British Virgin Islands Mutual Funds Law

The Mutual Funds Act (“the Act”), was enacted in 1996 in the British Virgin Islands (“BVI”). In 1997, prior to the Act becoming operative, it was amended by the Legislative Council of the BVI. The legislation, as amended, came into effect on 2nd January 1998.

The British Virgin Islands Mutual Funds Act, 1996

The purpose of the legislation was to provide for the regulation, authorisation and control of mutual funds, their managers and administrators carrying on business in or from within the British Virgin Islands and for related matters. The legislation is flexible and simple whilst providing the right degree of protection for the interests of those investing in mutual funds.

The Act defines a mutual fund as a partnership, unit trust or company or other similar body formed or organised which collects and pools funds for the purpose of investing and which issues shares or similar interests that entitle the holder to receive on demand an amount computed by reference to the value of the share or interest.

The Act does not attempt to regulate closed end funds. Further a fund maintained by a group of family trusts for the purpose of facilitating family investments are exempt from the requirement to become recognised under the Act. 

The Act provides for three categories of fund:

(1) Public Funds are:

• not a private or professional fund

• required to be registered

• required to have a Prospectus to be published and filed with the Registrar of Mutual Funds prior to registration

• required to have adequate accounting records and financial statements are kept in respect of each year

• required to have an annual audit by an auditor approved by the Registrar of Mutual Funds

(2) Private Funds are those which:

• the constitutional documents of the fund specify that it will have no more than 50 investors, or

• the constitutional documents of the fund specify that the making of an invitation to subscribe for or purchase shares issued by the mutual fund is to be made on a private basis, or

• the fund is designated a private fund by regulation

(3) Professional Funds are those which are:

• made available only to professional investors (as defined) and the initial investment in which, in the case of the majority of investors, is not less than US$100,000, or

• designated as such by regulation

Other Features of the Legislation 

• private and professional funds can comply with the Act by simply applying for recognition in the prescribed form

• professional funds can comply with the Act by applying for recognition within 14 days of the fund becoming operative as a professional fund

• confidentiality of private and professional funds is preserved by prohibiting the Registrar from disclosing any material filed with him except to the Governor (or a public officer authorised by the Governor), the Minister or the Attorney General or as a result of a court order for the purpose of a criminal proceeding

Mutual Fund Managers and Administrators

The Act also defines mutual fund managers and mutual fund administrators. 

A manager is a person, not being an officer or an employee of a mutual fund which has delegated management functions to a person licensed under the Act, who:

(a) for valuable consideration provides a mutual fund with management services either alone or together with investment advice; or

(b) is entitled to provide mutual funds with such services and facilities as provided in (a) above under the laws of a recognised jurisdiction.

An Administrator is a Person who: 

(a) for valuable consideration provides administrative services and facilities to a mutual fund; or

(b) is entitled to provide mutual funds with such services and facilities as provided in (a) above, under the laws of a recognised jurisdiction.

The Act requires those who wish to carry on business in the British Virgin Islands as a manager or administrator of mutual funds to make application to the Minister for a licence to carry out such work. Subsidiary legislation enacted at the same time as the legislation provides that BVI managers controlled by a person entitled to provide services in a recognised jurisdiction will be exempt from requiring a licence subject to certain criteria.