Author Archives: Natalie Bell

Natalie is a funds lawyer and the mother of two small children. When she can, she tries to find a moment’s peace on the yoga mat.

The BVI’s AEOI portal is now open for CRS filings. Are you ready?

The BVI International Tax Authority (ITA) announced yesterday that the BVI’s AEOI portal, BVI FARS, is now open for reporting under the OECD’s Common Reporting Standard (known as CRS)[1]. So, what do you have to do and by when?

The ITA has published an updated user guide but, since I know that most people are already glossing over and thinking about clicking on the more interesting email about drinks plans this evening which just flashed up in the right hand corner of their screens, I will try to summarise it as briefly as possible.

We are celebrating a small triumph in the BVI by beating our Cayman friends and rivals this year (in what has to be one of the world’s most boring races) to being ready to receive FATCA[2] filings. BVI funds have been diligently registering on BVI FARS and filing their FATCA reports, which were due by 31 May 2017. If you have missed the deadline, try not to panic and get in touch.

Despite a small delay (okay, I admit, Cayman beat us on this one) BVI FARS is now ready for CRS registration and so it’s now time to take the additional step of extending your registration on BVI FARS to cover reporting and filing under CRS. You can do this by logging into the BVI FARS portal as usual and changing the reporting obligations to include CRS. Actually, this really is pretty last minute and you only have until 30 June to register, yes that’s next Friday!

CRS filings have to be made on BVI FARS by 31 July 2017. A separate filing has to be submitted for each reportable jurisdiction in which the fund has reportable accounts. As with the FATCA process, you can either submit CRS filings using the manual entry using the online web form or by uploading an XML file that complies with the CRS XML Schema v.1.0, published by the OECD.

Any reports required to be made under UKCDOT[3] (the parallel reporting system for UK accounts which came in before CRS and will fall away in 2018) must also be made this year by submitting a CRS filing with the UK as the receiving country. Some accounts which are not yet required to be reported under CRS because they are pre-existing lower value individual accounts[4] and pre-existing entity accounts[5] will need to be reported under UKCDOT because the deadlines for reviewing those accounts under UKCDOT have now passed. The maximum required to be reported under the two regimes should be reported.

Don’t be caught out by the obligation under CRS which also requires investment managers and advisers, licensed in the BVI, to register on BVI FARS. Under FATCA, they weren’t required to do this because they were classified as Non-reporting FFIs.

So what are the key dates in 2017 for BVI funds and AEOI?

30 April 2017 All BVI Reporting Financial Institutions (including all BVI funds) were required to have registered with BVI FARS for FATCA.
31 May 2017 All BVI Reporting Financial Institutions should have made their FATCA reports. We recommend filing a nil return, even if you have no US Reportable Accounts.
30 June 2017 All BVI Reporting Financial Institutions (including funds and investment managers and advisers) must register on BVI FARS for CRS.
31 July 2017 All BVI Reporting Financial Institutions must file a report or a nil return on BVI FARS for CRS.
31 December 2017 All pre-existing lower value individual accounts and pre-existing entity accounts must have been reviewed for CRS.

 What else should BVI funds have done or be doing?

Most funds and their managers have been preparing for AEOI compliance and have been taking steps to ensure that they are complying with their notification, reporting and ongoing requirements but if you are still in the dark you should be:

  • Reviewing the fund’s existing documentation to make sure AEOI obligations are properly disclosed and the fund can get all the self-certification and other documents it needs.
  • Creating and implementing AEOI policies.
  • Reviewing pre-existing accounts. Financial Institutions have been given until 31 December 2017 to review pre-existing entity accounts and pre-existing lower value individual accounts. The review of all pre-existing accounts must have been completed by 31 December 2017 and all reportable accounts must be reported in 2018.
  • Appointing an authorised person as a principal point of contact to liaise with the ITA.

If you need more information or assistance with your filings, or want to discuss any of this in person, just contact one of our blog team and we will be happy to help.

Fiona has also been blogging on what is happening with AEOI in Cayman and you can read her blog here.

 

 

[1] OECD sponsored Multilateral Competent Authority Agreement and certain bilateral agreements or tax treaties regarding the common reporting standard on automatic exchange of information.

