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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.
It seems like almost six months since I was in Shanghai to present at the 2nd Annual Hedge Fund China Summit 2016 and to enjoy plenty of the vino tinto at the awards dinner afterwards where my firm, Harneys, picked up the trophy for “Best Offshore Law Firm for Hedge Funds”.
Wait, that’s because it was five months ago.
And what a five months it has been.
Shortly after picking up that award, I was thrilled to hear that my colleagues in our London office had been named Best Offshore Law Firm – Client Service at the HFM European Hedge Fund Services Awards, announced on 21 April 2016.
The HFM Awards are high profile in the global hedge funds industry and the client service award is independently judged based on the relative strength of client testimonials and market feedback. The awards recognise Harneys as having provided leading client service, innovation and expertise to our valued hedge fund clients of all sizes, from start-up hedge funds and emerging managers to global multi-billion dollar investment institutions. That is what we do.
Now, when I say thrilled … what I actually mean is … indignant that my colleagues in London would seek more glory than their far more humble colleagues battling away day and night here in the buzzing hub of economic activity that is Asia.
Many of our readers will no doubt have heard about the recent decision by the European Commission that Apple’s tax structure in Ireland breached the EU state aid rules. But what, you may wonder, does that have to do with offshore funds? For me it raises an important question of principle of who should be deciding international tax policy for multi-national corporations and other companies – including investment funds – that operate on a cross-border basis in Europe.
As we’ve blogged about before, the OECD’s been busy working on its BEPS plan to try to make the international tax system more joined up – and limit some of the mismatches that multi-national and other companies have for years (completely legally) used to reduce their tax bills.
Here in Europe, the European Council’s also been working on introducing legislation building on BEPS and the Commission’s 2015 Action Plan for Fair and Efficient Corporate Taxation in the European Union, via the Anti Tax Avoidance Directive. So far, this all looks suitably co-ordinated and sounds sensible when you bear in mind the Commission’s website statement that “National governments are responsible for raising taxes and settling tax rates…The EC Treaty does not specifically call for direct taxes (income and corporate taxes) to be harmonised.”
So how then does the 30 August 2016 state aid decision by the Commission about Apple’s tax structure in Ireland fit into this?
They’ve been talked about for a while by our bloggers and contributors but the moment has now come for the Cayman LLC, which has been available for registration since 13 July and numerous of which have already been formed. The Cayman LLC was introduced to meet the requirements of North American managers and intermediaries who use Delaware LLCs and want a flexible offshore version, and Cayman lawyers dealing regularly with North American clients are particularly excited about now being able to offer a “Cayman” version. Its introduction also highlights Cayman’s responsiveness to market demand as it continues to maintain its position as the dominant brand in North America for funds structures.
So what makes the Cayman LLC – or limited liability company, to give it its full name – so interesting?
In this guest post, my friend Scott Rosenthal discusses the role of an Outsource CFO and the reasons why fund managers might like to engage one. Do feel free to get in contact with Scott or myself if you would like to discuss any of this further.
There is a growing segment of the hedge fund and private equity fund service provider population called the Outsource CFO. Outsourcing has become very popular in recent years, in regards to back office, middle office, compliance (including outsourcing the investment advisers CCO), trading, and most other areas that a hedge fund needs to operate. What could be considered the final frontier of the service provider population is the Outsource CFO. The Outsource CFO model assists the start-up or smaller fund manager, who may not have the budget or the need for a full time CFO. So, instead of hiring someone who may not have the appropriate experience in order just meet the budgetary restrictions, fund managers can now opt to hire an Outsource CFO.
So why use an Outsource CFO?
As an emerging manager who has set up a BVI incubator fund with the backing of friends and family, the two to three-year incubation period is time to prove your credentials and build a solid track record with the ultimate aim of attracting sophisticated and institutional investors. However, there is so much more to do during that period than prove that your investment strategy stands up to scrutiny.
In an age of increasing transparency, it is vital that you use the incubation period to start preparing for a time when you will need to meet institutional-style demands in terms of your operations. It is still early days – and you may still fall below AUM thresholds for complying with extraterritorial regulation – but there is a level of infrastructure and reporting that sophisticated and institutional investors will expect before they are going to invest. Continue reading
Private Equity Funds and Fund of Funds in China, also known as ‘Sunshine Funds’, are growing rapidly. In this guest post, my colleague and Managing Partner of Harneys Shanghai Kristy Calvert explores the reasons behind this trend.
The Asset Management Industry is one of the fastest growing business sectors in China. Privately managed (non-retail) funds in China, often referred to as ‘sunshine funds’ by local practitioners, have traditionally enjoyed a largely unregulated environment – unlike the mutual funds industry, which is heavily regulated by the Chinese Securities Regulatory Commission (CSRC).
It was a packed room at The Lawyer Awards last week – all 1250 of us anxiously hoping our firm would be crowned winner – and with few categories so fiercely contested as Offshore Law Firm of the Year, we were definitely on the edge of our seat.
The Lawyer kept us entertained while we waited, though. With hours of comedy from Dara Ó Briain, a rocking band and a beautiful River Thames fireworks display, it was a glittering celebration of a year of hard work and success across the legal industry – and judging from the crowd still packed on the dancefloor at 2am, a night that many didn’t want to end.
So, the pound’s tanked, world stock markets are in turmoil, Scotland and Northern Ireland are considering whether to leave the United Kingdom so they can stay within the EU and the Prime Minister has announced his resignation. Last week’s vote to Leave the EU has certainly had a profound (and depressingly predictable for those of us who voted Remain) impact on the UK economy and politics already, with a long period of uncertainty yet to come. The financial services industry in the UK is likely to be significantly affected by Brexit, with various international investment banks having now announced that they’re reviewing their operations here, given the uncertainty over whether they will still be able to passport their financial services and products across Europe from London.
But what impact will Brexit have on Cayman and BVI offshore funds and how they’re marketed into Europe?
Our BVI funds team was out in full force today at a conference we hosted for the BVI financial services community.
As a new way to involve our audience, we put the power in the people and invited our attendees to submit questions for us to answer in a wheel of fortune-style quiz.
When the submissions started rolling in, they ranged from specific and technical points on CRS, FATCA and AML (anti-money laundering) legislation in the BVI to general questions on the state of the funds industry – and some more controversial questions about the Panama Papers. There were moments when we wondered whether we had made the right decision in asking for the views of the public – a feeling that may well have echoed the sentiments of David Cameron on this historic Brexit vote day.
With Phil as quiz master, we played for points and competed for a $500 award from Harneys to one of four local charities. Between us, we managed to tackle the questions and, I hope, keep the attention of the audience. Our regulatory expert, Mirza, dazzled the floor with a few of his spectacularly technical responses. I am happy to report that, despite lagging behind in the first rounds, I came through at the end and won the cash prize which we donated to the HIV and AIDS foundation in the BVI.
Here are a few pictures of us in action.
For those that are not aware, LeBron James just transcended his sport. Playing against a team that some have described as the best ever and down 3-1 in the Finals (a position that no other team in NBA history has ever come back from), he produced some of the greatest basketball the world has ever seen. Hell, some of the greatest sporting performances the world has ever seen.
He threw up numbers that are mind-boggling and yet he was far more than that. Leading a decidedly average supporting cast, there was something about this Cavaliers team that clearly just kept on believing in their superstar.
Because that’s what he is.
One of the tired narratives that you regularly hear when discussing sport is why people who throw/kick/catch a ball for a living deserve to be paid such ridiculous sums of money. Continue reading
Here in the UK the debate is intensifying around the EU referendum on 23 June on whether the UK should remain in or leave the EU. With not long to go to the vote, for obvious reasons a lot of the discussion about the impact of any “Leave” vote has been on the UK economy and UK citizens. Many onshore UK law firms have set out in detail the exit mechanism that would be involved following a vote to Leave and their thoughts on how it could affect the legislative landscape in the UK for financial institutions and investment managers. If the UK votes to remain in the EU, we can expect going back to business as usual in most areas, although quite how the Conservative party will re-unite itself after all the recent mud slinging remains to be seen. However, a Leave vote and subsequent Brexit from the EU could also have a much broader effect around the world, in ways that haven’t necessarily grabbed the headlines so far.
So what impact might any Brexit have on Cayman and BVI offshore funds and how they’re marketed into Europe?
When our global funds partners decided to meet in the Entertainment Capital of the World, there was a great deal of scepticism from the rest of the firm as to how constructive our collective output from the meetings might be.
One of our kindly litigation partners even had the temerity to question whether given the performance of the hedge funds sector in 2016 so far, we would be better suited meeting at a Holiday Inn in Blackpool (for those not familiar with this UK city, try and keep it that way).
As many of you are aware, there is an increased regulatory and investor focus on cybersecurity in the funds space (just last week the Cayman regulator issued this circular). In this guest post, my friend Erik Kellogg discusses one of the key cybersecurity issues that start up and emerging managers should address.
The international press has picked up on many stories during the last twelve months; we’ve seen a bailout of Greece, an American Flag raised in Cuba, Leicester winning the Premier League in England and Beyoncé and Kim Kardashian battling to be the first one to break the internet.
Well we here at the Offshore Funds Blog very much hope they don’t succeed. As our loyal followers will know, we’ve been in existence since May 2015 and to help celebrate our first year, our clever people behind the scenes have pulled together a list of the top five most-read blog posts just in case you missed them first time around.
If you’ve decided that a section 4(3) Cayman fund is the best structure for your fund (see our earlier blog for an Introduction to Cayman Fund Products), you’ll need to register it with the Cayman Islands Monetary Authority (CIMA) before you launch. The process is well established and fairly straightforward, involving your Cayman lawyers filing the following with CIMA via their online registration system.