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10.10.2019

The Rules

Classify, Classify, Classify In the tenth instalment of Harneys’ Substance on Substance series, Philip Graham and Josh Mangeot discuss the release of the final version of the guidance formerly known as the “Code”, which was published by the ITA on 9 October 2019 as its newly-titled Rules and explanatory notes (the Rules). Key Takeaways • With the certainty provided by the final Rules, it is vital that all directors and operators of BVI entities classify their entities as a matter of priority, if they have not already done so. There is an ongoing legal obligation on BVI entities under the Beneficial Ownership (Secure Search System) Act 2017, as amended with effect from 1 October 2019, to determine whether they are carrying on a relevant activity and the first compliance periods have started for all companies and other relevant legal entities. •Harneys online economic substance classification solution remains available for use at https://economicsubstance.vg and provides formal legal advice for a fixed fee – the solution reflects the final Rules and classifications received by users who have previously classified their entities using the solution are unaffected, subject to some minor cross-references to the numbering used in the final Rules. • the ITA released a useful summary document of the relatively minor amendments made to the last public published by the ITA. The key changes include: o where an entity wishes to be treated as provisionally “non-resident” due to its tax status under foreign laws, the “reasonable period” in which to provide the ITA with evidence of such status will be two “financial periods” o BVI entities in liquidation are still generally expected to comply with the substance requirements o the presumptions of non-compliance for BVI entities that are carrying on IP business have been made more difficult to rebut (ie disprove) and are subject to expanded reporting and evidentiary requirements • Economic substance reporting for each BVI entity will generally begin in 2020 at the end of the current financial period, so all BVI entities should determine any economic substance compliance requirements for the current period. This episode was recorded on 10 October 2019.
31.07.2023

Sanctions on Russia: At 18 months following the invasion (part 2)

In this episode, Global Head of Regulatory & Tax Aki Corsoni-Husain and guest expert Rachel Barnes KC of Three Raymond Buildings go into more detail about the state of play as of June 2023 regarding sanctions on Russia after the invasion of Ukraine, with a specific focus on professional services in the trust sectors. Key Takeaways: Outlining and reflecting on, the new UK sanctions on Russia impacting professional and financial services, trust industry restrictions and exemptions and the Overseas Territories’ inclusion to those sanctions.Providing an overview of new prohibitions in providing business services and their updates.Comparing sanctions imposed by EU, UK, and US on the professional services industry, legal advisory services and trust industry (as at June 2023).Examining the impact of sanctions on transactional lawyers, particularly in relation to the provision of legal advisory services on related matters (as at June 2023).Discussing the rule of law concerning sanctions and their application to asset movement of designated individuals.
28.07.2022

International transfer of personal data: Frictions and a dynamic road ahead

In this episode, Senior Associate Elina Mantrali is joined once again by guest expert Phil Lee, discuss the scope and practical implications of the EU’s rules on international transfers of personal data under the EU’s General Data Protection Regulation and, more recently, the European Court of Justice’s decision in Schrems II. Phil is a leading data protection expert and is a partner in Fieldfisher's leading Privacy, Security and Information law group in London, with experience on both sides of the Atlantic, having previously set up Fieldfisher’s office in Silicon Valley.
17.06.2022

International transfers of personal data: Theory and practice

In this episode, Senior Associate Elina Mantrali and guest expert Phil Lee, discuss the scope and practical implications of the EU’s rules on international transfers of personal data under the EU’s General Data Protection Regulation and, more recently, the European Court of Justice’s decision in Schrems II. Phil is a leading data protection expert and is a partner in Fieldfisher's leading Privacy, Security and Information law group in London, with experience on both sides of the Atlantic, having previously set up Fieldfisher’s office in Silicon Valley.
25.08.2023

Unravelling digital asset challenges: Examining the issues

In this episode, Global Head of Regulatory & Tax Practice Aki Corsoni-Husain, introduces Counsel Marc Piano, and guest expert Brett Hillis from Reed Smith in London. Together, they delve into the complex web of issues at the forefront of anyone exploring the digital asset industry. Key takeaways: Trends in the digital asset space Global regulatory developments in respect of digital assets and the response from offshore jurisdictionsThe UK Government's recent regulatory position of digital assets and its role in the wider economy
20.05.2020

Cross-border restructuring tips for US bankruptcy attorneys

Our third episode is hosted by Jayson Wood and Jessica Williams, Partners in our Litigation and Insolvency practice group. Key takeaways: The appointment of restructuring provisional liquidators in the Cayman Islands provides protection for a Cayman Islands company while a restructuring is negotiated in the US (and triggers a Cayman statutory moratorium).The gateway for the appointment of restructuring provisional liquidators is: (i) that the company is unable to pay its debts; and (ii) that it intends to present a compromise or arrangement to its creditors. The Cayman Islands has not adopted the UNCITRAL Model Law. US Bankruptcy practitioners will therefore consider if steps should be taken in Cayman, through a parallel restructuring, to protect the effectiveness of the Chapter 11 plan (and taking into account the Gibbs rule).The decision will largely come down to risk appetite (rather than costs), with parallel restructurings in the country of the law of the debt and the place of incorporation providing maximum effectiveness and recognition to the restructuring.
27.04.2022

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05.09.2024

Continuing obligations for Private and Professional Funds (BVI) The board and officers Functionaries and other service providers Service provider Requirement Is an exemption available? Notice requirements Event triggering an obligation to notify the FSC

As a recognised fund, your professional or private fund is regulated by the British Virgin Islands (BVI) Financial Services Commission (the FSC). This note provides a quick reference to your professional or private fund's ongoing BVI obligations. Professional and private funds are recognised under the Securities and Investment Business Act, Revised Edition 2020 and are subject to the Mutual Funds Regulations, Revised Edition 2020. A professional or private fund must: At all times have at least two directors, at least one of whom must be an individual Appoint an appropriately qualified and independent individual as Money Laundering Reporting Officer (MLRO) for the fund who may, in practice, be a person provided by one of the functionaries to the fund (see below for more detail on anti-money laundering obligations) Appoint a Foreign Account Tax Compliance Act (FATCA) responsible officer and a principal point of contact for the BVI International Tax Authority (ITA)(see below for more detail on obligations under FATCA and CRS) A private or professional fund is required to have the following functionaries and other service providers: Manager A private or professional fund must at all times have a manager. Yes, in certain circumstances, on application to the FSC. Administrator A private or professional fund must at all times have an administrator. No exemption is available. Custodian A private or professional fund must at all times have a custodian. The custodian must be functionally independent from the manager and administrator. Yes, in certain circumstances, on application to the FSC. The most common exemptions are for feeder funds in a "master-feeder" structure and for funds whose prime broker provides the custodial services. Auditor A private or professional fund must appoint and at all times have an auditor to audit its financial statements. Yes, in certain circumstances, on application to the FSC. Authorised Representative A private or professional fund must have an FSC licenced authorised representative (Authorised Representative) to act as a point of contact between the fund and the FSC. No exemption is available. On the happening of certain events, a professional or private fund is required to notify the FSC. The table below summarises these notification requirements and the timeframe for providing notice. The appointment of a functionary (ie the manager, administrator, investment advisor, custodian, any prime broker or (in the case of a unit trust) the trustee). Not less than 7 days prior to the date of appointment. A functionary ceasing to act (notice must include a statement of the reasons for such functionary ceasing to act). Within 7 days. The appointment of a director. Within 14 days. A director ceasing to hold office (for whatever reason). Within 14 days. The appointment of an Authorised Representative. Within 14 days. An Authorised Representative ceasing to hold office (for whatever reason). Within 14 days. The appointment of an auditor. Within 14 days. An auditor ceasing to hold office (for whatever reason). Within 14 days. Any change in the address of the fund's place of business, whether in or outside the BVI. Within 14 days. Any amendment to its constitutional documents. Within 14 days. The issuance of any offering document not previously provided to the FSC. Within 14 days. The amendment of any offering document previously provided to the FSC. Within 14 days. There are various reporting and payment deadlines for a professional or private fund throughout the year. 31 March Pay recognition fee of US$1,200 to the FSC. Failure to pay may attract administrative penalties and/or other enforcement action 30 April For funds that are limited partnerships, pay the Registrar of Corporate Affairs (together with the Registrar of Limited Partnerships, the Registry) licence fee of US$750 31 May FATCA reporting deadline and Common Reporting Standard (CRS) reporting deadline 31 May For funds that are companies incorporated ...
16.06.2025

The Hong Kong OFC. Maybe, Maybe Not?

