Introduction to Private Investment Funds

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The British Virgin Islands (BVI) Securities and Investment Business Act, 2010 (the Act) was amended to introduce a new private investment fund (PIF) regime for previously unregulated closed-ended investment funds effective as of 31 December 2019. The Act is accompanied by the Private Investment Funds Regulations, 2019 (the Regulations) which together constitute the PIF regime.

Under the PIF regime, a private investment fund must apply to the Financial Services Commission (the Commission) for recognition before it may be promoted or allowed to operate as a PIF in or from within the BVI. However, all PIFs currently operating in the BVI must apply for recognition within the transition period specified in the Act which commenced on 31 December 2019 and ends on 1 July 2020. Any PIF failing to do so will be considered to be conducting unauthorised financial services business and therefore subject to enforcement action.

In this guide, we focus solely on the application process for recognition of PIFs currently operating in the BVI which must be submitted to the Commission by 1 July 2020. This guide is based on the requirements contained in the Act and the Regulations, the Guidelines prepared by the Commission and the statements made by the Director of the Commission’s Investment Business Division at the virtual Meet the Regulator Forum held on 2 June 2020.

The Application Process

Step 1: As a critical first step, PIFs should conduct a classification exercise to determine whether or not they fall within the definition of “private investment fund” under the Act.

A PIF is defined as any company, partnership, unit trust or any other body incorporated, registered, formed or organised in the BVI or any other country which:

• collects and pools investor funds for the purpose of collective investment and diversification of portfolio risk; and
• issues fund interests, which entitle the holder to receive an amount computed by reference to the value of a proportionate interest in the whole or in a part of the net assets of the company, partnership, unit trust or other body.

PIFs will typically include most types of private equity funds, for example. However, joint venture enterprises, family offices and investment vehicles investing in only one asset class will not generally satisfy the PIF definition and will quite likely fall outside scope. In the final analysis, each PIF must be examined on its own circumstances to determine if both limbs of the definition are satisfied. If you are uncertain about your entity’s classification, we strongly recommend that you speak with a lawyer.

Step 2: PIFs are required to have an authorised representative and appointed persons responsible for undertaking:

• valuation;
• management; and
• safekeeping relating to the fund property.

You should have the names and addresses of these persons to hand as you prepare to complete the application.  You will also need additional information about the PIF including places of business inside and outside the BVI, entity type, the names of the directors or general partners, details of the trustees where applicable and the PIF’s financial reporting mechanism.

Step 3: Once you have gathered all the relevant information, you should commence the application process immediately.

You will need:

(a) the completed application form together with:

• the PIF’s constitutional documents;
• the PIF’s certificate of incorporation, formation, registration or equivalent document;
• the PIF’s valuation policy;
• the offering document or term sheet, or the proposed offering document or term sheet, if applicable;
• register of directors, if applicable;
• a résumé or biography for each director, general partner, trustee or other underlying individual(s) where the director, general partner or trustee is a corporate entity; and

(b) the initial application fee of US$700.

Please note that the PIF’s constitutional documents should indicate that:

• the PIF is not authorised to have more than 50 investors; or
• an invitation to subscribe for, or purchase, fund interests shall be made on a private basis only; or
• the fund interests shall be issued only to professional investors with a minimum investment of US$100,000.

It might not be necessary or feasible for a PIF to issue an offering document or a term sheet. In those cases, the PIF must specify in the application form:

• why the fund does not intend to issue an offering document or term sheet; and
• how the information relating to investments in the fund will be communicated to investors or potential investors.

Step 4: The Commission has said that it will not process incomplete applications.

You should therefore ensure that the application form is thoroughly completed and all supporting documents are in place and meet specifications.

Step 5: You should then submit the completed application form and accompanying documents to the Commission by hand or email.

Step 6: The Commission will assess completed applications to ensure that they are compliant with the Act and the Regulations.

Assessments will be done on a “first come, first served” basis and, as indicated by the Commission, within 24-48 hours of receipt.

