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New BVI fund regime offers distinct advantages

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By Philip Graham, Harneys – As a new ‘regulation-light’ fund manager regime is launched in the British Virgin Islands, eligible fund managers can now count on a simpler application process.

The British Virgin Islands (BVI) has introduced a new fund manager regime designed to meet the requirements of private equity, venture capital and other fund managers who want to commence business quickly in a cost-effective way. The ‘approved manager’ regime came into effect on 10th December, 2012, with the enactment of the Investment Business (Approved Managers) Regulations, 2012 (Regulations) and Approved Investment Managers Guidelines (Guidelines).

The Regulations and Guidelines come as a result of months of discussion and cooperation between the local service providers in the jurisdiction and the Financial Services Commission of the BVI to ensure that the funds industry has an appropriate suite of products to address the wide variety of requests received. The new regulatory alternative complements the more highly regulated investment business licensing regime under the Securities and Investment Business Act 2010 (SIBA).


he application process is simple and straight forward. An applicant must submit the prescribed form to the Commission, along with the application fee of $1,000, at least seven days prior to the intended date of commencement of the relevant business. After the expiry of the seven-day period (or, such shorter period as the Commission may approve), the applicant may carry on the relevant business for a period of up to 30 days (which can be extended for a further 30-day period by the Commission). During this time, the applicant will be deemed to have been approved under the Regulations. Should the approved under the Regulations. Should the Commission end up rejecting the application, the applicant must cease doing business.

The applicant must also submit, among other things:

(a) A copy of the applicant’s constitutional documents;

(b) Brief details about each director, general partner and senior officer and about each person who owns or holds a "significant interest" in the applicant along with a resume or curriculum vitae;

(c) A written declaration by the applicant that each director, general partner and senior officer and each person who owns or holds a significant interest in the applicant is "fit and proper";

(d) Details of the funds that the applicant intends to act for upon commencement of business; and

(e) Details of the individuals who will carry out the day-to-day investment business functions of the applicant.


A key feature of the new regime is that the approved manager is subject to a limit on the size of the funds which it manages or advises. Open-ended funds cannot exceed an aggregate of $400 million in assets under management and closed-ended funds cannot exceed $1 billion of capital commitments. It is thought that, once these limits are exceeded, a manager should, more appropriately, be regulated under the licensing regime of SIBA given the level of assets under management.

There are also limits on the type of funds approved managers may manage. Generally, a manager may carry on business as an investment manager or investment adviser to:

(a) One or more private or professional funds recognised under SIBA (the funds may be domiciled in the BVI or elsewhere, provided they are recognised under SIBA); or

(b) One or more closed-ended funds which are domiciled in the BVI and have certain characteristics of a private or professional fund.

However, there are some limited additions to this list as well.


The ongoing obligations for approved managers are far fewer than those required of managers and advisors holding a SIBA investment business license. Generally, an approved manager must:

(a) Have an authorised representative and at least two directors (one of whom should be an individual) at all times;

(b) Notify the Commission of any change to the information provided by the approved manager in connection with its application; and

(c) Submit financial statements (which do not need to be audited), a director’s certificate and a report on the affairs of the approved manager to the Commission, as well as an annual return.


While an approved manager will not be restricted to any material extent on the way it carries on business, the regime has been intentionally crafted to be a "licensing regime" rather than an entirely exempted activity. The Commission will have powers at its disposal to take enforcement action against the approved manager should it feel the need to do so in order to discharge its function as a regulator. The approved manager regime will always be compared to the exempt manager regime in the Cayman Islands.

The approved manager regime has a couple of distinct advantages:

(a) the regulatory fees payable by an approved manager are significantly lower for an approved manager (both for the initial application and on an annual basis thereafter); and

(b) an approved manager may act as manager or adviser to private funds and closed-ended funds that have the characteristics of private funds. Such funds only have restrictions on the number of investors and no restrictions on the sophistication or net worth of the investors, whereas a Cayman Islands exempt manager may, broadly speaking, only act for funds which fall within the definitions of "sophisticated investor" or "high net-worth person". This makes the BVI regime ideal for managers of funds with less than 50 investors, especially start-ups and family funds, for example.

The approved manager regime has provided an exceptionally helpful extra string to the bow of the BVI funds industry and one that should allow practitioners in the jurisdiction to provide a full and well-rounded service to clients.

This article originally appeared in the March 2013 edition of BVI Finance

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