Eternity Law International — News — Types of investment funds

Types of investment funds

Published:
January 30, 2020

TYPES OF PUBLIC FUNDS

According to SIBA, there are four categories of Open Funds:

  1. Professional foundation;
  2. Private foundation;
  3. Public fund;
  4. Recognized foreign foundation.

Professional foundation

Their statutory documents state:

  • the fund’s main interest goes only to “professional investors”;
  • the initial investment of each investor in the fund (other than “exempt investors”) must be at least US $ 100,000.

In the context of these provisions, the term “Professional Investor” means a Person who specializes in acquiring or disposing of property of the same type belonging to the foundation, both at his own expense and at the expense of others.

Or A person who has signed a declaration that he owns more than US $ 1 million or its equivalent in any other currency. That he agrees to be considered a professional investor.

An “exempt investor” is the Manager, Administrator, Promoter, Underwriter of the fund, and any employee of the fund manager or promoter.

Private Foundation

Private foundations are open funds, the statutory documents of which indicate that:

  1. The fund is not eligible to have more than 50 investors;
  2. Invitations to subscribe or purchase or fund interest issued by the foundation are made on a private basis only.

Public Foundation

Public funds have no criteria for investors, but are subject to higher control and supervision by the state.

Recognized foreign foundation

Recognized foreign funds are those that are sold in the British Virgin Islands and have been recognized by the FSC.

PUBLIC FUNDS STRUCTURE

1.BVI business company as an open fund

This type is most commonly used. A BVI business company can be structured to issue shares that can be redeemed. The rights and obligations of shareholders, the terms of redemption and the method of valuation are set out in the Memorandum and Articles of Association.

Shares
The maximum number of shares that a BVI Business Company is allowed to issue. The classes of shares that may be offered along with the rights, privileges, restrictions and conditions attached to each of these classes, shall be set out in the Memorandum of Association of the BVI Business Company.

Typically, an open-ended fund has a small number of management shares held by the holders. The remainder of the redeemable shares is issued in one of the classes.

The redeemable shares usually have par value, but they are issued at a fairly significant premium.

Investors may be granted different classes of shares according to differences in the interests and strategies pursued by the fund and / or may be admitted to different redemption rights and levels of remuneration.

A number of shares for each class of redeemable shares are usually issued to account for differences in the distribution of consideration caused by the timing of investments in shares of the same class. Different classes of shares can be denominated in different currencies.

Redemption of shares

To be redeemed, the shares must be designated as redeemable at the option of the holder of such shares in the Memorandum of Association of the BVI Business Company. The memorandum of association may also provide that the shares are redeemable at the option of the Company.

The redeemable shares of a BVI business company are usually offered to investors on a regular basis (usually monthly or quarterly) and are redeemable at the option of shareholders at specified times (often monthly or quarterly) within a specified period set aside for company notification.

The process for redemption of shares must be specified in the Memorandum or Articles of Association of the BVI Business Company. Often, the Memorandum of Association defines shares of a certain class or classes as such that are subject to redemption. The Articles of Association regulate the process of redemption of shares with additional details set forth in the relevant offer documents.

The charter of a BVO Business Company should also stipulate how the redemption price is calculated (usually based on net worth) and whether the redemption or redemption gate can be redeemed.

Directors

The Directors oversee and manage the BVI Business Companies.

Open fund directors typically delegate all day-to-day management tasks to contractual fund managers. Despite this, the Board of Directors retains overall supervisory control over the functionaries and management of the fund.

A BVI business company as a private professional foundation must have at least two directors, one of whom must be an individual.

Public foundations must have at least two directors, both of whom must be individuals.

2.International limited liability partnership

International limited partnerships can act as open-ended and closed-end investment funds. The most popular are closed-end funds or open-ended savings funds. Acting on the basis of a Limited Partnership Agreement (“Articles of Partnership”, hereinafter referred to as the “Agreement”).

Partners

To open an International Limited Liability Partnership, you must have at least two partners, one of which is General, and the other is Limited. The general partner must not be domiciled in the British Virgin Islands.

The general partner is responsible for the debts of the partnership. He administers the Partnership subject to the terms of the Limited Partnership Agreement. Often as the investment manager of a fund, he usually has the power to delegate the day-to-day management and administration of the fund to third parties. Where the General Partner is domiciled in the BVI and is acting as an investment manager, advice should be sought regarding licensing to comply with the requirements of the BVI Securities and Investment Business Act 2010.

The limited partner is liable up to the amount of capital deposited and may be liable for any other obligations stipulated in the Agreement. He does not take part in the management of the Partnership. Investors in such Partnerships usually act as limited partners.

Registration

The main information about the International Limited Liability Partnership and the General Partner is submitted to the Registrar and, subsequently, becomes available to the public.

The limited partnership agreement contains details of how profits, losses and expenses are allocated between partners and the conditions under which a partner can withdraw their investments from the fund.

3. Consolidated trust

All assets of the trust are held by the Trustees in accordance with a trust deed that divides the beneficial ownership of the trust into a specified number of shares, which are usually (but not necessarily) freely transferable and redeemable.

The rights and obligations of the Trustee and the Shareholder, the terms of redemption and valuation rules are set out in the trust agreement.

The trustee of a trust is generally a trust company and the BVI requires a license under the Banks and Trust Companies Act 1990, as amended. The Investment Manager is usually identified as such in the Trust Deed. He has clear authority to manage the current Consolidated Trust investment strategy that has been granted to him. It also usually delegates other day-to-day functions to a third-party related service provider.

Please call us at the phone numbers listed on the website, or write to the CRM form located at the bottom of the page. Our specialists will answer online if you want to learn more about the creation of a British Virgin Islands Investment Fund.

Investment fund

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