[2] US Foreign Account Tax Compliance Act

[3]  The Crown Dependencies and Overseas Territories International Tax Compliance Regulations

[4] Those with a value of less than US$1m.

[5] Pre-existing Entity Accounts with a value of less than US$250,000 do not need to be reviewed unless and until the balance exceeds US$250,000.

Is it time to consider a BVI mini-master?

We speak to a lot of emerging managers and we are always pleased to hear when they are looking to expand their investor base and bring in non-US and tax-exempt US investors (such as pension funds and charitable entities), because that is where we come in.

What makes us less happy is when we hear (which we do) that some managers are turning down allocations because creating a master-feeder structure with an offshore vehicle to accept those investors has traditionally been prohibitively expensive. In this current environment of capital raising, turning away potential investors is particularly difficult to contemplate.

Always looking for innovative solutions, we wanted to solve this problem and saw an opportunity to use the BVI “approved fund” vehicle to link up with a domestic limited partnership or limited liability company to form a cost-effective mini-master structure. This has enabled managers who have a proven track-record with a domestic fund to branch out into accepting investments of any size from non-US and tax-exempt US investors.

Continue reading

Girls just wanna have fun(ds)

We just spent the time staring at your arse in that tight cream dress, bending over the boardroom table” was the comment from a client that completely disarmed me as a newly qualified corporate lawyer. I was at a predominantly male completion dinner with some of my colleagues and a male management team, having just worked that “arse” off completing a massive management buy-out in record time, culminating in 72 hours working with no sleep.

Fortunately, during my career, explicitly sexist comments like this have been rare.  But being in a room filled with men and finding it tough to break into the conversation or feeling like I am suffering from a language barrier (when everyone is actually speaking my native language) has been a common theme. I find it difficult to put my finger on what it is that I find challenging about these situations, particularly when I work well with my male colleagues and clients, and count many men as my close friends. On a social level, I hold my own with men and women alike. Kim Elsesser, business psychologist, calls this “the sex partition”. Forming new business and social relationships is easier with people who are similar to us and, generally, the same sex. “The communication is easier and more predictable, and it results in greater trust”. And, taking this further, breaking into groups of the opposite sex, particularly in a competitive, marketing environment, is even harder.

The Financial Times reported in November last year that, according to research examining over 26,000 funds across 56 countries, only one in five has a female portfolio manager, a figure which has not improved since the financial crisis and in 2015 women held only 10.3 percent of C-suite positions in the hedge fund industry. Research also shows that, despite the evidence that women-owned or women-managed hedge funds outperform the industry, women-run funds continue to find capital raising more difficult than their male peers. This has led to many asserting that women must work harder and perform better to achieve the same results.

Continue reading

BVI Segregated Portfolio Companies go from strength to strength

Segregated Portfolio Companies (SPCs) are now well recognised and widely used corporate vehicles, and we are seeing increasing demand for them in the funds context in both the BVI and Cayman Islands. An SPC benefits from statutory segregation of its assets and liabilities in one segregated portfolio from those of any other segregated portfolio, and from the general assets and liabilities of the company, but is a single, legal entity. The SPC has only one set of constitutional documents, one board of directors and, importantly, one set of annual licence fees (although additional fees are charged per segregated portfolio on establishment (and, in Cayman, annually) these supplementary fees are much lower than the fees for establishing and maintaining multiple entities).

The ability to segregate the assets and liabilities of one segregated portfolio from another makes SPCs popular for umbrella or multi-class investment funds which can operate different investment strategies and, in particular, different levels of leverage, without risking cross contamination across the segregated portfolios.

In the past, SPCs have been popular with emerging managers who may have used an SPC platform as a cost-effective way to enter the market and establish an investment fund. They would effectively “rent” a segregated portfolio of the SPC platform rather than set up a standalone legal entity. This is still the case for Cayman SPCs although it has become less attractive in the BVI since the introduction there of specific products – the incubator fund and approved fund – tailored to the emerging manager each of which offers a quick and cost-effective set-up and minimum ongoing regulatory requirements.

Regulation of SPCs

In the BVI, a company is only eligible to be an SPC if it is, or will be on incorporation, a private, professional or public fund under the Securities and Investment Business Act, 2010. In Cayman, any exempted company can be incorporated as or convert into an SPC (if it follows the conversion procedure set out in the Companies Law).

