The Hedge Fund Law Report

The definitive source of actionable intelligence on hedge fund law and regulation

Articles By Topic

By Topic: British Virgin Islands

  • From Vol. 10 No.1 (Jan. 5, 2017)

    Loss of Substratum: Analysis of the Conflicting Cayman Islands Standards (Part One of Two)

    In two recent winding-up petitions issued against investment funds on the just and equitable basis, the Financial Services Division of the Grand Court of the Cayman Islands has revisited the controversial question of the appropriate test for winding up a company on the grounds of loss of substratum (i.e., loss of the purpose for purpose for its existence). Considered in the context of earlier Cayman authorities on the test for loss of substratum, the law is now in a considerable state of confusion and is therefore ripe for clarification by the Cayman Islands Court of Appeal – particularly because of its significance for Cayman’s financial services industry. In this guest article, the first in a two-part series, Tony Heaver-Wren and Sebastian Said, partner and counsel, respectively, at Appleby (Cayman), describe the history of the Cayman Islands loss of substratum and the competing current approaches – the “impossibility test” and the “non-viability test” – being used by the courts. The second article will analyze how the impossibility test can be properly applied in the context of a fund proposing a soft wind-down, and how the potentially valid policy factors identified by courts concerning its usage can appropriately be addressed. For additional insight from Appleby (Cayman) attorneys, see “Changes to Redeeming Investor Distribution Priority and Other Ramifications of the Primeo Appellate Decision for Cayman Islands Hedge Funds” (Sep. 15, 2016); “How Can Service Providers to Cayman Islands Hedge Funds Enforce Rights to Contracts to Which They Are Not Parties?” (Jun. 19, 2014); and the two-part series entitled “How Can Investors in Cayman Hedge Funds Maximize Protection of Their Investments When the Fund Is Near or at the End of Its Life?”: Part One (Dec. 5, 2013); and Part Two (Dec. 12, 2013).

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  • From Vol. 6 No.13 (Mar. 28, 2013)

    BVI Court Rules on the Validity of the Appointment of Hedge Fund Liquidators by a Hedge Fund Manager Subject to SEC and CFTC Enforcement Actions

    The Eastern Caribbean Supreme Court (Court) in the High Court of Justice in the British Virgin Islands (BVI) recently opined on the validity of the appointment of BVI liquidators for several BVI-domiciled hedge funds made by a manager that has been separately charged by the SEC and the U.S. Commodity Futures Trading Commission with defrauding investors.  The challenge to the liquidators’ appointment came from a U.S.-court-appointed receiver of the hedge funds.  This article summarizes the factual background, legal analysis and holdings by the Court in this matter.  For a discussion of the waterfall provisions applicable to BVI hedge fund insolvency proceedings, see “BVI Court of Appeal Rules on Priority of Redeemed Investors Versus Remaining Investors in a Hedge Fund Liquidation,” The Hedge Fund Law Report, Vol. 6, No. 12 (Mar. 21, 2013).

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  • From Vol. 6 No.12 (Mar. 21, 2013)

    BVI Court of Appeal Rules on Priority of Redeemed Investors Versus Remaining Investors in a Hedge Fund Liquidation

    The Court of Appeal of the Eastern Caribbean Supreme Court recently ruled on whether investors in a hedge fund, who had given notice of redemption but who had not been paid in full at the time the fund went into liquidation, have priority in the liquidation over fund investors who had not redeemed their shares prior to the liquidation.  This article recounts the relevant facts of the case and summarizes the Court’s decision and reasoning.  For a discussion of the trial court’s decision, see “British Virgin Islands High Court Issues Landmark Decision Affecting the Distribution Rights of Redeemed Versus Continuing Investors in a Liquidating Hedge Fund,” The Hedge Fund Law Report, Vol. 5, No. 47 (Dec. 13, 2012).

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  • From Vol. 6 No.7 (Feb. 14, 2013)

    What Does the Introduction of a Lighter Touch Fund Manager Regulatory Option in the British Virgin Islands Mean for Hedge Fund Managers?

    Historically, fund managers wishing to do business in the British Virgin Islands (BVI) have had to undergo a rigorous process of applying for a full licence (Existing Regime) pursuant to Part 1 of the Securities and Investment Business Act 2010 (SIBA).  However, the BVI recently adopted a “regulation light” fund manager regime (Lighter Touch Regime) for eligible investment managers or investment advisers who have or wish to have a BVI licence to carry out investment management or investment advisory services for funds, without being subjected to certain regulatory requirements under the Existing Regime that may be disproportionate to the scope of their operations.  Among other things, the Lighter Touch Regime, which came into effect on December 10, 2012, expedited and facilitated the manager approval process.  The Lighter Touch Regime can be attractive for managers who have investors who prefer to have their managers subject to regulation and yet wish to avoid the more stringent requirements of the Existing Regime.  In a guest article, Michael J. Burns, James McConvill and Nadia Menezes describe the evolution of SIBA fund manager regulation; the basic requirements of the Lighter Touch Regime, including manager eligibility criteria; the benefits of the Lighter Touch Regime; and the interaction between the Lighter Touch Regime and the Existing Regime.  Burns is the Managing Partner and Head of the Corporate and Commercial department in the BVI office of Appleby; McConvill is a consultant to Appleby in the BVI; and Menezes is a Senior Associate at Appleby in the BVI.

