British Virgin Islands Hedge Funds
The British Virgin Islands (BVI) is the second most popular jurisdiction for offshore hedge funds behind the Cayman Islands. In many ways the offshore hedge fund formation process is better in the BVI, and it is certainly much cheaper. This article will detail the costs to establish a management company and a hedge fund in the BVI. It will also detail to costs for BVI registered agent services.
Establishing a BVI Business Company
The central entity that is established in the BVI is called the “Business Company” and it is established under the BVI Business Companies Act. The BVI Business Company is functionally equivalent to a domestic corporation. Establishing BVI Business Companies is done through the BVI Regisry which is associated with the BVI Financial Service Commission.
The general cost for establishing a BVI Business Company is a $350 incorporation fee which is paid to the BVI Registry. The Business Company will need to have at least one director (who does not need to be a resident of the BVI)* and will need to have a BVI based registered agent.
*Note, the BVI Registry has recently imposed an informal “four eyes” policy which requires BVI based hedge funds to have two directors. Please see an earlier article on this issue: Offshore Hedge Fund Director Requirements. If a fund needs another director, some companies will provide this service for a yearly fee.
Establishing a BVI Management Company
If a manager wished to establish a BVI based management company, the manager would establish a BVI Business Company and then go through a registration process with Financial Services Commission. Generally a fund established in the BVI does not have a management company that is also established in the BVI. There are many reasons for this, but the central reason is that if a manager is going to establish an offshore management company then it is much easier (and quicker) to establish a Cayman management company.
Establishing the Fund Entity
A hedge fund established in the BVI will be a BVI Business Company which has been “recognized” as a mutual fund by the BVI Registry. The fees are:
BVI Business Company $350
BVI Recognition Fee $350
Registered Agent Fees
If the fund is a master-feeder hedge fund, then there would typically be two BVI entities and thus the costs above would be doubled.
BVI Registered Agent Costs
As noted above, each BVI Business Company must have a BVI based registered agent. The registered agent is charged with knowing their customer and are subject to harsh penalties if they associate with terrorists or money launderers. Because of this, many registered agents will go through a thourough due diligence process to make sure they understand who will be running the company and what the company will be doing. The registered agent will also charge a higher fee than registered agents in the U.S.
Typical BVI registered agent fee: $500 – $1,000 per year, per entity
Please contact us if you need help to establish an offshore hedge fund. Other hedge fund law articles related to this post include: