Mr Shameer Jasani
Principal

Shameer is principal of Travers Thorp Alberga’s New Zealand office, in Auckland.

Shameer brings to the firm significant expertise from his years of practice in London and then Cayman Islands, and over 24 years of legal practice experience overall, specifically in advising Cayman Islands and British Virgin Islands hedge and private equity funds and investment managers on all aspects of open and closed end fund structuring, formation and ongoing governance and regulatory requirements. More recently, Shameer has worked extensively on advising investment managers and their investment funds, globally, in the Digital Asset space including in Australia and New Zealand.

Shameer also regularly advises strategic and seed investors on pre-IPO financing and advises on acquisitions, joint ventures and a wide range of other corporate and intellectual property law matters.

Ms Gaela James
Senior Associate

Gaela James is a Cayman Islands investment funds and digital assets attorney. She is skilled at crafting bespoke structural solutions that align with the dynamic nature of offshore investment structures. Gaela empowers clients by guiding them through intricate regulatory landscapes, finding practical solutions that fit their business needs.

Gaela’s day to day work encompasses advising on the establishment, governance and ongoing operation of hedge, private equity and venture capital funds and digital asset platforms in the Cayman Islands and the BVI. Her comprehensive expertise in investment fund structures is bolstered by deep insights into privacy and information governance issues in the burgeoning digital asset sector.

Investment Fund structuring trends in the British Virgin Islands

 

INTRODUCTION

The British Virgin Islands (“BVI”) is a popular domicile for a variety of different types of collective investment schemes (i.e. investment funds) and investment managers. The BVI has long been seen as an attractive and sophisticated jurisdiction for the establishment of investment funds and mangers, in part due to its business-friendly environment and robust regulatory standards. In this article, I will look at (1) recent trends, (2) recent developments in law and regulation, and (3) a summary of the various key products available which contribute to its continued success.

Investment Funds

A defining feature of the BVI investment funds market is its ability to support a wide range of fund structures. Whether open-ended or closed-ended, hedge funds, private equity funds, or venture capital funds, the BVI offers a regulatory framework that enables fund managers to optimize structures for tax efficiency and compliance.

The jurisdiction remains committed to aligning its regulatory framework with global standards, enhancing transparency, and ensuring compliance. This regulatory rigor has reinforced investor confidence and strengthened the BVI’s resilience amid an evolving financial landscape.

Recent product innovations, such as the Incubator Fund and the Approved Fund (which are described in more detail below), have further bolstered the BVI’s appeal. These structures offer lower setup costs and lighter regulatory requirements (subject to thresholds), making them increasingly attractive to emerging fund managers. As of 31 October 2024, the BVI Financial Services Commission (“FSC”) reported a total of 2,087 registered investment funds.1.

Approved Managers

Prior to the introduction of the Approved Manager regime, all BVI-based managers of open-ended and closed-ended funds required full licensing. Recognizing that smaller fund managers pose lower risks, the BVI implemented the Approved Manager regime, which has since gained significant traction.

As of October 2024, 989 investment managers were registered under this regime, up from 782 the previous year.2. The regime is attractive due to its cost-effective incorporation, registration, and maintenance fees. Additionally, BVI Approved Managers are currently not subject to economic substance requirements, reducing administrative burdens. However, certain limitations apply:

Assets under management restrictions:

o Open-ended funds: Maximum of US$400 million

o Closed-ended funds: Maximum US$1 billion in aggregate capital commitments

TRENDS

Some of the recent trends we are seeing are as follows:

Single Asset Funds

A growing trend involves single-asset fund structures, where a BVI-approved manager oversees multiple BVI business companies, each holding a distinct asset. Investors receive shares in specific companies corresponding to their chosen investments. When a new investment opportunity arises, a separate entity is established, effectively forming a new single-asset fund.

The traditional model for these types of funds has been the segregated portfolio company (“SPC”) (knows as a protected cell company in some jurisdictions). The SPC allows for the creation of separate segregated portfolios which are each protectED by law for assets and liabilities, and which can invest in different asset(s). Investors chose which segregated portfolio in which to invest. However, the SPC is one legal entity, and therefore as a whole, there would be multiple investments and therefore diversification. In contrast, single asset vehicles do not pool investor funds for portfolio diversification and therefore they do not qualify as “private investment funds” under the Securities and Investment Business Act (“SIBA”) which requires diversification, and they are therefore unregulated. However, they retain the option to apply for recognition under SIBA if desired.

This has proved a popular fund product for clients who invest in underlying portfolio companies, real estate transactions, and other private equity deals.

