on 1 april 2026, the bvi financial services commission (fsc) published its q1 2026 newsletter, detailing significant updates and initiatives in the financial services sector. the publication highlights the bvi fsc's proactive approach to global stakeholder engagement, legislative reforms, and compliance enhancement.

to help you stay ahead, we have summarised the most critical updates from the newsletter:

• global expansion: the bvi fsc announced a new latin american representative office in panama, set to open by the end of 2026. furthermore, they officially inaugurated a highly modernised asia representative office in hong kong, strengthening their presence in key international markets.
• legislative reforms: the bvi fsc detailed vital updates to beneficial ownership regulations. these include new rules around exemptions, liquidator responsibilities, and access to filed information.
• compliance enhancements: the bvi fsc strongly emphasised its commitment to aml/cft/cpf compliance. through targeted training initiatives and strategic partnerships, such as those with the robert mathavious institute, they continue to build robust industry capacity.
• deadlines and penalties: you must remain vigilant about upcoming filing deadlines. the bvi fsc clearly outlined the strict penalties for non-compliance regarding beneficial ownership filings, which take effect this month.

these developments reflect ongoing adjustments in the bvi’s regulatory environment and highlight active measures being taken to address international standards and industry expectations. stakeholders are encouraged to review these updates carefully and assess their potential impact on future operations.

for more information the bvi fsc’s newsletter can be accessed here

we recently contributed to a special issue of international corporate rescue on offshore insolvency and restructuring, featuring articles by members of our global network.

offshore insolvency and restructuring are dynamic, ever-changing areas of practice, and our articles, drawn directly from the work our teams are doing with clients across the leading offshore financial centres, reflect that landscape.

the special issue covers a broad range of topics, including the privy council's decision in sian participation corp v halimeda international ltd and its divergence from hong kong's approach to arbitration contracts in an insolvency context, which features prominently, as does our analysis of the cross-border implications of the recent hyalroute decision.

further articles address the restructuring officer and provisional liquidator regimes in the cayman islands, the bvi's unfair preference regime, what is believed to be the first extra-territorial summoning of a company director by the bermuda supreme court, the immovables rule in cross-border insolvency, and a comparative look at singapore's model law regime alongside the approaches in the bvi, cayman islands, and bermuda.

we hope these articles provide a valuable and practical resource. please do not hesitate to reach out to any of the contributing authors or the authors of this post, if any of the topics are relevant to matters you are currently facing.

download the pdf to read the articles

the articles included in the special issue were written and prepared for international corporate rescue and shared on our channels with the permission of chase cambria publishing.

the recent decision in in the matter of the d, e, f, g and h trusts serves as an important reminder on the nature of the confidentiality framework in trust proceedings for parties in the cayman islands. in a clear and helpful judgment, the grand court has restated the principles governing when, and how, confidentiality orders will be granted in private trust cases.

background

between 2007 and 2009, a former trustee accepted additions to the trust fund from an individual without appreciating that, under the terms of the trust instrument, the act of making those additions rendered the contributor a "settlor" and, by operation of the definitional machinery, an "excluded person" who could no longer benefit from the trust. distributions were subsequently made to or for the benefit of that individual, and assets were transferred to related trusts established for his children in which he also held an interest. on the trustee's analysis, each of these steps had been taken in breach of trust.

seeking to rectify the position, the current trustee turned to a remedy that will be familiar to trust practitioners: an application under section 64a of the trusts act (2021 revision), the statutory codification of the hastings-bass jurisdiction in cayman law, for declarations that the relevant deeds of addition were void. before filing the substantive proceedings, the trustee adopted what has become the established two-stage approach: by first making an ex parte on notice application for confidentiality and anonymisation orders designed to shield the trusts, the family, and the proceedings from the public; followed by the substantive section 64a proceedings.

the legal framework: balancing open justice and privacy

the chief justice identified the constitutional starting point in determining whether to grant a confidentiality order: the principle of open justice. sections 7(1) and 7(9) of the constitution require that proceedings be conducted in public and, as newman ja observed in ahab, "the administration of justice in cayman must comply with the principle of open justice".

