Regulation, licensing and registrationPrincipal regulatory bodies
What are the principal regulatory bodies that would have authority over a private equity fund and its manager in your jurisdiction, and what are the regulators’ audit and inspection rights and managers’ regulatory reporting requirements to investors or regulators?
The primary legislation regulating funds in the BVI is the Securities and Investment Business Act 2010 (SIBA), compliance with which is monitored by the FSC. SIBA is supplemented by regulations, including the Mutual Fund Regulations, the Financial Services Commission (Securities and Investment Business Fees) Regulations 2010 and the Securities and Investment Business (Incubator and Approved Funds) Regulations 2015.
SIBA only regulates open-ended funds and entities engaged in investment activities in or from within the BVI. The vast majority of private equity funds are closed-ended and, as such and unless where otherwise stated, this chapter focuses primarily on unregulated, closed-ended structures only. As unregulated funds, there are no audit or inspection rights held by regulators over closed-ended private equity structures.
The regulation of persons engaged in investment activities in or within the BVI (for instance, managers) is set out in more detail in question 12. Any regulatory reporting requirements of a regulated manager will relate to the accounts and business of the manager, rather than the underlying private equity fund.
As a BVI entity, a fund (whether open- or closed-ended), if structured as a company, will be registered with the BVI Registry of Corporate Affairs and its corporate affairs will be governed by the BVI Business Companies Act 2004 (as amended) and, if structured as an LP, will be registered with the BVI Registrar of Limited Partnerships and its corporate affairs will be governed by the LP Act. There is no requirement for a BVI entity, which is not regulated, to submit annual accounts or returns.Governmental requirements
What are the governmental approval, licensing or registration requirements applicable to a private equity fund in your jurisdiction? Does it make a difference whether there are significant investment activities in your jurisdiction?
As noted in question 10, closed-ended funds are not regulated in the BVI and so are not required to obtain government approvals or any license or to register to act as a closed-ended fund.
There are no additional licensing requirements where the fund invests within the BVI, save that any non-belonger entity (see question 17) that wishes to invest in land within the BVI must first obtain a land-holding licence and any significant investment into a BVI regulated business (for instance insurance or fiduciary companies) will often require approval by the applicable authority.Registration of investment adviser
Is a private equity fund’s manager, or any of its officers, directors or control persons, required to register as an investment adviser in your jurisdiction?
Where fund managers, investment advisers or fund administrators are established outside the BVI, they (and their directors and officers) will not normally need to be registered or licensed in the BVI, provided that they have no physical presence in the BVI, and the fund has no presence in the BVI save for its registered office and agent. Where a manager, adviser or administrator is established in the BVI, or where the fund has operations or investments within the BVI, and such functionary carries out services for persons other than members of its group, the manager, adviser and administrator will normally be required to be licensed under SIBA as carrying on an ‘investment business’.
Licensees under SIBA are subject to requirements to, among other things, file audited financial statements and seek approval from the FSC for any change in its directors, officers or significant interest holders, for any business carried on outside the BVI and any establishment of a subsidiary.
An alternative option to registration under SIBA is to register as an ‘approved manager’ under the BVI Investment Business (Approved Managers) Regulations, which impose lighter requirements than SIBA, including no requirement to appoint an auditor. The ‘approved manager’ regime is available for BVI entities that act as investment managers or advisers to closed-ended funds that meet the characteristics of a public or private open-ended fund (excluding the redemption rights, among other things), and, in each case, whose aggregate assets under management do not exceed US$1 billion (or its equivalent in another currency).
Registration under either SIBA or the ‘approved manager’ regime will require payment of an initial and recurring annual fee.Fund manager requirements
Are there any specific qualifications or other requirements imposed on a private equity fund’s manager, or any of its officers, directors or control persons, in your jurisdiction?
As noted in question 12, fund managers established outside the BVI will not normally require registration or licensing in the BVI, provided they, and the funds they manage, have no physical presence in the BVI save for the fund’s registered office and agent. There are no specific qualifications or other requirements on such unlicensed managers.
Where managers are required to be licensed under SIBA or the ‘approved manager’ regime (see question 12), the FSC must find the licensee to be ‘fit and proper’ to carry out their roles, taking into account, among other things, their reputation, financial soundness, experience and past conduct. Licensees or ‘approved managers’ must have at least two directors (neither of which are required to be based in the BVI) and must satisfy itself that its directors and officers are also ‘fit and proper’ for their roles.
BVI-incorporated and SIBA-licensed fund managers may be required to meet substance requirements under new economic substance regulations (see ‘Update and trends’).Political contributions
Describe any rules - or policies of public pension plans or other governmental entities - in your jurisdiction that restrict, or require disclosure of, political contributions by a private equity fund’s manager or investment adviser or their employees.
There are currently no specific rules in the BVI that restrict, or require disclosure of, political contributions by a PE fund manager, investment adviser or their employees. The Elections Acts 1994 (as amended) empowers the government to regulate the financing of election campaigns, however to date no such regulations have been brought into force.Use of intermediaries and lobbyist registration
Describe any rules - or policies of public pension plans or other governmental entities - in your jurisdiction that restrict, or require disclosure by a private equity fund’s manager or investment adviser of, the engagement of placement agents, lobbyists or other intermediaries in the marketing of the fund to public pension plans and other governmental entities. Describe any rules that require a fund’s investment adviser or its employees and agents to register as lobbyists in the marketing of the fund to public pension plans and governmental entities.
There are currently no such rules applicable to BVI closed-ended funds.Bank participation
Describe any legal or regulatory developments emerging from the recent global financial crisis that specifically affect banks with respect to investing in or sponsoring private equity funds.
There have been no specific developments in the BVI following the global financial crisis aimed at regulating banks’ investment into, or sponsoring of, private equity funds. In general, non-BVI banks would need to have regard to applicable overseas legislation where this restricts investment in private equity funds.