CAYMAN ISLANDS & BVI COMPARISON

HEDGE FUND JURISDICTION COMPARISON
CAYMAN ISLANDS & BRITISH VIRGIN ISLANDS COMPARED
JULY 2012

 

CAYMAN ISLANDS

BRITISH VIRGIN ISLANDS

Regulator Cayman Islands Monetary Authority (CIMA) British Virgin Islands Financial Services Commission (BVI FSC)
Types of Fund Available Registered Funds (MF1)
Administered Funds (MF2)
Unregistered Funds (up to 15 investors who have the power to remove the Directors)
Private Fund
Professional Fund
Public Fund
Names Names of Exempt Companies (the type most commonly used for funds) need not include the word “Limited” or “Ltd”.  Foreign character names are permissible. Foreign character names are permissible.
Closed End Funds Do not need to be registered with CIMA. Do not need to be registered with the BVI FSC.
Master Funds The Cayman Islands requires that funds with more than one regulated feeder fund, register as a Master Fund (if it is not otherwise registered with CIMA). Master Funds generally are not required to register as Mutual Funds, but this will depend on the fact pattern of the fund structure involved.
Law Governing Funds Mutual Funds Law (2009 Revision) Securities and Investment Business Act, 2010 (SIBA, 2010)
Anti-Money Laundering Legislation & Rules Funds are required to comply with the Guidance Notes on the Prevention and Detection of Money Laundering in the Cayman Islands.  Where the Administrator is based overseas, it should perform Anti-Money Laundering comply in accordance with Schedule 3 of the Guidance Notes.  There are other general anti-money laundering and common law rules that may apply. Funds are subject to the Anti-Money Laundering and Terrorist Financing Code of Practice, 2008 and other legislation.  Under applicable legislation anti-money laundering obligations may be outsourced to a service provider outside of the BVI e.g. an Administrator that complies with FATF standards.
Investment Restrictions & Fees No regulatory requirements on investment objectives, restrictions or fee arrangements.  The terms are subject to contract set out in the offering document etc. No regulatory requirements on investment objectives, restrictions or fee arrangements. The terms are subject to contract set out in the offering document etc.
Investor Requirements Registered Fund- $100,000 Minimum initial subscription or its equivalent in another currency.Unregistered Fund– No investor or minimum initial subscription requirements.  No more than 15 investors are permitted.  They must have the ability to remove the operators (normally means the ability to remove the Directors through holding voting shares).Administered Fund – No investor or minimum initial subscription requirements. Private Fund– No minimum subscription requirements, investors must be invited to invest on a private basis, and no more than 50 investors are allowed.Professional Fund– Investors must initially subscribe at least $100,000 (initial subscription) and meet investor suitability requirements that they are a professional investor with net assets, either individually or jointly with their spouse of $1,000,000.Public Fund – No investor subscription minimums.  As it is essentially, a retail fund the licensing requirements in the BVI are stricter for this type of fund.
Closed End Funds Do not need to register with CIMA.  They must not permit redemptions on a regular basis and should have a lock-up period, generally expected to be at least 2 years. Do not need to register with FSC.  They must not permit redemptions at the option of the investor(s).
Audit Requirements Registered Funds (MF1) and Administered Funds (MF2) must appoint local Cayman Islands auditors. Private and Professional funds must appoint an auditor, which need not be based in the BVI.
Annual Filing Requirements Audited Financial Statements must be filed by the Auditors with CIMA within 6 months of the Fund’s year end. Fund Annual Return (FAR) Form (containing basic information about the fund) must be submitted by the Auditors with the audited financial statements. Audited Financial Statements must be filed with the BVI FSC within 6 months of the Fund’s year end.  No local auditor requirement.  Annual return must also be submitted to the BVI FSC.  Annual return reporting period is to 31st December each year.  Annual return must be submitted within 6 months of year end.
Types of Legal Entity Available Company, Limited Partnership, Trust Company (IBC), Limited Partnership, Trust
Segregated Portfolio Companies possible? Yes, Segregated Portfolio Companies Yes, Segregated Portfolio Companies
Administrator Local Administered not required.  For an “Administered Fund” (MF2), a local Administrator must provide principal office in the Cayman Islands. Local Administrator not required.
Custody & Bank Accounts No requirement for local custodian or bank accounts. No requirement for local custodian or bank accounts.
Directors Although not prescribed in law for registered and administered funds (MF1 and MF2), 2 Directors are generally required.  1 Director must normally be a natural person.  Directors do not need to be located in the Cayman Islands. Directors do not need to be located in the British Virgin Islands.
Investment Manager No requirement for Investment Manager to be located in the Cayman Islands. If the Investment Manager is established in the Cayman Islands it is possible to seek exemption under the Securities Investment Business Law (SIBL), provided it meets certain requirements. No requirement for Investment Manager to be located in the British Virgin Islands.  If the Investment Manager is established in the British Virgin Islands it must be licensed under the SIBA 2010.
Taxation No income or capital gains taxes. No income or capital gains taxes.
Government and Regulatory Fees Annual government and regulatory fees apply depending on the registrations and entities involved. Annual government and regulatory fees apply depending on the registrations and entities involved.

This is not intended to be legal advice and is not exhaustive.  If you are considering using this information or would like advice please contact Murray LLP (www.murrayllp.com).

Anthony Murray
Murray LLP
212 729 3045

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