The British Virgin Islands And AIFMD: Ready For Business

The British Virgin Islands (BVI) is the world's second largest domicile of offshore investment funds and a leading international finance jurisdiction known for effective regulation and products which are fl exible and relevant.

With the Phase II implementation date of the Alternative Investment Fund Managers Directive (AIFMD) fast approaching this month, interest in the AIFMD is as high as ever as investment fund managers seek to determine what, if any, eff ect the AIFMD will have on their structures as well as their ability to market within the European Union (EU).

Harneys off ers this article as guidance on the British Virgin Islands' perspective and to assist with a careful assessment of the projected impact of the AIFMD.

What is the AIFMD?

The AIFMD came into force on 21 July 2011 to create a comprehensive and eff ective regulatory and supervisory framework across the European Economic Area for alternative investment fund managers (AIFMs) either based within the EU or marketing their products within the EU. The keys drivers are investor protection and reduced risks for professional investors in alternative investment funds (AIFs) through uniformed cross-border management and marketing requirements on AIFMs.

What are AIFs?

An AIF in accordance with the AIFMD is a collective investment undertaking which raises capital from a number of investors and invests in accordance with a defi ned investment policy for the benefi t of those investors. It does not distinguish funds based on risk spread, number of assets, minimum number of investors, open-ended or closed, listed or unlisted or of a particular legal form.

An AIF entity is either:

(a) authorised or registered in an EU Member State under the applicable national law or has its registered/ head offi ce in an EU Member State (an "EU AIF"); or (b) a "non-EU AIF".

Each AIF must have one AIFM; either a legal person whose regular business is managing one or more AIFs and whose registered offi ce is in an EU Member State (an "EU AIFM") or a non-EU alternative investment fund manager (a "non-EU AIFM"), who are also known as a "Third Country Managers".

What are AIFMs?

An AIFM is either:

(a) an EU AIFM which manges EU AIFs or non-EU AIFs; (b) a non-EU AIFM which manages EU AIFs;

(c) a non-EU AIFM which market AIFs in the EU, irrespective of whether such AIFs are EU AIFs or non-EU AIFs;

(d) a non-EU entity which has been substantially delegated management functions for AIFs from an EU AIFM; or

(e) an EU entity which has been substantially delegated management functions from a non-EU AIFM.

Are (d) and (e) referring to the concept of "letter-boxing"?

An analysis of where the management activities and management responsibility are being exercised must be carried out to decide which entity falls within...