that principle, however, is not absolute. the chief justice noted how section 7(10) of the constitution expressly permits derogation where it is "necessary or expedient in the interests of justice”, including where publicity would prejudice the interests of justice, involve the welfare of minors, or compromise the private lives of the persons concerned.

drawing on a rich line of authority, the chief justice distilled the applicable test into three clear questions:

1. gateway: does the case fall within a recognised category permitting derogation from open justice?
2. proportionality: is the confidentiality sought necessary and proportionate?
3. countervailing interest: is there any public interest that outweighs the privacy interests engaged?

judgment

applying the three-stage test to the present case, the chief justice found this to be "a paradigm case for the grant of confidentiality orders”. the court found that: the proceedings were properly characterised as internal trust administration matters; that there was no suggestion of public misconduct, regulatory concern, or wider public interest engaged; and that the information at stake (encompassing financial affairs, family relationships, and the identity and status of beneficiaries, including minors) was described as "inherently private”.

the court accordingly granted the relief sought: anonymisation of the parties by initials, the filing of an anonymised originating summons only, sealing of the court file, private hearings, and anonymised publication of any resulting judgments or orders.

comment

this judgment serves as a welcome restatement of the principles governing confidentiality in cayman islands trust proceedings.

for parties to trust applications and proceedings, the chief justice's three-stage test provides a clear framework that must be squarely addressed in every application:

1. identify the gateway: establish that the matter falls within a recognised category permitting derogation from open justice.
2. demonstrate necessity and proportionality: show that the confidentiality sought is no more than is required to protect the interests engaged.
3. negate any countervailing public interest: affirmatively address the absence of factors that would tip the balance against confidentiality.

obtaining confidentiality orders in trust cases is not a “rubber stamping” exercise. the matters outlined above must be properly advanced in evidence to support the relief sought.

the harneys private wealth team in cayman regularly acts for trustees, beneficiaries, protectors, court-appointed administrators and other interest holders across a wide variety of trust and estate matters and has extensive experience in securing confidentiality orders and other protective relief.

the bermuda monetary authority (bma) introduced an approval in principle (aip) process to streamline the establishment of new investment funds in bermuda. this initiative aims to balance efficient decision-making with robust regulatory oversight.

key highlights of the aip process:

• conditional pre-approval can be granted within 2-3 business days for applicants submitting the required documentation.
• this allows sponsors to address operational and outstanding requirements in a structured manner.
• full applications are typically reviewed within eight business days.

it is important to note that aip is not equivalent to formal registration or authorisation under the investment funds act 2006. funds cannot commence operations, accept subscriptions, or claim registration until all statutory and regulatory requirements are met, and formal approval is granted.

for further details, bma’s notice can be found here

on 17 april 2026, the european securities and markets authority (esma) published a statement clarifying its supervisory expectations as the mica transitional period reaches its eu-wide expiry on 1 july 2026.

1) transitional period expiry

• esma states that the mica transitional period “will officially expire across the eu on 1 july 2026” and after 1 july 2026, any entity providing crypto-asset services to eu clients without a mica licence will be “in breach of eu law” and “must cease offering such services”.
• esma also underlines that the prohibition applies irrespective of whether mica has been implemented in a member state or not, reinforcing the pan‑eu compliance cut‑off.

2) wind-down obligations for unauthorised casps

esma reiterates following its related statement of 4 december 2025 that casps unauthorised by that date should have orderly wind‑down plans “ready for implementation” if authorisation is not obtained by the relevant deadline. esma expects wind‑down plans to:

• wind-down plans must be operational, credible, and immediately executable, designed in compliance with applicable eu conduct, prudential, and aml/cft obligations.
• plans must facilitate orderly client offboarding, including by arranging the transfer of crypto-assets held on behalf of clients to an authorised casp or to a self-hosted wallet, with prior notice to affected clients.
• by 1 july 2026, unauthorised casps must have already implemented their wind-down plans — the mere existence of a plan on paper will not suffice.

