for BVI companies. This was followed swiftly by the creation of a segregated portfolio company regime for funds which increased the versatility and ease of use of BVI companies, making them more popular with fund managers and prospective investors alike. The 2012 amendments to the BVI Business Companies Act further enhanced corporate law and have been welcomed by the corporate and funds sectors.
The size of the BVI and its heavy reliance on the offshore financial services industry allows for legislation to be introduced with a speed and timeliness that is difficult to achieve onshore. The latest major suite of legislation in the form of the Securities and Investment Business Act, 2010 (SIBA) and its related regulations followed swiftly on the heels of the global financial crisis and the storms that shook the hedge funds industry as a result of the Bernie Madoff fraud. Consequently, many of the mechanisms within SIBA address the call for greater accountability and enhanced corporate governance.
A sign that the BVI financial services industry remains committed to identifying new product offerings has been the introduction of new regulated products under SIBA in the form of a licensing regime for brokers and dealers, and scope for foreign currency trading platforms. These have proved to be very popular especially with US and European clients looking for a level of regulatory supervision that is robust yet has fewer hurdles (such as prohibitive authorised capital thresholds). Another new development is the introduction of a lighter touch regulatory option in the form of the Approved Managers Regime in December, 2012, which offers a speedy option for managers of smaller funds and private equity vehicles with substantially lower annual fees than the equivalent option in other jurisdictions. This latest offer has attracted a great deal of interest and further increases the attractiveness of the BVI as a one-stop-shop jurisdiction.
In the years since Madoff's catastrophic fraud, courts in the BVI have become more adept at analysing related issues and handing out judgment and guidance faster than the judiciary of many onshore jurisdictions. This has further honed and matured the legal skills of service providers within the BVI, and the funds documentation being prepared now reflects the lessons learnt from that tumultuous period.
The first 16 years of the BVI's funds industry has seen the territory expand rapidly into a well-established and recognised jurisdiction of choice for many managers and investors. BVI service providers demonstrate high levels of quality, sophistication and responsiveness while adopting a proactive approach on par with onshore jurisdictions.
This article originally appeared in the April edition of BVI Finance
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