This Guide provides an overview of the various investment fund vehicles available in the British Virgin Islands. This Guide concentrates on regulated investment funds and, in particular, offshore hedge funds, since these constitute a large majority of the investment funds domiciled in the British Virgin Islands and make up approximately one quarter of all offshore hedge funds established worldwide.


The investment funds industry in the British Virgin Islands is regulated by the Investment Business Division of the Financial Services Commission (the “FSC”) and the primary legislation which governs the industry is the Securities and Investment Business Act, 2010 (“SIBA”).

Under Part III of SIBA and the Mutual Fund Regulations, 2010 (“MFRegs”), regulated funds are categorised as private funds, professional funds or public funds. It must be borne in mind, however, that not all investment funds will be subject to SIBA, as it only regulates open-ended funds (whose equity interests are redeemable at the option of the investor). Closed-ended funds (funds whose equity interests are not redeemable at the option of the investor) are not subject to specific regulation in the British Virgin Islands.

While there are many offshore jurisdictions offering a tax-free domicile for investment funds, there are a number of advantages to establishing an investment fund in the British Virgin Islands. These include:

  • tax neutral environment;
  • a stable political and economic jurisdiction which is committed to remaining fully compliant with all supra-governmental bodies responsible for policing the world’s financial markets;
  • a recognised and respected legal system derived from English Common Law as supplemented by modern local legislation;
  • a dedicated Commercial Court with a dedicated specialist judge and court staff;
  • no regulatory restrictions on investment policies or strategies or on performance and other fee arrangements;
  • no requirement to appoint local directors, local functionaries or local auditors;
  • fast track procedure for professional funds;
  • the ability to amend the memorandum and articles of association of the fund without (in most scenarios) requiring a vote of the members;
  • statutory segregated portfolio ring-fencing; and
  • comparatively low start-up and ongoing fees and costs.


Sponsors and fund managers considering establishing investment funds in the British Virgin Islands may choose to structure the fund as either one of the following:

  • a BVI Business Company.
  • a Limited Partnership.
  • a Unit Trust.

The majority of British Virgin Islands investment funds are established as companies limited by shares under the BVI Business Companies Act, 2004 (“BVIBCA”). Limited Partnerships are also common while unit trusts are relatively rare.

2.1. BVI Business Companies

A BVI Business Company is a separate legal entity from the investing shareholders. The shareholders of a BVI Business Company have no direct legal or beneficial interest in any of the assets of the company which are instead legally and beneficially owned by the company itself.

The BVIBCA provides a great deal of flexibility in terms of structuring funds which adds to the characteristics that made the historical International Business Companies Act in the British Virgin Islands the number one offshore corporate domicile.

As an example, there is no longer a concept of “authorised capital” or “share capital” and therefore there is no longer a requirement for there to be any par value or capital attributed to shares. A company only has to state in its Memorandum of Association the maximum number of shares that it is authorised to issue. The directors may designate different series of shares within each class without the need to amend the constitutional documents of the fund, giving a great deal more flexibility to funds wishing to use series accounting techniques to achieve equalisation of performance fee allocations among shareholders.

2.2. Limited Partnerships

British Virgin Islands limited partnerships are established pursuant to the Partnership Act, 1996. A limited partnership is formed by a general partner and at least one limited partner executing Articles of Partnership and by submitting a Memorandum of Partnership to the FSC. The Articles of Partnership do not have to be filed with the FSC and form the internal governing document of the partnership dealing with issues such as partnership contributions and withdrawals and the day-to-day running of the partnership.

A limited partnership does not have a separate legal personality distinct from its partners. The General Partner is therefore liable for the debts and obligations relating to the limited partnership. As a matter of British Virgin Islands law, a limited partner is not liable for the debts and obligations of the limited partnership so long as the limited partner does not participate in the control of the partnership business.