Approved Managers

As has been mentioned above, the Approved Manager regime has also proven to be an excellent product and solution for clients looking to establish an investment management entity offshore. This is particularly attractive for clients who are multi-jurisdictional in their make up (meaning where the principals are domiciled in multiples jurisdictions, and are looking for a neutral jurisdiction in which to establish their management entity).

More recently, we have seen Approved Managers used for “SMAs” – single managed accounts. In order to this, a filing is required with the regulator in the BVI for each additional SMA to which the Approved Manager will provide services, however the process is straightforward and reflects the BVI’s approach to flexibility and efficiency.

Digital Asset Fund Managers

We are seeing increasing number of start-up funds and managers in the Digital Asset space, and such managers are increasingly attracted to the BVI for their investment fund launch because of the points set out in the paragraphs above. Moreover, often the principals, because they operate in the Digital Asset space, naturally come together from multiple jurisdictions and therefore look for an investment management solution in a neutral jurisdiction.

Hybrid structures with the Cayman Islands

Two areas where we are seeing hybrid products launched (with products covering the Cayman Islands and BVI) are:

– BVI Approved Managers with Cayman Islands Investment Funds. As I have noted, the BVI Approved Manager regime offers a fantastic solution for investment management offshore. Therefore, fund managers launching Cayman Islands investments, are often pairing this with a BVI Approved Manager.

– BVI start-up investment fund product feeding into a Cayman Islands investment fund (which can take its own direct investors as well), and this may also be paired with an onshore feeder fund. This allows fund managers to take advantage of the more flexible start-up products in the BVI for smaller investors (especially friends and family) while also offering a Cayman Islands investment fund to larger investors, as part of the same structure.

REGULATORY AND LEGAL DEVELOPMENTS

There has been a number of updates in the BVI very recently that are relevant to investment funds and managers. In the main, these are to maintain the BVI’s status as a leading offshore jurisdiction and to align itself with other prominent jurisdictions, and reflect its commitment to transparency and world class laws and standards.

Amendments to the BVI Business Companies Regime

The BVI Business Companies (Amendment) Act, 2024, effective 2 January 2025, introduced enhanced record-keeping, filing obligations, and compliance measures. Similar updates were made to the Limited Partnerships Act to align with global financial regulations (and these are set out briefly below).

Key Changes:

  • Companies must file a register of members with the BVI Registrar.
  • Nominee shareholders’ details must be disclosed if applicable.
  • Beneficial ownership information must be filed within 30 days of incorporation.
  • Directors must be appointed within 15 days (previously six months), with details filed within the same timeframe.
  • Foreign companies must provide additional registration details.
  • Penalties for late filings range from $10,000 to $75,000.

Updates to Beneficial Ownership Regime

As of September 2024, the BVI has overhauled its beneficial ownership framework, replacing the BOSS system with VIRRGIN, the main BVI registry platform.

Some new requirements include:

  • Companies must file accurate beneficial ownership information within 30 days of incorporation.
  • Any changes must be reported within 30 days.
  • Information is accessible to entities with a legitimate interest (e.g., financial crime prevention).
  • Filing fees: $125 for companies, $100 for limited partnerships.

Strengthened Anti-Money Laundering (AML) Measures

The Anti-Money Laundering (Amendment) Regulations, 2024, effective 15 October 2024, now require Money Laundering Reporting Officers (MLROs) to be pre-approved by regulatory authorities. Investment funds are exempted entities but they must notify the regulator within 14 days of the appointment.

Limited Partnership Law Amendments

Key changes under the Limited Partnership (Amendment) Act, 2024 include some of the following and align limited partnership regulations with recent changes to BVI business companies.:

  • Mandatory filing of partner registers.
  • Beneficial ownership information must be collected and maintained.
  • Annual financial return submissions.
  • Stricter registered agent resignation procedures.
  • Updated good standing certificate requirements.
  • Increased penalties for late filings.

A SUMMARY OF INVESTMENT STRUCTURES IN THE BVI

Investment funds in the BVI are regulated by the FSC pursuant to SIBA, the primary governing legislation of investment funds in the BVI, and its associated statutory instruments. In particular, SIBA provides a governing framework for five different types of open-ended fund products, along with one closed-ended fund product, and we set out a brief summary herein.

Open-Ended Funds

The BVI offers the following open-ended fund types (noting that all must be registered with the FSC, and that each has different qualifications):

1.1 Incubator Funds

The key features, in summary only, of an Incubator Fund are as follows:

  1. No more than 20 “Sophisticated Private Investors”.
  2. Initial investment for all investors of at least US$20,000.
  3. Assets under management cannot exceed US$20,000,000.
  4. Maximum lifetime of two years (with a possible extension of one year, by way of application to the FSC) after which the fund must be converted into a different product, or the business of the fund must be terminated.
  5. Financial statements are required to be submitted, but they do not need to be audited.
  6. The fund must appoint an authorized representative.
  7. A summary of terms (or offering document in lieu) must be submitted to the FSC as part its application.
  8. Can commence business after two business days of submission of the application for with the FSC.