As specified in the Act, when the Commission grants an application for recognition, it will register the PIF in the Register of Private Investment Funds. The Commission will also issue a certificate of recognition as a PIF upon payment of the recognition fee of US$1,000 (for approvals up to 30 June 2020).

Recognition fees for any PIF approved after 30 June 2020 will be US$500. Such recognition will be valid until the end of the year. PIFs must then pay an annual fee of US$1000 to maintain the certificate of recognition.

If the application has been denied, the Commission will notify the applicant accordingly.

Conclusion

PIFs currently operating in the BVI should seek to become compliant with the new PIF regime as a matter of urgency. We can help you to navigate this process from classification of your investment vehicle to recognition by the Commission.

For more information or if you require any assistance with your PIF applications, please feel free to email us at ghp@ghpbvi.com or reach out to one of our lawyers using the contact details below.

Jermaine O Case Joins George Henry Partners LP

Jermaine O Case joined George Henry Partners LP (GHP) on 18 May 2020 as the newest addition to the firm. Jermaine brings to the firm experience and expertise in the areas of banking, financial services regulatory, corporate and commercial, debt finance, employment and general commercial litigation. Jermaine also advises on all aspects of the British Virgin Islands’ telecommunications regulatory framework.

“Jermaine is a great addition to our team. His particular skill set and experience are an excellent fit for GHP, and enhance our offering and capacity to provide the best service to our clients. We are excited to have Jermaine on board at this critical stage of our development and look forward to deploying the expanded suite of services his addition to the GHP team brings,” remarked Sheila George, Managing Partner.

“I am ecstatic about joining GHP and couldn’t be prouder to be a part of this highly qualified and skilled team. I am delighted to have the opportunity to work in an environment with a culture of excellence, where every member of the team is given a platform and is motivated to achieve his or her full potential. GHP’s core values certainly align with my own. Their people-centric approach ensures that clients receive consistent, high quality, tailored legal support. I very much look forward to using my skills, expertise and experience to add value to the team,” said Jermaine Case.

View Jermaine’s Profile

 

Download the PDF of our guide to employers’ obligations in relation to the coronavirus outbreak 

As of 16 March 2020, there were no confirmed cases of coronavirus (officially known as Covid-19) within the British Virgin Islands. As more coronavirus cases are detected outside of China and the first cases have been identified within the Caribbean area, BVI employers should monitor the impact of the outbreak and take steps to protect their employees and their business.

The outbreak of coronavirus raises points of employment law, immigration, and health and safety for BVI employers. Specific legal advice should be sought where necessary, particularly as the situation is changing daily.

General Measures

Employers should have regard to the following measures to help them to manage the current coronavirus outbreak:

• Monitor and follow advice and guidance from relevant authorities such as the World Health Organisation, the BVI Health Services Authority, Pan American Health Organisation and the Caribbean Public Health Agency
• Determine protocols for the self-isolation of employees, where deemed appropriate
• Carry out a risk assessment to identify the risks faced by employees and visitors and implement measures to mitigate those risks, paying particular attention to vulnerable persons (such as those with weakened immune systems, older people, and those with long-term health conditions including diabetes, cancer, heart disease, asthma and chronic lung disease)
• Inform employees about any proposed measures to be implemented in the workplace, consulting with employees or employee representatives where appropriate, bearing in mind the need to encourage employee participation
• Review the possibility of flexible working and whether existing employment contracts, policies and working arrangements permit such flexibility. If they do not, consider how such flexibility might be achieved
• Review existing policies governing business travel, vacation leave, sick leave, caring for dependents and working from home. Employers should adopt a reasonable and consistent approach, taking account of risk assessments and official guidance
• Review any relevant insurance policies and guidance issued by insurers, particularly in connection with travel, medical insurance, and business interruption
• Ensure that contact details for employees are up to date, including who should be contacted in the event of an emergency
• Consider how employees who are currently travelling or who have travel plans will be impacted by the current travel restrictions
• Consider arrangements for dealing with employees who need to travel abroad, who may be at particular risk of contracting coronavirus, or who report symptoms and may have coronavirus

The BVI economy is built on the twin pillars of financial services and tourism, both of which involve significant elements of international travel. Both of these areas of the economy will be impacted to varying degrees by the restrictions on travel and interaction that are being effected by governments around the world. 