2.3. Unit Trusts

Unit trusts are established pursuant to a deed of trust. A unit trust arrangement is not a separate legal entity. The Trustee has legal capacity and holds the assets of the fund on the terms of the deed of trust for the investors in the unit trust scheme. Under British Virgin Islands law, the holders of units in a unit trust scheme are the beneficial owners of the trust assets.

If the trustee of a British Virgin Islands unit trust is a company incorporated in or operating out of the British Virgin Islands then the trustee is likely to require a trust licence under the British Virgin Islands Banks and Trust Companies Act, 1990 as well as having to apply for recognition of the unit trust as a fund under SIBA.


British Virgin Islands law facilitates a number of alternative structures for investment funds including the following common structures:

  • Single class funds which are set up with a single class of shares giving investors the opportunity to participate in a single investment portfolio.
  • Multi-class funds (sometimes referred to as umbrella funds) which issue equity interests in a number of different classes to enable investors to participate in a range of investment portfolios. The objective is normally to achieve cost efficiency but, since the portfolios are only segregated for internal accounting purposes, a conventional company is subject to the inherent risk of cross class liability. To deal with this issue, multi-class funds
  • can be incorporated in the British Virgin Islands as Segregated Portfolio Companies under which the assets attributable to a particular portfolio are segregated by statute and not available to meet the liabilities of creditors attributable to any other portfolio.
  • Master/feeder funds which are structured to enable subscriptions made in separate feeder vehicles to be pooled into and managed as a single master fund portfolio. A typical example of a master/feeder fund would involve United States domiciled taxable investors investing directly in an onshore vehicle (often a United States limited partnership) and United States tax exempt or non-United States investors investing in an offshore vehicle (normally a BVI Business Company). Each “feeder” fund then invests all its assets in an offshore “master” fund (normally a BVI Business Company). The principal objective is to enable investors that are subject to differing tax or other regulations or with distinct requirements to participate together in the same investment portfolio having common investment objectives. The structure achieves economies of scale for portfolio related activities.
  • Single investor funds are widely used by institutions, funds of funds and high net worth individuals as an alternative to managed accounts solutions. By establishing a fund investors maintain the flexibility and limited liability of a corporate vehicle which can engage its own service providers.


SIBA requires all investment funds formed in the British Virgin Islands and falling within its definition of “fund” to be recognised or registered as a fund by the FSC.

SIBA defines a “fund” as a company or any other body, a partnership or a unit trust incorporated, formed or organised, whether under the laws of the British Virgin Islands or the laws of any other country which:

  1. collects and pools investor funds for the purpose of collective investment; and
  2. issues fund 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 company, the partnership, the unit trust or other similar body, as the case may be; and includes
  1. an umbrella fund whose shares are split into a number of different class funds or sub- funds, and
  2. a fund which has a single investor which is a mutual fund not registered or recognised under SIBA.

The three categories of regulated investment funds are as follows:

 Private Funds

A private fund is restricted to either (a) having no more than 50 investors or (b) only making an invitation to subscribe for or purchase fund interests on a private basis.

Private funds must be recognised by the FSC before they carry on business. Historical policy guidelines issued by the FSC under the previous mutual funds regime suggested that a fund will be regarded as having commenced its business when a prospectus, or other document the purpose of which is to make an invitation to purchase or subscribe for shares of the fund, is published.

Professional Funds

A professional fund may carry on its business or manage or administer its affairs for a period of up to 21 days without being recognised under SIBA.

A professional fund, which is a fund the shares in which are only made available to “professional investors” and the minimum initial investment by each professional investor (other than exempted investors) is not less than $100,000 (or other currency equivalent).

A “professional investor” is a person (i) whose ordinary business involves, whether for that person’s own account or the account of others, the acquisition or disposal of property of the same kind as the property, or a substantial part of the property, of the fund; or (ii) who whether individually or jointly with his spouse, has a net worth in excess of US$1,000,000 (or other currency equivalent).