The prior approval of the BVI Financial Services Commission (FSC) is required before any BVI company may be registered or incorporated as an SPC and this is only granted where the FSC is satisfied that the applicant has, or has available to it, the knowledge and expertise necessary for the proper management of segregated portfolios. There is no equivalent approval needed for Cayman SPCs.

In both the BVI and Cayman, each segregated portfolio either has its own offering memorandum or there is a base offering memorandum for the fund and each segregated portfolio has its own portfolio supplement.

A BVI SPC is required to have an administrator, manager and custodian. As discussed in our Introduction to Cayman Fund Products blog post, a Cayman SPC which is a regulated fund will need to have an administrator and manager but is not required to have a custodian but a Cayman SPC which is unregulated is not required under Cayman legislation to appoint functionaries. The same functionaries may be appointed to all of the segregated portfolios of a BVI SPC or a Cayman SPC which is a regulated fund. Alternatively, each segregated portfolio may appoint its own functionaries. The documents appointing the functionaries must state clearly the segregated portfolios for which the appointment is being made.

Both a BVI  SPC and a Cayman SPC which is a regulated fund are required to have an auditor, and audited financial statements must be filed with the FSC or the Cayman Islands Monetary Authority (as applicable) within six months of the end of its financial year.

The future of SPCs

The use of SPCs, especially in the funds and insurance industries, has grown in recent years and the concept is now well recognised in the international financial services industry. As a consequence, we are getting more frequent enquiries about establishing SPCs and clients are seeing that the features of SPCs are useful, not only for regulated funds but also for a broad range of other uses such as closed-end, unregulated funds or employee benefit schemes. The Cayman legislation is currently more flexible than the BVI legislation and allows unregulated funds to be established as SPCs. Consequently, Cayman is currently winning this work. The BVI Business Companies Act, 2004 provides scope for greater flexibility as to the type of vehicles that are able to adopt the SPC structure, and the FSC is looking into widening the circumstances in which SPCs can be used. When it does this (and we are hopeful that this is imminent), the BVI, with its much lower establishment and annual fees, will become extremely competitive in this market.

If you are interested in setting up an SPC in the BVI or the Cayman Islands, please get in touch.

BVI Funds industry to partner with Help for Children

Hedge Funds Cares BVI Committee

Members of the BVI Hedge Funds Care committee are photographed with Renee Skolaski, CEO of Help for Children, fifth from right, during her visit to the BVI in early November.

Last week we had the absolute pleasure of hosting Renee Skolaski, the CEO of Hedge Funds Care, which recently rebranded as Help for Children, here in the BVI.

Help for Children (HFC) is a charity supported by the alternative asset management industry with international recognition, having divisions in the US, Canada, the UK, the Cayman Islands, Ireland and Hong Kong. Its mission is to prevent and treat child abuse using proven methods. HFC has distributed over $44 million in grants, positively impacting 87,000 lives on an annual basis.

Renee was here to help us set the cogs in motion for the establishment of a BVI division of HFC, an idea conceived by Rob Davis, the founder of HFC, Renee, and Phil Graham at an HFC event in New York earlier this year and which we, with other members of the Investment Funds Association, have been working to develop. This is such an exciting opportunity because funds raised in the BVI will go directly to fund BVI projects to prevent and treat child abuse here on our islands.

During the two days that Renee was here, we had a full schedule meeting professionals currently involved in the prevention and treatment of child abuse in order to understand the need here in the BVI. We learned that the BVI has enacted legislation and put in place procedures to address the treatment of child abuse. It also has highly motivated professionals who are working very hard to address this issue. A shortage of funding means that services are suffering and implementation can be challenging. There are so many potential projects that could be funded, and the support of a BVI division of HFC could make a huge impact.

On Wednesday evening, the Investment Funds Association in the BVI sponsored an event at Peter Island at which Renee spoke to members of the industry to drum up support. We were honoured to have Lorna Smith OBE, Interim Executive Director of BVI Finance, attend and speak at the event and to have her full support for this project. Given the positive response that we received from members of the BVI Investment Funds Association, we feel that we have a responsibility to grasp this opportunity for our community. We are totally committed to seeing a branch of HFC established here in the BVI.