3) client migration

• at the same time, esma expects authorised casps to “actively manage” migration of existing clients ahead of 1 july 2026, including taking steps to onboard eu clients before the expiry of the transitional period.
• esma expressly links such onboarding to robust aml/cft processes and “full compliance” with applicable aml/cft requirements, signalling limited tolerance for simplified procedures during mass migration.

4) third‑country perimeter, reverse solicitation and anti‑circumvention

• esma further reminds market participants that entities established outside the eu are (save for those relying on the reverse‑solicitation exception) prohibited from providing crypto-asset services to eu clients or soliciting eu clients with a view to providing such services.
• esma further reaffirms that this restriction applies also in a b2b context and notes that mica prohibits casps from outsourcing/delegating certain services to non-eu entities which are not authorised as casps under mica.

5) expectations on ncas: verification and enforcement

esma’s expectations for ncas ahead of and after expiry, including:

• verifying the existence and adequacy of wind‑down plans and ensuring timely implementation without undue economic harm to clients.
• acting against the unauthorised provision of crypto-asset services post‑expiry of the transitional period (including cooperation with other authorities where appropriate); and
• scrutinising client migration strategies, including to ensure unauthorised casps do not continue “business‑as‑usual” beyond the transitional period.

6) investor-facing warnings

finally, esma directs investors to verify whether a provider is authorised as a casp in the eu. esma stresses that mica protections apply only when dealing with specific eu-authorised casps, not other group companies and not non‑eu entities, even where a common brand is used across jurisdictions.

esma’s statement can be found here.

on 3 june 2026, the british virgin islands financial services commission (fsc) issued industry circular 16 of 2026, advising stakeholders of the government of the virgin islands' initiative to develop a national financial services strategy. the strategy is directed at enhancing the territory's competitiveness, resilience, and global standing within the international financial services landscape.

as part of this initiative, the government is soliciting structured input from industry participants via a confidential stakeholder survey, administered through a dedicated platform. key aspects of the survey process are as follows:

• responses will be aggregated and analysed anonymously, with completion estimated at approximately ten minutes.
• the data collected will directly inform both the formulation of the strategy and its accompanying implementation roadmap.
• a select group of respondents may subsequently be invited to participate in targeted focus groups to examine specific topics in further detail.

the survey seeks to capture stakeholder perspectives on current sectoral strengths, prevailing challenges, and prospective opportunities. the fsc has underscored that meaningful stakeholder engagement is critical to ensuring the strategy adequately reflects industry realities, addresses emerging risks, and positions the bvi financial services sector for sustained competitiveness.

the deadline for survey submissions is 15 june 2026.

stakeholders with operations or interests connected to the bvi are encouraged to participate promptly, given the limited consultation window.

industry circular 16 of 2026 can be accessed here

the alternative investment fund managers directive (aifmd) is the cornerstone of eu regulation for managers of non-ucits investment funds.

it determines which fund managers require authorisation, sets asset thresholds that trigger full regulatory obligations, and establishes the framework for marketing alternative investment funds to eu investors. it also created a passport allowing aifms to market their funds throughout the eea without relying on national private placement rules (npprs). this note sets out the scope of aifmd, the key thresholds and exemptions available, how the directive applies to eu and non-eu managers, as well as recent changes introduced by aifmd ii.

what is the alternative investment fund managers directive (aifmd)?

the alternative investment fund managers directive (directive 2011/61/eu), commonly known as aifmd, is the primary eu regulatory framework governing managers of alternative investment funds (aifs). it was adopted in 2011 and transposed into national law across eu member states by july 2013. aifmd was subsequently amended by directive (eu) 2024/927 (aifmd ii), which had to be transposed by member states by 16 april 2026.

aifmd regulates alternative investment fund managers (aifms), not the funds themselves. its core objectives are:

