Hedge Fund Formation - BVI

About BVI

The British Virgin Islands (BVI) has established itself as a key offshore financial centre, drawing a large number of investment funds, notably hedge funds.

The BVI provides a favourable legislative framework, tax efficiency, privacy and confidentiality, various fund structures, professional service providers, and global recognition for hedge fund establishment. These elements have led to the BVI’s popularity among hedge fund managers and investors.

The BVI Financial Services Commission (FSC) is the regulatory body in charge of the BVI’s financial services industry. It guarantees that relevant rules and regulations are followed and encourages the safe operation of investment funds, especially hedge funds.

The British Virgin Islands are located in the Caribbean, east of Puerto Rico, between the Caribbean Sea and the North Atlantic Ocean.

According to the most recent United Nations estimates, the current population of the British Virgin Islands is 30,809 as of Saturday, May 20, 2023. The population of the British Virgin Islands is equivalent to 0.00039% of the total world population.

English is the official and most widely spoken language in the Virgin Islands. Literacy rates in the Virgin Islands range between 90 and 95%.

The law of the British Virgin Islands is a combination of common law and statute that is significantly influenced by English law. The law in the British Virgin Islands is a mix of the very old and the very new.

1. Favorable Regulatory Environment

For hedge funds, the BVI offers a well-established legislative structure and regulatory apparatus. The BVI Financial Services Commission (FSC) regulates the financial services industry and guarantees that all applicable laws and regulations are followed. The regulatory framework is known for being flexible and business-friendly, which makes establishing and operating a hedge fund easier.

2. Tax Efficiency

The BVI provides considerable tax advantages to hedge funds. In the BVI, there is no corporate income tax, capital gains tax, withholding tax, or estate or inheritance tax. This tax efficiency can assist hedge fund managers and investors in optimising returns while minimising tax costs.

3. Privacy and Confidentiality

The BVI has strict privacy regulations that safeguard hedge fund managers’ and investors’ confidentiality. The names of shareholders and directors are not made public, protecting privacy and anonymity. Individuals who desire discretion in their financial concerns may find this option particularly intriguing.

4. Flexible Fund Structures

The BVI permits a variety of fund formats, such as open-ended and closed-ended funds, as well as limited partnerships. This flexibility allows hedge fund managers to select the structure that best suits their investing strategy and investor base. It also makes fund administration and management easier.

5. Experienced Service Providers

The BVI boasts a thriving financial services business with a diverse selection of experienced service providers such as lawyers, accountants, administrators, and custodians. This ecosystem of professionals experienced with hedge fund formation and operation can give hedge fund managers with vital support and advice.

6. Global Recognition and Investor Confidence

Globally, the BVI is regarded as a trustworthy jurisdiction for hedge funds. It is home to a large number of hedge funds and has a track record of fund formation success. This recognition and investor trust can attract funds from investors all over the world who are familiar with and trust the BVI as a jurisdiction.

7. Geographic Advantage

The British Virgin Islands are strategically positioned in the Caribbean, close to major financial centres such as the United States and Europe. This geographic advantage can make communication, travel, and access to investors, service providers, and markets easier.


License: Incubator or Professional Fund
Timeframe for Approval: 1 month
Regulator: British Virgin Islands Financial Service Commission (BVI FSC)

Company Structure

Local Director: At least one
Local Shareholder: At least one
Local Registered Office: Required
Local Staff: Required
Compliance Officer: Required
AML/KYC: Required
Audit: Required
Economic Substance: Required
Corporate Tax Rate: 0% on Offshore Profits
Currency: United States Dollar (USD)
Minimum Paid-up Capital: $50,000
Capital Requirement: Zero
Tax Structure: No income or capital gains tax

1. Obtain Legal Counsel

It is best to choose a qualified attorney or law firm that specialises in BVI hedge fund development. They can advise you on the unique needs, legal structures, and the application process.

2. Establish the Fund Structure

Determine the best fund structure for your investment strategy and investor base in consultation with your legal counsel. The British Virgin Islands provides a variety of alternatives, including open-ended funds, closed-ended funds, and limited partnerships.

3. Draft and Prepare Fund Documents

Prepare the required fund documents, such as the offering memorandum or prospectus, subscription agreement, and constitutional documents such as the memorandum and articles of organisation or partnership agreement. These documents must be in accordance with BVI rules and regulations and should contain the fund’s objectives, investment strategy, terms, and conditions.

4. Appoint a Fund Administrator and Registered Agent

Engage the services of a certified fund administrator to handle the fund’s day-to-day operations, such as accounting, reporting, and compliance. Appoint a registered agent in the BVI to serve as the fund’s local representative.

5. Submit Application to the BVI Financial Services Commission (FSC)

Prepare and submit an application for a hedge fund formation licence to the BVI FSC, including all needed forms, supporting documentation, and fees. The FSC will assess the application and do due diligence on the promoters, directors, and compliance procedures of the fund.

6. Regulatory Review and Approval

The FSC will examine the application to ensure that it complies with BVI rules and regulations. During the review process, they may request additional information or clarification. When the FSC is pleased with the application, it will grant a hedge fund formation licence.

7. Fund Launch and Compliance

After getting the hedge fund creation licence, you can proceed with the fund’s launch and operations. Maintain continuing compliance with BVI rules and regulations, such as filing annual reports and financial statements, as well as adhering to anti-money laundering (AML) and know-your-customer (KYC) standards.

  • Registered Agent Services
  • Compliance Support
  • Fund Administration
  • Directorship Services
  • Compliance Monitoring
  • Corporate Secretarial Services
  • Tax Advisory Services
  • Custody and Prime Brokerage

Documents for company incorporation and fund approval

Required documents from all involved individuals (directors, shareholders and beneficial owners)

  • Notarized passport copy;
  • Notarized utility bill issued in the last 3 months;
  • CV for each individual;
  • Two professional reference letters
  • Certified academic diploma
  • Police report

For a corporate shareholder required documents include

  • Articles of Association;
  • Registered office address document;
  • Register of directors
  • Register of UBOs (shareholder register, or incumbency certificate, or share certificates)
  1. Formation of British Virgin Island limited company (management company) together with Articles of Association, investment management agreement, organizational meeting minutes/resolutions, founder subscription agreement, membership unit ledger, physical certificates.
  2. Formation of British Virgin Island limited company (master fund) together with Articles of Association, investor due diligence questionnaire, investor subscription agreement, limited share unit ledger, certificates of partnership, capital call and distribution notices, UBTI agreement/entity.
  3. Formation of US limited partnership (feeder fund) together with limited partnership agreement, investor due diligence questionnaire, investor subscription agreement, limited share unit ledger, certificates of partnership, capital call and distribution notices, UBTI agreement/entity.
  4. Draft two (2) private placement memorandum; (a) master fund investors and (b) US feeder fund investors together with related subscription agreements.
  5. Anti Money Laundering, Know-Your-Customer, OFAC policy, code of ethics, valuation policy and Disaster/Data Loss policy together with website disclosures.
  6. Regulatory filings including fund registration and exempt manager registration with British Virgin Island Financial Services Commission and Form D filing with US. Securities and Exchange Commission.
  7. Draft and structure investment management agreement together with related investor disclosures.
  8. Facilitate opening of bank and brokerage accounts for master and feeder funds.