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Alina Marinich

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Besides offshore company incorporation and maintenance services, and creation of economic substance and preparation of accounts for offshore companies, specialists of ITA Business Consultants can help you establish investment funds in different offshore jurisdictions.

For example, a registered mutual fund can be established in the Cayman Islands, and a closed-end fund in Seychelles. It is possible to establish private investment funds (so-called PIFs) in the British Virgin Islands (BVI) and Panama.

All the above funds are united by the fact that they are not subject to licensing, which significantly simplifies the functioning of such funds and decreases their maintenance costs compared to licensed funds. However, such funds are normally obliged to prepare and file accounts, sometimes audited accounts, with state authorities (though there are exceptions to this rule: for example, a Panamanian private investment fund not exceeding 20 investors, which is also called PIF 20, must keep accounts and inform its registered agent of their storage address, but is not obliged to file them with state authorities).

As you know, an investment fund is a supply of capital that belongs to numerous investors and is used to collectively buy securities while each investor retains control and ownership of their own shares. An investment fund provides a larger number of investment opportunities, better management expertise, and lower investment fees than investors might get on their own.

One of the kinds of investment funds is mutual funds. It is a form of collective investments that allows investors (unitholders) to purchase interest (a unit) in the fund thereby gaining access to its asset portfolio. The principle of work of such a fund can be illustrated with a private investment fund established in the BVI. Such a fund is a legal entity that:

  • draws and unites investors’ money for the purpose of collective investment and portfolio diversification; and
  • issues units/shares of the fund that give their holder the right to receive an amount calculated based on the value of the proportionate interest in all or part of the net assets of the legal entity.

A PIF can be established in the BVI in the form of a company limited by shares with special articles of association that provide for 2 classes of shares:

1 – shares with voting rights and (sometimes) with the right to receive dividends – shares of this class are held by the investment manager responsible for management of the fund;

2 – non-voting shares with the right to receive dividends – such shares are held by investors; they do not participate in management of the company, but receive income in the form of dividends paid out of the general profit of the fund.

In addition to the special articles of association, a subscription agreement and shareholders’ agreement (if shareholders’ relations should be additionally regulated) are drawn up.

A closed-end fund in Seychelles is established and functions in a similar manner.

Since creation of any fund requires special elaboration and each jurisdiction, in spite of some similarities, has its own specific nature, we recommend that you consult our specialists, who will help you select a suitable option and analyze tax and other consequences and estimate costs of the establishment and subsequent maintenance of your fund.