Our fund raising will mainly take the traditional HFC form of one big-ticket gala event so keep an eye on our blog for a save the date. In the meantime, if you are a member of the BVI financial services community and your organisation would like to be a local sponsor, please get in touch with Phil  or me.

Preparing for the demands of institutional investment in an era of transparency

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

Hands on your buzzers – BVI funds conference

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.

 

Contestants

 

Audience

 

Speakers

AIMA adds voice to those defending offshore funds

I was really pleased to see yesterday that AIMA, the Alternative Investment Management Association, has published a paper which gives a really clear explanation as to why so many of the world’s alternative investment funds are set up in offshore jurisdictions such as the Cayman Islands and the BVI. As the paper comments “What sets offshore funds – and particularly, offshore alternative funds – apart is the combination of tax neutrality, investment flexibility and sophistication allowed by offshore alternative fund structures.

Continue reading

The Five Key Ongoing Obligations of BVI Funds

I wanted to write a post on the continuing obligations for BVI funds because if you are thinking of launching a fund in the BVI, knowing what your obligations will be is essential. My challenge was how to do it without boring you all to tears. I think I have managed to capture the obligations in five key headings so, hopefully, I can hold your attention for just long enough!

Continue reading

The Approved Manager, what is it and how do I set one up?

It is nearly three years since the BVI launched its Approved Manager Regime. The introduction of the Approved Manager Regime at the end of 2012 was the jurisdiction’s first step towards putting together a complete package focused on the smaller and emerging manager and it has been a great success.

My Cayman colleagues will probably jump up and down when I say this; but it is such a success that we now see Cayman funds being set up with BVI Approved Managers, given that the Approved Manager out-performs the Cayman equivalent, the Cayman Islands Securities and Investment Business Law (SIBL) Exempted Manager, both on cost (establishment and ongoing) and because it has the stamp of being a regulated product, which the Cayman equivalent does not. In addition, the Approved Manager offers greater flexibility, as a Cayman Exempted Manager is limited to only acting for funds whose investors fall within the definitions of a “sophisticated investor” or “high net worth person” under SIBL, whilst the Approved Manager has no such limitation.

Continue reading

Something has happened and we need to suspend NAV calculations and redemptions. What next?

It seems to have fallen upon me to talk about all the things that can go wrong with your fund! As it happens, suspending NAV calculations, subscriptions and redemptions is not the end of the world that it was once considered. If you keep in mind a few key considerations, chances are you will survive this challenge.

Continue reading

cancelling a BVI fund

De-registering or cancelling the certificate of recognition of a BVI fund

If you want to de-register a BVI fund by cancelling its certificate of recognition, the chances are things haven’t gone as planned.  Perhaps the launch was not a success and the fund never traded, perhaps the launch went well but performance was poor and you are winding up. Or maybe things are more positive, you have just realised that you could operate as a closed-end fund and it makes financial sense to de-register or you think you would be better off domiciled in another jurisdiction. Whatever the reason, don’t be down.  In the words of Henry Ford, “Failure is only the opportunity to more intelligently begin again”.  The good news is, de-registering is pretty easy so we can save you a headache!

Continue reading

A guide to BVI funds products

Last month, the BVI launched the incubator fund and the approved fund. These fast and low-cost options for managers wanting to set up a regulated fund are a great addition to the BVI funds industry.  It is not surprising that everyone is talking about them.  If you have missed this, have a read of my last post.

It is taking the internet a bit of time to catch up with the developments in the BVI and I have noticed that much of the general information available on BVI funds is out of date.

For anyone thinking of establishing a new fund in the BVI I have set out a brief guide to each of the BVI fund products below.  I try to limit the use of acronyms but you will need to know that the funds industry in the BVI is governed by the Securities and Investment Business Act (SIBA) and regulated by the Financial Services Commission (FSC).

Incubator Funds

An incubator fund will be restricted to having a maximum of 20 investors, each investing no less than $20,000, and a cap on assets under management of the fund of $20,000,000.  The incubator fund is aimed at the start-up manager looking to launch quickly (approval is given within two days of submitting a complete application) with low cost, minimal regulatory hurdles and no mandatory functionaries.  It can operate as an incubator fund for up to three years.  At that point, if the fund has proved to be viable, it will need to convert to a private, professional or approved fund.  Alternatively, it can wind up its operations.

Continue reading