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BVI Limited Partnership Hedge Funds: Calling Japan

July 2012

The British Virgin Islands is a leading offshore jurisdiction for the establishment of hedge funds, offering the advantages of tax neutrality, developed professional infrastructure, common law judicial system and strong legislative framework. In the latter regard, the BVI is particularly noted for its versatile company law statute, the BVI Business Companies Act, 2004 (“BCA”), which is modeled on Delaware law.

However, while a majority of BVI hedge funds are incorporated under the BCA, the company form is not the only option available for BVI funds. In particular, a limited partnership (“LP”) structure may be an appropriate alternative where target investors are located in jurisdictions such as Japan, where securities laws may make certain allowances for the general partner of an offshore LP to market LP interests to Japanese investors. BVI LP funds benefit from the same jurisdictional advantages listed above and, as noted below, the position of the investor as limited partner will normally be analogous to that of a non-voting, participating shareholder in a BVI company fund.

Although currently numbering far fewer than BVI business company funds, as the BVI fund investor universe continues to expand, LPs may become an increasingly attractive structure for hedge fund promoters. In that regard, LPs offer structural flexibility and enable investors to be placed in a comparable position to, and to benefit from the same jurisdictional advantages as, BVI fund company shareholders.

 

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