• investor protection through enhanced transparency and disclosure requirements
• systemic risk monitoring across the alternative investment fund sector
• a harmonised regulatory and supervisory framework for aifms operating across the eu

an aif is defined broadly as any collective investment undertaking that raises capital from a number of investors with a view to investing it in accordance with a defined investment policy for the benefit of those investors, and which is not a ucits fund. this definition captures hedge funds, private equity funds, real estate funds, infrastructure funds, fund of funds and other non-ucits structures.

which funds and activities fall within the scope of aifmd?

aifmd applies to any entity that manages one or more aifs, regardless of the legal form of those funds or whether they are open-ended or closed-ended. the directive captures both eu aifms and, in certain circumstances, non-eu aifms.

funds within scope

• private equity and venture capital funds (including carried interest and co-investment vehicles)
• hedge funds (including single-strategy and multi-strategy vehicles)
• real estate, infrastructure and debt funds
• fund of funds structures
• any other collective investment scheme that does not require authorisation under the ucits directive

key regulated activities

• portfolio management and risk management (these are the minimum functions that define an aifm)
• marketing of aif units or shares to investors in the eu
• administration, valuation and ancillary services (where performed by the aifm)
• delegation arrangements (the aifm remains responsible even where functions are delegated to third parties)

structures outside scope

certain structures are expressly excluded from aifmd, including holding companies, institutions for occupational retirement provision (iorps), supranational institutions (such as the eib and ebrd), central banks, national governments and bodies managing social security and pension funds, employee participation or savings schemes, securitisation special purpose entities, and single-investor vehicles where the investor itself has management control.

aifmd thresholds and common exemptions

aifmd provides a registration regime for smaller eu-aifms that fall below certain asset thresholds. these sub-threshold aifms are exempt from the full scope of aifmd but remain subject to registration and reporting obligations with their home member state regulator.

de minimis thresholds (article 3)

• eur 100 million: applies where the aifs managed include funds that employ leverage. this threshold is calculated on the total value of assets under management (aum), including any assets acquired through leverage.
• eur 500 million: applies where the aifs managed are unleveraged and have no redemption rights exercisable during a period of five years from the date of initial investment.

eu aifms that fall below these thresholds must still register with their national competent authority and comply with ongoing reporting requirements (including annex iv reporting under aifmd ii). they may also voluntarily opt in to full aifmd authorisation to access the eu marketing passport.

specific exemptions

• european venture capital funds regulation (euveca ): managers of qualifying venture capital funds with aum below eur 500 million may register under the euveca regime instead of seeking full aifmd authorisation.
• european social entrepreneurship funds regulation (eusef): a parallel regime for managers of qualifying social entrepreneurship funds with aum below eur 500 million.
• european long-term investment funds regulation (eltif ): the eltif framework allows authorised aifms to manage and market long-term investment funds across the eu under a tailored product regime, with eltif 2.0 (regulation (eu) 2023/606) significantly broadening eligible assets and investor access from january 2024.

does aifmd apply to non-eu fund managers?

aifmd has significant implications for non-eu fund managers (referred to in the directive as “non-eu aifms”). although a non-eu aifm is not required to obtain aifmd authorisation simply because it manages funds, aifmd becomes relevant in two principal scenarios:

marketing into the eu: where a non-eu aifm markets an aif (whether eu or non-eu) to investors in an eu member state, aifmd applies. in the absence of an activated third-country passport (articles 35 and 37–40, which have not yet been switched on), non-eu aifms must rely on npprs where available. npprs are not harmonised and vary considerably between member states.

managing an eu aif: where a non-eu aifm is appointed as the manager of an eu-domiciled aif, the non-eu manager must comply with certain aifmd requirements as determined by the relevant member state.

nppr conditions (article 42)

where a non-eu aifm markets under an nppr, typical conditions include:

• the non-eu aifm’s home jurisdiction must not be listed as a non-cooperative country by the financial action task force (fatf)
• cooperation arrangements must be in place between the competent authority of the member state of marketing and the supervisory authority in the aifm’s home jurisdiction
• compliance with aifmd transparency and reporting requirements (articles 22–24), including annual reports and investor disclosure
• notification to the relevant competent authority before marketing commences

aifmd ii introduces additional requirements for non-eu aifms, including enhanced substance expectations, stricter delegation rules to prevent letterbox entities, and expanded reporting obligations under the revised annex iv framework.