With the number of confirmed cases in the Caribbean area on the increase, employers need to understand what their obligations are to employees and how they should react to some of the challenges that will be faced. While specific legal advice should always be sought in relation to the coronavirus and its impact upon the workplace, we have endeavoured to cover some of the more common questions and concerns below.

What is an employer’s duty of care?

The Labour Code places obligations on employers in relation to health and safety in the workplace. This obligation requires employers to ensure that:

• a safe, sound and secure working environment is provided so far as reasonably practicable
• every reasonable precaution is taken in the circumstances for the protection of workers
• reasonable precautions are taken in the circumstances to protect the general public who come into contact with the workplace
• all applicable standards and policies established by the Labour Department and other relevant agencies of the Government in consultation with stakeholders are complied with. Practically, such agencies would include the BVI Health Services Authority and the Environmental Health Division of the Ministry of Health and Social Development

A breach of an employer’s obligations pertaining to health and safety under the Labour Code constitutes a criminal offence. Criminal liability may extend to individuals (including directors and other employees) where a breach of the obligation has been facilitated by their neglect.

The Labour Code requires employers to undertake a suitable and sufficient assessment of the risks to the safety and health of both (i) employees while at work; and (ii) persons who are not employees, but which are impacted in some way by the employer’s business. This latter category will capture persons such as customers, visitors, suppliers and persons on secondment. Employers should take the time now to review and update their risk assessment to reflect the challenges faced by the coronavirus outbreak and ensure that any required changes are implemented as soon as possible.   

Can an employer expect an employee required to self-isolate to work from home?

This will depend on the circumstances of each case, but is likely to depend on:

• whether the employee is impacted by symptoms of coronavirus – in which case, it is likely that they should not be working and should be on sick leave
• is it a type of job that can be undertaken from home?
• if it is a type of job that can be undertaken from home, does the employer/employee have the systems in place to enable that job to be undertaken from home?

Employers should consider whether they need to take any steps to facilitate working from home. This may include ensuring that employees have a way of logging on to secure systems and can access any necessary materials. The ability to work from home should be assessed for support staff as well as more senior staff. In this regard, employers should assess the availability of laptops, printers and other devices, the absence of which might prevent employees working effectively from home. Working from home may not be an option for some professions and trades.

The key point is that employers should take steps now to assess the viability of working from home, since the spread of the coronavirus has been unpredictable so far and it is unclear how long the duration of any impact might be. Using other countries that have confirmed cases of coronavirus as examples, it is likely that some workplaces will be closed (either voluntarily or required to close by the authorities) and employers need to make sure that any disruption is limited, to the extent possible.

Can an employer prevent employees travelling abroad on vacation?

It is unlikely that an employer could prevent an employee from travelling on vacation, even if the proposed destination is considered to be high risk. However, it would be prudent to advise employees against travel to certain areas in accordance with official advice, to ensure that government guidance is accessible to employees and to ask employees to notify the employer if they are intending to travel to affected areas.

Can an employer ask employees to provide cover for those who are unwell or in self-isolation?

Employers should review employment contracts and any relevant policy to determine whether employees can be required to provide cover for other employees who are unable to attend work because of the coronavirus. Employees should be consulted as it may not be appropriate or reasonable for some employees to work additional hours.

In any event, employers should pay close attention to the provisions of the Labour Code as they relate to the requirement to pay premium pay and also in respect of meal and rest periods.

Can an employer prevent an employee who has refused to self-isolate from accessing the workplace to limit the spread of coronavirus?

Employers must bear in mind the duties of care that they owe to other employees and members of the general public that could come into contact with the workplace. If an employer knowingly allows an employee who has been advised to self-isolate to attend the workplace, the employer may be in breach of those duties.

Suspension may be an option where an individual who has been advised to self-isolate refuses to do so, but employers should consider whether they have a right to suspend in these circumstances. Where no express contractual right to do so exists, legal advice should be sought.

