Investing in African and international businesses through funds established in the British Virgin Islands (BVI) is a well-trodden path that’s designed to provide flexibility and help mitigate the risk of investment, says Nicholas Kuria, a counsel in Conyers’ BVI office.
“Because BVI is an international financial centre, a BVI fund will likely suit global investors pooling resources to invest in African businesses,” Kuria explained. “However, BVI funds can also be used as a platform for pooling investment funds from African investors looking to invest in African businesses.”
One of the key selling points of the BVI as a jurisdiction is that it is utilised by, and familiar to, investors from all corners of the world, commented Kuria. Another positive aspect is flexibility, with a wide variety of fund types available.
“At one end of the spectrum there are incubator funds and approved funds which are more cost-effective, can be launched on the basis of a term sheet rather than full offering document, and are subject to a relatively light regulatory burden,” Kuria said. “Further along the spectrum we get into professional funds, private funds and public funds. The professional fund is, I would say, the most popular BVI type of fund. This particular type of fund is aimed at high net-worth, professional investors.”
Kuria explained that incubator funds are designed for start-up fund managers looking to set up quickly and develop a track record. Incubator funds allow for a maximum of 20 investors, investing a minimum of $20 000 each, with net assets of the fund not exceeding $20 million. Such funds can operate for two- to three years, then need to graduate to another type of fund or cease operation.
Approved funds, which Kuria says are “very popular with family and friends types of offerings”, can have up to 20 investors and $100 million in net assets, with no minimum investment and no time restrictions. A professional fund can also be launched relatively quickly, but is only open to “professional investors” each making a minimum $100 000 investment. Private funds are offered to up to 50 targeted investors or on a private basis only, and public funds, which Kuria says are “essentially retail offerings”, are also available, but carry a significantly heavier regulatory burden.
“These funds are designed to be flexible and relatively investor-friendly,” commented Kuria. “At Conyers we can help navigate the landscape because we have expertise in dealing with the regulatory issues involved. We are ideally placed to advise on the most suitable structures to help clients achieve their objectives relatively quickly and efficiently. These are great platforms for investment managers and investors, and we want to make sure there’s greater awareness of the variety of products in Africa.”
Kuria and his colleagues have seen interest across the board from global investors and African-based investors in using these funds to invest in African businesses from traditional sectors like mining, infrastructure and natural resources, to more recent interest in the technology space, particularly fintech and digital business.
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