Welcome to the Offshore Funds Blog

Well done for tracking us down and thanks for checking us out.

We are a diverse group of funds lawyers that have come from far and wide and now happen to be all under the global roof of one of the leading offshore law firms, Harney Westwood & Riegels.  This blog was born from wanting to try and address everyday questions we receive from our clients such as “Why do I need an offshore fund?”, “How do I go about setting one up?” and “Why are you lawyers so damn expensive?” (a common misconception).

Wanting to be good Samaritans (and hopefully remove the common misconception), Lewis Chong and I started looking around online and were surprised to see that there was not a lot of helpful information for people with these types of questions. So, after a couple of cold Heinekens one evening, we decided to create this blog.

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GDPR and offshore funds

Offshore funds established in the Cayman Islands and BVI could be forgiven for thinking that European laws on data protection don’t apply to them. That all changed recently though after the General Data Protection Regulation (GDPR) came into force in Europe last Friday, 25 May.

What’s GDPR and when can offshore funds be caught?

GDPR is broad in scope and expands Europe’s earlier data protection laws, with an overall aim of improving European individuals’ rights over their personal data and how it’s collected, stored and processed. GDPR applies to data controllers and data processors established in the European Union but can also apply to controllers/processors when they’re based outside the EU, depending on their activities.

Offshore funds may be classed as data controllers, if they’re processing data about EU individuals and the processing is related to offering goods or services to individuals in the EU. In practice, this means that offshore funds with EU investors or who actively market their fund to EU investors may be in scope. Unfortunately whether a fund is being offered or actively marketed to EU investors under GDPR isn’t the same as whether it’s being marketed under AIFMD, so funds need to review their activities and investors again to see if GDPR applies. GDPR can also apply to offshore funds where personal data’s being processed outside the EU by controllers/processors established in the EU.

Service providers to funds, including administrators and IT providers who hold personal data caught by GDPR, may also be classed as data processors. Specific GDPR requirements for arrangements between controllers and processors may then mean that a fund’s administration and outsourcing agreements need reviewing.

With potential penalties of Euro 20 million or 4% of annual global turnover, whichever’s greater, offshore funds that may be in scope of GDPR need to take it seriously.

Here at Harneys our Cyprus team has been busy advising funds and their service providers on whether they’re in scope and if so what they have to do to make sure they’re compliant, with a handy flowchart as the starting point.

The detailed impact of GDPR on offshore funds in practice is likely to be a discussion point for the industry for months to come, despite it coming into force last week, with one commentator remarking that the legislation’s “woollier than a row of sheep”. Here in Europe there are many people who are simply relieved that their inboxes have stopped being swamped with updated privacy policies, many from companies they can barely remember being in contact with in the first place…

Hedge Funds Care offers funding to support BVI children

We are very excited to be able to share the news that the BVI branch of Hedge Funds Care is now in a position to be able to work with and fund BVI projects aimed at preventing and treating child abuse on our islands.

Our plans to reach out to the community were delayed when we were rudely interrupted by the visits of hurricanes Irma and Maria in September 2017.  But after taking a moment to dust ourselves off, Help For Children BVI this week went public with a call for proposals from charities, not-for-profits and child-serving agencies in the British Virgin Islands. The call for funding proposals seeks to support programs and initiatives related to child protection, safe–guarding, well-being and child abuse prevention and treatment as the community continues to recover and rebuild from last year’s hurricanes.

I am very grateful to fellow blogger Natalie Bell and the fabulous team at Hedge Funds Care without whom we would not have reached this point. Now we look forward to seeing the vision manifest into something meaningful for BVI children!

Click here to read more about Harneys’ involvement with Help For Children BVI, and how the project got started.

DREAMING THE IMPOSSIBLE DREAM

Something quite magical happened yesterday morning.

Kyron McMaster, born and raised in the British Virgin Islands (population circa 30,000) qualified for the 400m hurdle finals at the Commonwealth Games. Now, given he would have been competing against the very best athletes from the likes of Canada (population circa 36mil), Great Britain (population circa 60mil) and India (population circa 1.3bil), this very humble 21 year old truly should have had no chance.

When you then throw in the fact that his coach was tragically killed back in September last year due to the passing of Hurricane Irma, this really was impossible. Continue reading

AEOI in Two Minutes

All BVI and Cayman investment funds are now subject to AEOI (the Automatic Exchange of Information). AEOI has been around for a while now but is still new to a lot of our clients, particularly US-based managers who are expanding their investor base and setting up an offshore structure for the first time (and also, a lot of lawyers).  So what is it, what is it all about, what do you need to know and what can you leave to the experts?

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Cryptocurrency subscriptions through the eyes of the taxman

As the world of cryptocurrency changes pretty much as regularly as I change my underwear (just to be clear mum, that is a lot, I promise), one of the very common questions we are asked by prospective managers looking to set up a new crypto focused fund is whether they can take in subscriptions in a digital currency of some form, whether that is from their own wallet or from an outside investor’s stash.

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Why I’m Going Long on Women

We are delighted today, on International Women’s Day, to host a blog from Georgie Loxton. I first connected with Georgie when she commented on my blog about women in the funds industry on this day, last year. Little did I imagine back then that, one year on, Georgie would become a friend, a neighbour and a collaborator and that I would become an avid reader of her thoughtful and insightful blog. As a woman, an investment manager with 14 years’ experience managing other people’s money and as someone who is passionate about making investing more accessible to women, Georgie is extremely well positioned to talk about women and money. Enjoy.