how aifmd operates across different eu member states

although aifmd is an eu directive that requires transposition into national law, implementation varies across member states. key areas of divergence include:

national private placement regimes

not all member states maintain an nppr. some jurisdictions do not practically permit marketing by non-eu aifms under an nppr. others (such as the netherlands, germany and luxembourg) offer established nppr frameworks, though the specific conditions and notification requirements differ in each case. the united kingdom, post-brexit, operates outside the aifmd framework entirely and has its own parallel regime.

gold-plating and local requirements

certain member states impose additional requirements beyond the aifmd minimum. for example, local regulators may require the non-eu aifm to appoint local paying agents and comply with supplementary local rules. other jurisdictions may impose additional conduct-of-business obligations through local financial regulation or specific requirements on depositaries.

the eu marketing passport

a fully authorised eu aifm benefits from the aifmd marketing passport, which permits marketing of eu aifs to professional investors across all eu member states through a notification procedure to the aifm’s home member state regulator. this is one of the primary commercial advantages of full aifmd authorisation.

the passport is not currently available to non-eu aifms or for the marketing of non-eu aifs.

aifmd ii: key changes across member states

aifmd ii introduces a number of changes that will apply uniformly once transposed, including:

• loan origination framework: aifms will be able to originate loans directly, subject to risk retention, diversification and leverage limits
• enhanced delegation rules: stricter requirements to ensure aifms retain sufficient substance and do not become letterbox entities
• liquidity management tools: mandatory availability of at least two liquidity management tools for open-ended aifs (excluding suspension and redemption gates)
• depositary regime: limited cross-border depositary services permitted for smaller markets where no suitable local depositary is available
• expanded reporting: revised annex iv reporting obligations with more granular data requirements and harmonised reporting templates

early engagement with local counsel in each relevant jurisdiction is advisable to ensure compliance with both the directive and any additional national requirements.

how harneys can help

we advise fund managers, sponsors and institutional investors on the structuring, establishment and ongoing regulatory compliance of alternative investment funds across multiple jurisdictions. our investment funds team works closely with eu-based and non-eu managers, navigating aifmd authorisation, sub-threshold registration, nppr notifications and cross-border marketing arrangements.

whether you are assessing whether your fund falls within scope, structuring to take advantage of available exemptions or preparing for the impact of aifmd ii, our team can provide tailored guidance at every stage.

to discuss how these developments affect your fund or management arrangements, please contact our investment funds team.

harneys has bolstered its transactional team in the british virgin islands with two significant hires. la toya james joined the firm's regulatory & tax practice in april 2026, where she leads its tax team in the bvi. she joins harneys following her role as director at a major bvi regulatory body. alexandra holden joined the banking & finance team as counsel in may 2026. she was previously a partner at kirkland & ellis in london.

la toya specialises in advising clients on financial services, regulatory, and tax matters, with a particular focus on economic substance, the common reporting standards, the crypto asset reporting framework, and exchange of information upon request in relation to tax compliance. before joining harneys, la toya spent 13 years as the director of the international tax authority in the bvi. during her tenure, she played a pivotal role in shaping the jurisdiction's legislative framework, drafting primary and secondary legislation as well as guidance notes to support compliance with international tax standards.

alex specialises in general banking and finance law, with broad experience acting for borrowers, sponsors, and lenders across a range of financings and sectors. her practice encompasses corporate lending, debt restructuring, corporate reorganisations, project finance, digital infrastructure, and acquisition financing. alex has expertise in advising infrastructure clients on complex transactions, with a focus on digital infrastructure and real estate. she has also advised on several large, structured finance transactions in this space.

