The Securities and Investment Business (Amendment) Act, 2019 (the “SIBA”) and the Private Investment Funds Regulations, 2019 (the “Regulations”) came into force on 31 December 2019, which legislation introduces a supervisory regime for close-ended funds. We set out below the key features of the new legislation, please contact us for further detailed information. 1. Definition The SIBA creates a new category of fund which is required to make a filing with the BVI Financial Services Commission (the "FSC") in order to receive "recognition" by the FSC provided that it meets certain criteria. The new category of fund is to be called a "private investment fund" and is defined as a company, partnership, unit trust or any other body which: a) collects and pools investor funds for the purpose of collective investment and diversification of portfolio risk; and b) 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. An entity which does not have the above characteristics will not be a private investment fund and will not be affected by the legislation. The FSC is able to recognize a private investment fund if it satisfies the following conditions: a) the fund is lawfully incorporated, registered, formed or organized under the laws of the BVI or of a country outside the BVI; and b) the constitutional documents of the fund specify that: Ø the fund is not authorized to have more than 50 investors, or Ø an invitation to subscribe for or purchase fund interests shall be made on a private basis only, or Ø The fund interests shall be issued only to professional investors with a minimum initial investment (other than for exempted investors) as may be prescribed in the Regulations (currently US$100,000); c) the fund meets such criteria as may be specified in the Regulations; and d) on recognition, the fund will be compliant with the legislation, the Regulations, and any practice directions applicable to the fund; and e) recognizing the fund is not against the public interest. 2. Regulatory obligations In order to become recognized as a "private investment fund", close-ended funds will be required to comply with the following ongoing obligations: a) to have at all times "appointed persons" responsible for undertaking: Ø the management of fund property; Ø the valuation of fund property; and Ø the safekeeping of fund property. b) to have at all times an "authorized representative" in the BVI; c) if structured as a company, to have at all times at least two directors; d) its offering terms shall contain the regulatory disclosures required by the Regulations; e) to maintain a clear and comprehensive policy for the valuation of fund property, which must be followed by the "appointed person" responsible for the valuation of fund property; f) to prepare each year audited financial statements and file a copy of these audited financial statements with the FSC within six months of the financial year to which they relate (although it is possible to apply for an exemption from this requirement to audit); g) to provide notification to the FSC within 14 days of certain key changes (i.e. change of director; material changes to the fund's business; amendments to constitutional or fund offering documents; amendments to the fund's valuation policy etc.); and h) to maintain financial records that: are sufficient to show and explain its transactions; at any time enable its financial position to be determined with reasonable accuracy; and enable it to prepare such financial statements and make such returns as it is required to prepare and make under the SIBA Amendment Act and the PIF Regulations (and such financial records are required to be maintained for a period of at least 5 years after completion of the transaction to which they relate) 3. Transitional period For existing close-ended funds, there is a transitional period to 1 July 2020. During the period existing close-ended funds can apply to the FSC to become recognized as a private investment fund under this new regulatory regime. For new funds which fall within the definition of a "private investment fund", they will be required to submit an application for recognition as a "private investment fund" within 14 days of commencing business. Prior to receiving their certificate of recognition such funds may still operate as such for a period not exceeding 21 days during this intervening 21-day period, they will be deemed to have been recognized as a "private investment fund".