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  • From Vol. 5 No.47 (Dec. 13, 2012)

    British Virgin Islands High Court Issues Landmark Decision Affecting the Distribution Rights of Redeemed Versus Continuing Investors in a Liquidating Hedge Fund

    On November 16, 2012, the Commercial Division of the High Court in the British Virgin Islands issued a landmark decision bearing on the distribution rights of redeemed versus continuing investors in a hedge fund in liquidation.  Among other things, the decision provides insight to a hedge fund investor who must evaluate whether to redeem its investment in a fund that is expected to liquidate in the near future.  This article summarizes the factual background and legal analysis of the decision.  See also “Seventh Circuit Approves Federal Receiver’s Hedge Fund Liquidation Plan Subordinating Priority Rights of Redeeming Investors,” The Hedge Fund Law Report, Vol. 3, No. 50 (Dec. 29, 2010).

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  • From Vol. 5 No.45 (Nov. 29, 2012)

    Use by Private Fund Managers of the British Virgin Islands for Private Equity Fund Formation and Private Equity Investments

    The British Virgin Islands (BVI) has a reputation of being Asia’s favoured offshore jurisdiction for companies.  However, whilst the use of BVI companies as holding companies, sole director entities and, more recently, listing vehicles for Hong Kong initial public offerings is well known, the advantages of the BVI as a domicile of choice in the context of private equity transactions is not as widely recognized.  Many features which make the BVI an attractive domicile for listing vehicles also make it an attractive jurisdiction for private equity investments and for the formation of private equity funds.  In a guest article, Michael Gagie and James Gaden, both partners at Maples and Calder, outline some of the benefits of the BVI as an attractive jurisdiction for private equity transactions and for the formation of private equity funds.

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  • From Vol. 5 No.23 (Jun. 8, 2012)

    Cayman Court of Appeal Holds that Soft Wind-Down of One or More Segregated Portfolios of a Segregated Portfolio Company Does Not In and Of Itself Justify a Judicial Winding-Up of the Entire Company

    In the wake of the 2008 financial crisis, some troubled hedge funds organized under the laws of the British Virgin Islands (BVI) and the Cayman Islands elected to suspend redemption rights and undertook “soft wind-downs” of their operations.  See Cayman Hedge Funds, Soft Wind-Downs and Disclosure,” The Hedge Fund Law Report, Vol. 4, No. 7 (Feb. 25, 2011).  In response, fund investors sought to gain leverage by petitioning to force the funds into involuntary liquidation on the ground that the funds were no longer capable of carrying out their stated business purposes.  BVI and Cayman courts have taken conflicting views on whether a soft wind-down is a valid ground for an involuntary winding-up petition.  The Cayman Island Court of Appeal recently addressed a novel question involving whether the winding down of the various segregated portfolios comprising a “segregated portfolio company” (SPC) would warrant winding down of the entire SPC.

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  • From Vol. 4 No.42 (Nov. 23, 2011)

    Speakers at Walkers Fundamentals Hedge Fund Seminar Provide Update on Hedge Fund Terms, Governance Issues and Regulatory Developments Impacting Offshore Hedge Funds

    On November 8, 2011, international law firm Walkers Global (Walkers) held its Walkers Fundamentals Hedge Fund Seminar in New York City.  Speakers at this event addressed various topics of current relevance to the hedge fund industry, including: recent trends in offshore hedge fund structures; hedge fund fees and fee negotiations; fund lock-ups; fund-level and investor-level gates; fund wind-down petitions and the appointment of fund liquidators; corporate governance issues; D&O insurance; fund manager concerns with Form PF; and offshore regulatory developments, such as proposed legislation requiring registration of certain master funds in the Cayman Islands, the EU’s Alternative Investment Fund Manager (AIFM) Directive and the British Virgin Islands (BVI) Securities & Investment Business Act (SIBA).  This article summarizes the key points discussed at the conference relating to each of the foregoing topics and others.

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  • From Vol. 3 No.17 (Apr. 30, 2010)

    Implications for Hedge Funds of Changes to the British Virgin Islands’ Securities and Investment Business Act

    The British Virgin Islands (BVI) is significantly changing the regime applicable to investment business and hedge funds by the enactment of the Securities and Investment Business Act (SIBA) and the accompanying Mutual Fund Regulations (MFR).  This will affect existing private and professional funds currently recognized under the Mutual Funds Act, 1996 (MFA), which includes most hedge funds organized in the BVI.  As a result of the implementation of SIBA, the MFA will cease to apply to hedge funds in the BVI.  In a guest article, Nadia Menezes, a Senior Associate at Ogier, discusses the implications for hedge funds of the changes to the BVI’s fund regulatory regime, including consequences relating to directors, authorized representatives, minimum investments, functionaries, submission of financial statements and written notice of changes.

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