An “exempted investor” means

  1. the manager, administrator, promoter or underwriter of the fund; or
  2. any employee of the manager of the fund.

Public Funds

A public fund is a fund that is neither a private fund nor a professional fund. It is generally viewed as a retail product and accordingly the regulatory burden is considerably higher.

Public funds must be registered by the FSC before they carry on business. Registered public funds may not make an invitation to the public or any section of the public to purchase shares unless prior to such invitation they publish in writing a prospectus which complies with SIBA and the Public Funds Code, which is approved by and signed on behalf of the fund’s directors and is registered by the FSC.


SIBA requires a fund wishing to be recognised or registered to appoint the following functionaries:

  • investment manager,
  • administrator,
  • custodian,
  • auditor

However, private or professional funds may apply for an exemption to appoint an investment manager, custodian or auditor.

In considering an application for recognition or registration, SIBA requires that the manager, investment advisor, administrator and/or custodian of a British Virgin Islands mutual fund satisfy the FSC’s fit and proper criteria. The following countries have been designated by the FSC as “Recognised Jurisdictions”:

Please click here to view the list of countries.

An application for recognition or registration of a mutual fund whose functionaries are domiciled in a Recognised Jurisdiction and which holds the appropriate regulatory status in that jurisdiction will generally be processed without further assessment of the fit and proper status of the relevant functionary. The FSC also may accept a functionary domiciled in another jurisdiction if the applicant can satisfy the FSC that it has a system for the effective regulation of investment business including mutual funds business.


SIBA places various statutory requirements on mutual funds recognised as private or professional funds, the key provisions of which are as follows:

  • a mutual fund must notify the FSC within 14 days of certain events occurring. These include the appointment or removal of a director, an amendment to its constitutional documents or offering document or a change in the address of the fund’s place of business.
  • a mutual fund must also notify the FSC at least 7 days prior to the appointment of a new functionary.
  • all mutual funds must appoint an authorised representative in the British Virgin Islands. This entity acts as the conduit between the fund and the FSC. An affiliate entity of Harneys (Craigmuir Authorised Representative Limited) provides this service.
  • a mutual fund must submit a copy of its offering document to the FSC, which must contain a prescribed investment warning.
  • a mutual fund must appoint and at all times have an auditor to audit its financial statements (although the FSC may exempt certain funds upon application). Audited financial statements for each financial year must be submitted to the FSC within 6 months after year end.
  • a mutual fund must have at least two directors, one of whom shall be an individual.

Mutual funds registered as public funds must not only apply with the above provisions, but also some further regulatory requirements set out in SIBA, the MFRegs and the Code.


The BVI anti-money laundering or “AML” regime applies to all mutual funds since they are classified as ‘relevant persons’ under the Anti-Money Laundering Regulations, 2008. As such a mutual fund will, in summary, be required to:

  • Put in place investor onboarding procedures which address typical KYC requirements.
  • Appoint an officer of the fund or another individual as Money Laundering Reporting Officer for the fund. In practice this may be a director of the mutual fund itself, or else a person provided by one of the functionaries to the mutual fund.
  • Report suspicious transactions to the BVI Financial Investigations Agency.
  • Put in place documentation, such as a compliance manual, which outlines how the mutual fund complies with the AML requirements in the BVI.

The BVI rules do acknowledge that mutual funds may outsource all and any of these obligations to functionaries based outside of the BVI, such as an administrator or investment manager. These outsourcings need to be documented in writing.


Fees payable by BVI Funds to the FSC are competitive and lower than other offshore and onshore jurisdictions. From 1 January 2011, a private or professional fund must pay a US$700 application fee and an annual fee upon recognition of US$1,000. Prior to 1 January 2011 there is no application fee. From 1 January 2011, a public fund must pay US$1,000 on application for registration and an annual fee of US$1,500. Again, prior to 1 January 2011 there is no application fee.