But will the OFC and proposed tax changes really entice Hong Kong based hedge fund managers to set up funds in Hong Kong? Much of the talk of the "advantage" for a Hong Kong manager in setting up an OFC over a Cayman domiciled fund relates solely to a requirement for dealing only with the Securities and Futures Commission (SFC) and not also the Cayman Islands Monetary Authority (CIMA). This seems to me a little simplistic. As a starting point, with a Hong Kong manager directly managing a Hong Kong fund, and without any offshore manager, there will be no opportunity for any management or performance fees to be earned at the Cayman level and tax-deferred. Moreover, hedge funds are cross-border by their very nature. Most hedge funds have investors from a lot of different countries and have investments in a lot of different countries. Accordingly, managers will already need to be considering the securities laws of various countries. All the investors in a hedge fund will have their own local tax obligations, so as a very base condition a manager is seeking to domicile their fund somewhere with no additional taxes. However, this is not enough. A manager also needs to domicile their fund somewhere that provides investors from a lot of different countries the relevant level of comfort to place their investments in such a vehicle. There are some very important factors that are considered by the type of sophisticated investors that invest into hedge funds in determining this comfort level. Such factors that a jurisdiction must exhibit include the absolute rule of law, respect for property rights and access to a sophisticated judiciary free from political interference. The Cayman Islands is a jurisdiction that fulfils these requirements and has reliably proven itself to do so over decades. As a result, over 85 per cent of the world's hedge funds are domiciled in the Cayman Islands. Hong Kong is a jurisdiction that some might consider is rapidly being subsumed into the People's Republic of China. Even when you drill down into more of the minutiae of the OFC regime it appears that the Cayman Islands remains a clear leader. The level of prescription and oversight which is contemplated by the OFC regime, whilst it may be familiar to operators of Hong Kong retail funds, is far more than would be familiar to hedge fund managers, or than applies to private Cayman funds. The OFC's governing document is required to contain certain prescribed provisions, including the kinds of property in which the OFC can invest. Any change to this governing document will require the SFC's approval. There are no restrictions imposed by the Cayman regime on investment strategies of Cayman funds or their use of leverage. A Cayman fund does not have prescribed provisions in, and CIMA's approval is not required for any changes to, its memorandum and articles of association. The appointments of the directors of an OFC are subject to the SFC's approval, and the SFC will require the directors to be appropriately qualified and experienced. By contrast, CIMA requires directors to register via a web portal but does not impose an approval process nor any requirements as to qualifications, experience or independence. An OFC must appoint a custodian approved by the SFC which meets the eligibility requirements set out. In practice, many hedge funds appoint one or more prime brokers, and many prime brokers may not, and may not wish to, meet these eligibility requirements. A Cayman fund sold in Hong Kong by private placement is not required to appoint a custodian. The OFC regime requires that the valuation and pricing of the OFC's property is the investment manager's responsibility. This is inconsistent with the typical hedge fund model, where valuation and pricing is typically delegated to the fund's administrator. Any change of name of an OFC is subject to the SFC's approval. No approval is required to a change of name of a Cayman fund. Transfers of OFC shares will be subj...
18 мая

Data protection for investment funds domiciled in the British Virgin Islands

The Virgin Islands Data Protection Act 2021 (the Act) is now in force. The Act imposes a number of obligations upon investment funds in relation to the processing of personal data that they will inevitably collect as part of the investor onboarding procedure. In order to ensure compliance with the Act, investment funds should: Provide investors with a privacy notice Update their offering and subscription documentation Revisit service agreements with third parties, most importantly, the fund administrator Overview The Act governs how a data controller may process, use and retain personal data. Anyone who falls within the definition of a data controller" (of which an investment fund domiciled in the BVI clearly does) must now comply with the seven principles in the Act in relation to any personal data processed by the fund. Where a data controller engages a third party (such as an administrator or investment manager) to process personal data on its behalf (defined in the Act as a data processor), the data controller must ensure the data processor has appropriate safeguards in place in respect of the personal data. In addition to governing how a data controller processes, uses and retains personal data, the Act also sets out the rights of individuals to control their personal data and implements a series of offences and enforcement measures designed to ensure compliance. The Act is broadly designed to reflect the General Data Protection Regulation (GDPR) and the Cayman Islands Data Protection Act (both of with which many clients will already be familiar), however there are a number of differences that you should be aware of. Application of the Act to investment funds Any investment fund structured as a BVI company or partnership, or any foreign company registered in the BVI that acts as a general partner of an investment fund will be subject to the Act and will be a data controller. Investors in a BVI investment fund will routinely provide certain personal identifying information to the investment fund such as their name, address, date of birth, bank details etc and this is to be regarded as "personal data". Although the persons whose data is gathered under the Act ("data subjects") have to be natural individuals, the Act will still apply in connection with corporate investors who provide personal data for their beneficial owners, directors, employees and members. The individual to which the personal data relates does not need to be in the BVI or a citizen of the BVI in order for the Act to apply. What must an investment fund do to comply with the Act? As a data controller, an investment fund must ensure that it complies with the seven data protection principles contained in the Act. See our guide BVI introduces data protection regime for further information. In practical terms, an investment fund can demonstrate compliance with the data protection principles by taking the following actions: Send a privacy notice to existing investors, whether as a separate document or part of an update to the offering document Update subscription documents to include a privacy notice for new investors as well as obtain certain acknowledgements, representations and warranties Update offering documents Update agreements with any third parties that would be regarded as a data processor on the basis that they process personal data on behalf of the data controller Privacy notices If the investment fund is already subject to GDPR then it may have already adopted a GDPR compliant privacy notice. If that is the case, then a few amendments to the privacy notice to reflect the Act are all that are needed. If the investment fund has not yet adopted a privacy notice, then it should prepare one in order to communicate the required information to its investors and we would be happy to assist with this drafting where required. In either case, the privacy notice should be sent to existing investors and/or made available on an investor or fund administration ...

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