Should employees who are required to self-isolate be paid?

Employers are unlikely to be able to insist that employees take vacation leave for any period of self-isolation in the absence of a contractual right to do so where such self-isolation accords with official guidance. As these employees are not “sick”, it is unlikely that they will be covered by sick leave. Instead, assuming the employer has instructed employees who according to official guidance should self-isolate to remain away from their place of work, employees are likely to be on a period of leave. This leave is likely to need to be paid, unless an employer has a contractual right to place the employee on a period of unpaid leave. The situation is more nuanced where employees consider they should self-isolate for reasons other than those reflected by official guidance.

Where an employee voluntarily remains away from the workplace due to self-isolation without discussing this with the employer first, or for reasons that are not proportionate or reasonable, there may be more scope for considering such leave to be unpaid, although this will depend on the circumstances in each case.

Are employees with coronavirus entitled to sick leave?

This will depend on an analysis of the employee’s employment contract, any relevant policy and an understanding of the statutory position under the Labour Code.

In essence, the Labour Code links the eligibility to sick leave with illness. There could be circumstances in which a person is advised to self-isolate (perhaps because they have been in close contact with a person that has tested positive for coronavirus) but is not actually unwell. In such cases employees may not have a legal entitlement to sick leave under the Labour Code.  Where an employee is unwell, the Labour Code entitles that employee to sick leave with pay for a period of not less than twelve working days in any one year, provided the employee has been continuously employed for a period of at least four months.

Employers should consider making exceptions to their usual sick leave policies to ensure that employees do not feel compelled to attend the workplace when in accordance with official advice they should self-isolate to help to contain the spread of coronavirus.

How should an employer deal with incidents of discrimination and harassment?

There have been reports in other parts of the world of racism and prejudice being shown towards persons from certain countries that have been heavily impacted by the spread of coronavirus, particularly China. Employers need to be mindful of the risk of such behaviour occurring in the workplace.

Employers will potentially be liable for harassment or discrimination by their employees towards other employees and should therefore ensure that reasonable steps are taken to prevent such conduct.

Should business travel be curtailed?

Certain countries have imposed travel restrictions, and these are likely to be updated regularly and with little notice. In the BVI, the visa-free initiative for Chinese nationals is currently suspended.

Employers should pay attention to official advice relating to travel restrictions and should also consider implementing policies to minimise the risk of employees catching coronavirus in connection with business-related travel. Measures to be considered should include health screening for employees returning from abroad and delaying or cancelling non-essential business travel and meetings. Employers should also consider contingency planning for the possibility of employees being quarantined or falling ill when travelling abroad. Employers should review their current travel and medical health insurance arrangements to determine if they remain in force and are adequate.

How to deal with employees who are unable or unwilling to attend work?

Some employees may be able but unwilling to attend the workplace because of fears of contracting coronavirus. Where work can be undertaken from home, it may be possible to agree that the employee works from home for a short period.

In other cases, it may be possible to agree that time away is taken as vacation or unpaid leave. However, if an agreed resolution cannot be found and an employee refuses to attend work without good cause, disciplinary action could be considered.

Before acting, employers should ensure that they have undertaken a risk assessment and have taken steps to mitigate any workplace risks which might cause employees concern. Employers should also ensure that they have dealt with requests to remain away from work in a proportionate, reasonable and consistent manner.

Other employees may be willing but unable to work because they are caring for dependents, as a result of closed schools, or transport disruptions. Employers will need to consider the terms of employment contracts and any relevant policies when determining how to respond to requests to be absent from work, bearing in mind that such requests could be made in relation to an extended period of time and by a significant number of employees.

For more information and to discuss these and any other ways in which the coronavirus outbreak may have an impact on your business, please feel free to email us or reach out to one of our lawyers using the contact details below.

The content of this guide is intended for general information purposes only and is current as at the date of publication indicated. This guide does not constitute legal advice and should not be relied upon as such. You should always seek specific legal advice that takes into account your individual circumstances.