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Regulatory news for Cayman Islands funds

The Cayman Islands government kept funds lawyers busy over Christmas and into the New Year by publishing a draft of updated laws and regulations in December which affect Cayman Islands investment funds. This blog briefly summarises those changes, please let any of the blog team know if you’d like more information or advice on any of them or have a look at our more detailed client alerts in the links below.

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Thoughts in Crypto Custody – Part One

In today’s environment of high-profile hacks and cyber security breaches, it’s not a huge surprise to me that the majority of my fund manager clients who trade digital-assets have a distrust of institutions that claim that they can safeguard their assets. In addition, despite the exponential growth of managers trading digital-assets over the past few years, there is still a dearth of service providers willing and able to service the industry (custodians included) which means the prices that institutional custodians currently charge are not yet at levels that can be tolerated by emerging managers. Finally, there’s the question of frequency of trading; by placing their digital-assets with a third party, many managers feel that this will slow down their ability to react to market volatility and take advantage of arbitrage opportunities between different exchanges.

The combination of these factors (perceived security risks, high costs and a reduced speed of trading) means that the majority of my fund manager clients trading digital-assets prefer to safeguard their own assets through the use of cold storage e.g. by sharding their private keys, putting them on individual thumb drives and, sometimes, even placing them in different safety deposit boxes in various locations. The number one question I get asked by my clients at the beginning of any engagement is can they self-custody their assets and, if so, should they do this? With this mind, I thought it would be helpful to set out the regulatory requirements (from a BVI and Cayman law perspective) together with what we see as current market practice.

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Know your Crypto – how do you verify the source of funds on cryptocurrencies?

The phenomenal rise in the price of bitcoin during the course of this year mirrors the extraordinary amount of enquiries (and subsequent instructions) that our team has received in relation to the formation of cryptocurrency funds and digital token launches.

As cryptocurrencies and digital tokens continue their aggressive push into the mainstream investment world, regulators and lawyers worldwide are grappling with how to fit this square peg of digital assets into the round hole of the existing legal and regulatory framework. As a result, this is one of the most exciting (and, if I am honest, slightly scary) times in my legal career and my day-to-day mindset amusingly mirrors the extraordinary fluctuation in the price of most of the cryptocurrencies this week. I know my colleague Oliver Bell will be blogging about this next week and so for now, I’ll focus on one of the narrower areas our team has been trying to get its collective head around.

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Get A Room? Hotels, PE and the BVI – Part 2

In what I fear may be the least anticipated sequel since Sharknado 5, the second part of this blog looks at two real world scenarios, taken from recent transactions in the hospitality sector, that illustrate the flexibility of the BVI’s corporate code and why it matters for investors in this space. Both are based on transactions which we recently completed, but with names and certain details changed to protect client confidentiality.

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A solid investment – the BVI as a home for collective funds

As Chair of the BVI Investment Funds Association, I eagerly awaited the publication of the Capital Economics Report like a kid in the run-up to Christmas.

The BVI has a long-standing reputation in this industry for excellence, dating back to the publication of the Mutual Funds Act in 1996, but we have never had the statistics to back up every practitioners’ firm belief in the jurisdiction that we have one of the globe’s largest and most flexible fund jurisdictions.

Until now.

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Get a room? Hotels, PE and the BVI – Part 1

For some readers of this blog, combining the words ‘Virgin Islands’ and ‘hotels’ in a sentence probably conjures up a beachfront suite, with a view of turquoise ocean and perhaps, a hammock hanging invitingly just outside, shaded by a solitary palm tree. If you are currently suffering through the dank days of darkest November, I can only apologise for putting that image in your head.

However, for myself and the corporate team at Harneys, the connection between the hotel industry and the jurisdiction is not limited to properties located in our corner of the Caribbean. During 2017, we have worked on hotel and hospitality transactions involving British Virgin Islands holding company structures with a combined value of more than US$1 billion and involving a change to the indirect ownership of more than twenty hotels around the world (some of them actually in quite cold climates).

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New York, New York

It has been a real pleasure to spend a lot of time recently in New York, one of my favourite cities in the world. This is undoubtedly the best time of year to see it as well as the leaves start to change colour, the festive lights start to twinkle and it is impossible to resist getting the running trainers on and heading out for a plod around the majestic Central Park.

Until you get up there and realise that the entire city runs faster than you.

The first call to arms was a true honour; our global funds team had been shortlisted for the Offshore Law Firm of the Year in the very prestigious HFM Week Awards and so Oliver Bell and I trooped up to firstly buy something to wear (it was decided that “Hurricane Chic” was not the right look) and then secondly to attend the awards at the fantastic Cipriani on 42nd Street.

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Irma leaves love in her wake

I have stared at this blank screen for twenty minutes now.
Desperately wanting to write a blog, but simply not knowing where to start or what possible words I can use to accurately describe the “experience”.
For those that are not aware, the British Virgin Islands was hit head on by Hurricane Irma earlier this month. It became the largest storm the Atlantic had ever seen and the eye of the storm absolutely swallowed up and spat out our beautiful islands.
You can read a lot of narratives online already and view the truly disturbing photos and videos that are apparently everywhere.

I have to admit, I have barely looked at nor read anything at all in the last few weeks. I don’t need to. It’s all there, burned into the retina.
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