The hedge fund centre on the move - Incisive Media

assets under administration and
750 <strong>hedge</strong> <strong>fund</strong> clients.
“We’re very excited to be down
there,” says Burton
“<strong>The</strong>re are a lot of large <strong>fund</strong>s
down there and it’s a lower cost
environment for registration and
the cost of services.”
GOVERNMENTAL SUPPORT
“BVI has really taken off in the
last couple of years,” says Heidi
de Vries, managing partner of
Walkers’ BVI office. She points out
that the BVI Business Companies
Act which was enacted in 2005
“is very flexible and innovative
— <strong>fund</strong>s can be structured in a
flexible way.”
She also points to the BVI Financial
Services Commission being
granted full membership to IOSCO
as providing an acknowledgement
that BVI regulatory standards are
on a par with the rest of the world.
And she points to the arrival of
major service providers—including
all the major offshore law firms
and all the major accounting firms,
as well as Fortis and Conifer, as
giving a strong push to BVI’s offshore
business.
“<strong>The</strong> infrastructure here has
improved a lot,” she says. “<strong>The</strong>y
are up to speed on new regulations
and as the jurisdiction continues to
grow and as the next generation of
<strong>fund</strong>s comes, they have laws to deal
with it in a responsive way.”
“We always thought BVI was
well regulated and respected,” says
William Harris of Folio Administrators.
“<strong>The</strong>re’s no exemptive legislation
like there is in the Cayman
Islands,” he adds.
“We’re also seeing the infrastructure
of the island getting
much stronger,” says Folio Administrators’
Daniel Cann (pictured,
page S4). He also points out that,
because of the weakness of the
dollar, certain offshore domiciles
in Europe “are twice as expensive
as BVI. Also the BVI is “less rigid
than other offshore jurisdictions.”
“<strong>The</strong> territory has matured from
being a traditional start-up center
to one which is primarily used for
the launch of new <strong>fund</strong>s by institutional
managers,” says Kieron
O’Rourke, partner at Harneys’
<strong>fund</strong>s practice in the BVI.
“<strong>The</strong> BVI is a strong second to
Cayman for the domicile of <strong>hedge</strong>
<strong>fund</strong>s,” he says.
Ogier’s Schilder adds that as it
is slightly cheaper to set up and
maintain <strong>fund</strong>s in the BVI than in
Cayman, this cost saving is often
an important consideration for
start-up investment managers.
Schilder adds that the BVI is for
some United States counsel the preferred
offshore domicile.
“One firm we work with likes BVI
because of the ease with which you
can amend a <strong>fund</strong>’s constitutional
documents – its memornadum and
Articles of Association – in order
to create additional share classes,”
he says. “To amend a <strong>fund</strong>’s memorandum
and Articles of Association
and so create a new share class
here you need only the approval of
directors, but in Cayman you also
need shareholder approval. <strong>The</strong>re
are some US lawyers who prefer the
using the British Virgin Islands for
this very reason.”
On a more mundane note, he notes
that, as the BVI sits in the same time
zone as the United States east coast,
it makes doing business easy.
In a note to clients on the virtues
of the BVI, Walkers says,
“as a British Overseas Territory,
the BVI offers all the security and
stability traditionally associated
with the British flag. <strong>The</strong> territory
is responsible for its own internal
self-government. <strong>The</strong> BVI has an
independent legal and judicial
system based on English Common
Law, with a right of final appeal to
the Privy Council in London.”
It goes on to say that while the UK
remains responsible for the British
Virgin Islands’ external affairs,
defense, internal security and the
courts, “based upon BVI’s integrity
and responsiveness to the interests
of the financial community, it has
become the only Caribbean Overseas
Territory to which the British Government
has devolved responsibility
for developing and managing its
own financial services industry.”
<strong>The</strong> note also points out that
“BVI offers state of the art telecommunications,
infrastructure and
support services, and a well-trained
management and workforce. <strong>The</strong>
BVI enjoys one of the world’s
highest literacy rates at 98% and
has developed a wide range of
specialised programs to train its
people in financial service skills,”
Walkers says. In a presentation he
made to potential BVI companies,
Mark Chapman, partner at Deloitte,
said that BVI “is an island paradise…but
more…it has modern
laws, a tax-free environment and
sound regulatory procedures.”
RELEASING THE BURDEN
Chapman also points out a “close
and effective working relationships
between the financial industry and
the BVI regulatory authorities,”
and “efficient and reasonable government
regulation and the absence
of burdensome bureaucracy.”
Chapman, in an interview, also
said that more and more investment
managers “are physically locating
here. If you’ve got a manager who
wants to demonstrate they are offshore,
there’s only one way to do it
— move their offices here.”
He adds that the managers “see
the advantage of operating a management
company out of here.”
In his presentation, Chapman
points out other things that favor
BVI, including “attorneys, bankers,
administrators and accountants
with diverse expertise drawn from
around the world; no restriction on
the amount of money which may
be brought into or taken out of the
BVI and companies can easily be
listed on stock exchanges in other
countries such as Luxembourg, Ireland
or Bermuda.”
He also pointed to the BVI Business
Companies Act (BCA) and
said that “the concept of capital
has been replaced with rules which
determine when a company may
make distributions.
“<strong>The</strong> Business Companies Act
acknowledges that the concept
of preserving share capital is an
archaic method of protecting creditors
and shareholders.”
Deloitte’s Chapman also points
to the power that the Act gives to
directors of British Virgin Islands-
registered companies.
“Directors of a British Virgin
Islands company can be given the
power to amend its Memorandum
JURISDICTION FOCUS
nees when it comes to domiciling <strong>hedge</strong> <strong>fund</strong>s
Mark Chapman
Deloitte
Tanis McDonald
KPMG
“We always thought BVI was well regulated and
respected. <strong>The</strong>re is no expemptive legislation like
there is in the Cayman Islands. We’re also seeing the
infrastructure of the island getting much stronger.”
Daniel Cann, Folio Administrators
Robert McIntyre
Maples & Calder
Calum McKenzie
Folio Aministrators
Simon Schilder
Ogier
and Articles of Association and to
vary shareholders’ rights without
requiring shareholders’ consent,”
he says.
<strong>The</strong> benefits of these provisions
are that “this avoids time delays
and legal costs when restructuring
is required,” and points out that
“other jurisdictions require shareholder
consent.”
SEE-THROUGH ADVANTAGE
Although some firms like offshore
jurisdictions because of their supposed
secrecy, Robert Briant says
that BVI supports transparency in
its laws. <strong>The</strong> type of secrecy associated
with a country like Switzerland
is not here, and Briant believes
it helps boost the reputation of the
British Virgin Islands.
“A proper request (to appropriate
authorities) concerning criminal
conduct will get information from
the British Virgin Islands,” says
Briant. “<strong>The</strong> company structures
here are not about tax evasion or
even tax avoidance.”
Moreover, he points out, “there is
a tax information exchange agreement
between the British Virgin
Islands and the United States and
the British Virgin Islands is committed
to entering into them with
all OECD member countries.”
Briant says that while some
members of the US Senate are
proposing laws to “stop tax haven
abuse” which are aimed at places
like the British Virgin Islands and
Bermuda, they are really not aware
that there is reasonable transparency
in the laws.
He adds “there are jurisdictions
where people can hide assets and
which won’t give out information
to authorities. “This is not one of
them.”
www.<strong>hedge</strong><strong>fund</strong>sreview.com October 2007 | BRITISH VIRGIN ISLANDS SUPPLEMENT HEDGE FUNDS REVIEW | S5