Mutual Funds

Mutual funds are regulated under the Mutual funds Act, 1996 (as amended), which includes the following provisions:

Mutual fund defined

A mutual fund is defined under the Act as a company incorporated, a partnership formed, or a unit trust or other similar body organised under the laws of the BVI or any other jurisdiction, which collects and pools funds for the purpose of collective investment, and which issues shares or equity interests that entitle the holder to receive on demand, or within a specified period after demand, an amount computed by reference to the value of a proportionate interest in the whole or in a part of the net assets of the fund.

A fund is subject to the Act if it is organised under the laws of the BVI, operates in or from within the BVI, or solicits subscriptions from persons in the BVI.

The Act provides for a three tier system of regulation, distinguishing between Public, Private and Professional funds. The Act also regulates managers and administrators of funds.

Private and Professional Funds

A Private Fund must specify in its constitutional documents that an invitation to subscribe for or purchase shares can only be made on a private basis, and that it cannot have more than fifty investors.
A Professional Fund must have a minimum initial investment of US$100,000 in respect of each investor (except for the manager, administrator, promoter or underwriter), and all investors must be deemed professional investors or have a net worth in excess of US$1 million.

A Private or Professional fund must submit an application in the prescribed form for recognition as a Private or Professional fund, accompanied by:

• details confirming the lawful constitution of the fund in the BVI or elsewhere
• proof that the fund qualifies as a Private or Professional fund
• notice of the fund's business address in the BVI, the person resident in the BVI who is authorised to represent the applicant, and the addresses of any other places of business outside of the BVI
• payment of the application fee of US$350 (only payable for funds not incorporated in the BVI)

An annual government fee of US$350 is also payable by 31st March in each year subsequent to its recognition.

Public Funds

A Public Fund, defined as any fund that is not a Private or Professional Fund, must submit an application in the prescribed form for registration as a Public fund, accompanied by:

• a statement setting out the nature and scope of the business to be carried on by the fund in or from within the BVI and any other jurisdictions
• details confirming the lawful constitution of the fund in the BVI or elsewhere
• notice of the fund's business address in the BVI, the person resident in the BVI who is authorised to represent the applicant, and the addresses of any other places of business outside the BVI
• payment of the application fee of US$500

An annual government fee of US$500 is also payable by 31st March in each year subsequent to its registration.

Prior to offering shares to the public, a Public fund must file its prospectus with the Registrar of Mutual Funds, and subsequent changes to the prospectus must be filed within 14 days.

A Public fund must maintain adequate accounting records in the BVI, available for examination by the Registrar, and must provide all investors, or make available to them, audited financial statements.

A Public fund which carries on business outside of the BVI under the laws of another jurisdiction must file an annual certificate of compliance within three months of its financial year end, issued by a competent authority responsible for the regulation and supervision of the conduct of the fund's activities in the jurisdiction where the fund carries on its principal business.

Managers and Administrators

A licence is necessary to provide mutual fund management or administration in or from within the BVI. However, there is no requirement that a mutual fund recognised or registered under the Act need appoint a licensed BVI manager or administrator.

Application for a licence must be submitted in the prescribed form, accompanied by:

• a statement of the financial and human resources and administrative facilities available to the applicant for the competent and efficient conduct of its business
• payment of the application fee of US$250
• confirmation that an auditor has been appointed

Annual government fees of US$500 for a manager or administrator are payable by 31st March in each year subsequent to receiving its licence.

The IBC is a popular structure for mutual funds and in excess of 1,000 funds are domiciled in the BVI. A full range of administrative and custodial services are available in the BVI, although there is no requirement for any such services to be specifically provided in the BVI