1.2 Approved Funds

The key features of an Approved Fund, in summary only, are as follows:

  1. No more than 20 investors are permitted at any one time (investors do not need to be “Sophisticated Private Investors” or “Professional Investors”).
  2. There are no minimum subscription requirements.
  3. Assets under management cannot exceed US$100,000,000.
  4. No term limit.
  5. Financial statements are required to be submitted, but they do not need to be audited.
  6. The fund must appoint the following service providers:
  7. authorized representative; and
  8. administrator.
  9. A summary of terms (or offering document in lieu) must be submitted to the FSC as part its application.
  10. Can commence business after two business days of submission of the application for with the FSC.

1.3 Professional Funds

The key features of a Professional Fund, in summary only, are as follows:

  1. No limits on the number of investors. However, all investors must be “Professional Investors”.
  2. An initial investment for all investors of at least US$100,000 or a foreign currency equivalent (there are certain exemptions available).
  3. No restriction on assets under management.
  4. No term limit.
  5. Audited financial statements are required to be submitted to the FSC within six months of the end of financial year.
  6. The fund must appoint the following service providers (subject to certain exemptions):
  7. authorized representative;
  8. administrator;
  9. fund manager
  10. custodian; and
  11. auditor.
  12. A summary of terms (or offering document in lieu) must be submitted.
  13. Can commence business for a period not exceeding 21 days, and shall submit an application with the FSC within 14 days after the commencement of business.

1.4 Private Funds

The key features of a Private Fund, in summary only, are as follows:

  1. No more than 50 investors are permitted at any one time, or, this number may be exceeded if an invitation to subscribe for, or purchase, fund interests issued by the fund are made on a “private basis” only. Investors do not need to be “Sophisticated Private Investors” or “Professional Investors”.
  2. There are no minimum subscription requirements.
  3. No restriction on assets under management.
  4. No term limit.
  5. Audited financial statements are required to be submitted to the FSC within six months of the end of financial year.
  6. The fund must appoint the following service providers (subject to certain exemptions):
  7. authorized representative;
  8. administrator;
  9. fund manager;
  10. custodian; and
  11. auditor.
  12. A summary of terms (or offering document in lieu) must be submitted.
  13. Can commence business for a period not exceeding 21 days, and shall submit an application with the FSC within 14 days after the commencement of business.

1.5 Public Funds

The Public Funds regime is designed for retail funds, and therefore has significant regulatory requirements (which cannot be covered in this article).

Closed-Ended Funds

Closed-ended funds are registered under the PIF regime. The acronym is used to distinguish between these funds and the open-ended Private Funds.

The key features of a PIF are as follows:

  1. Interests can be offered to either:
  2. no more than 50 investors; or this number may be exceeded if an invitation to subscribe for, or purchase, fund interests issued by the fund are made on a “private basis” only (investors do not need to be “Sophisticated Private Investors” or “Professional Investors”); or
  3. “Professional Investors” only.
  4. There are no minimum subscription requirements.
  5. No restriction on assets under management.
  6. No term limit.
  7. Audited financial statements are required to be submitted to the FSC within six months of the end of financial year.
  8. The fund must have a person (referred to as an “appointed person”) responsible for undertaking:
  9. the management of fund property;
  10. the valuation of fund property; and
  11. the safekeeping of fund property, including the segregation of fund property.
  12. The fund must appoint the following service providers:
  13. authorized representative; and
  14. auditor.
  15. A summary of terms (or offering document in lieu) must be submitted.
  16. Can commence business for a period not exceeding 21 days, and shall submit an application with the FSC within 14 days after the commencement of business.

Conclusion and outlook

The British Virgin Islands remains a leading jurisdiction for investment funds, driven by regulatory flexibility, cost-effectiveness, and strong investor confidence. Its ability to adapt to financial trends ensures continued growth and resilience in the global market.

Key drivers for 2025 include increased demand for single-asset funds, hybrid structures, and digital asset fund management. The jurisdiction continues to attract fund managers seeking an efficient and well-regulated environment. Regulatory updates, such as amendments to the BVI Business Companies Act and enhanced AML measures, further strengthen its global standing, reinforcing compliance with international standards and bolstering investor trust.

With inflation easing and markets stabilizing, the BVI’s diverse fund structures offer tax efficiency, regulatory certainty, and risk diversification. The combination of flexible fund products, a business-friendly environment, and ongoing regulatory enhancements positions the jurisdiction to maintain its competitive edge and foster continued growth in the investment funds sector.