commenting on the appointments, george weston, the firm's global head of corporate and head of bvi transactional, said: "we are delighted to welcome la toya and alex to the team. these hires represent a significant investment in the depth and breadth of our transactional offering in the bvi. la toya brings unrivalled knowledge of the jurisdiction's tax and regulatory landscape, having spent over a decade at the forefront of shaping its legislative framework, and alex's experience advising on complex banking and finance transactions is an invaluable addition to our capabilities. together, these appointments underscore our commitment to providing clients with market-leading expertise across the full spectrum of transactional work in the bvi."

the harneys transactional team brings together the firm's banking & finance, corporate, funds & asset management, and regulatory & tax practices to deliver integrated advice on complex offshore and cross-border transactions. operating across key jurisdictions, the firm supports clients on the full spectrum of transactional work, from debt finance, m&a, and corporate advisory matters to fund formation, restructuring, and closure, as well as regulatory, compliance, and tax issues.

on 19 may 2026, the department for business and trade (dbt) published general trade licence gbsan0004 (the licence). the licence exempts diesel and jet fuel refined from russian-origin crude oil in third countries from the new import ban introduced under chapter 4ib of the russia (sanctions) (eu exit) regulations 2019 (the russia regulations). it came into force on 20 may 2026, has no fixed end date and will be periodically reviewed by the secretary of state.

notably, the licence was published without prior announcement, on the same day the new chapter 4ib import ban was due to take effect. in practice, it carves out the two product categories that constitute the vast majority of the uk's imports of refined russian-origin oil products, meaning the new ban has limited immediate impact on existing supply chains for diesel and jet fuel.

what does the licence cover?

the licence applies only to products falling within the following commodity codes:

• 2710 19 42 or 2710 19 44: diesel
• 2710 19 21: jet fuel

all other oil products derived from russian crude remain subject to the new import ban. the licence does not override any other provisions of the russia regulations, if an act would breach another sanctions rule, the licence does not authorise it. standard record-keeping obligations under regulation 76 continue to apply, as do any windsor framework obligations for northern ireland.

the secretary of state may vary, revoke, or suspend the licence at any time, with aim to give at least four months' notice before revocation.

why has the government done this?

the uk banned direct russian energy imports in 2022. however, a gap in the sanctions framework allowed over £4 billion of jet fuel and other oil products refined from russian crude in third countries, principally india, to continue entering the uk market. ministers had committed to close this loophole by spring 2026, most recently reaffirming that position in april.

the policy reversal is driven by supply disruptions from the us–israeli conflict with iran, including the effective closure of the strait of hormuz, which has pushed brent crude to around us$110 per barrel. a separate temporary licence has also been issued for liquefied natural gas from certain russian plants. trade minister chris bryant described both exemptions as "temporary" and stated that the government would "suspend them as soon as we possibly can," whilst acknowledging that the communication of the decision could have been handled better.

how does this compare with the us and eu approach?

the us treasury extended its own sanctions waiver for russian oil cargoes already at sea, renewed for a second time in may 2026. the eu, by contrast, has taken a harder line, with economics commissioner valdis dombrovskis stating at the g7 finance ministers' meeting that it was not a time to "ease pressure on russia". reports suggest that certain european counterparts and ukraine were not consulted before the uk's decision.

can i use this licence in the uk overseas territories or crown dependencies?

in general terms, unfortunately not, as each uk overseas territory and crown dependency is responsible for issuing their own licences despite the fact that the underlying trade sanctions are based on the uk sanctions regime. we are keeping track of developments in the harneys jurisdictions and will update this blog in due course as and when further licences are issued.

what should compliance teams do now?

market participants should note the following points:

• narrow scope: the licence covers only diesel and jet fuel under the specified commodity codes. all other russian crude products remain prohibited under chapter 4ib. compliance screening processes should be updated to reflect this distinction.
• revocation risk: although the licence has no fixed end date, it can be revoked on four months' notice. this creates uncertainty for longer-term supply contracts and procurement planning.
• ongoing monitoring: dbt guidance should be monitored closely. the government has stated its intention to withdraw the exemption once supply conditions normalise, so the position may change at relatively short notice.

the general licence can be accessed here.

harneys acted as cayman islands counsel to the lenders on the us$575 million inaugural holding company financing for digital edge, a leading developer and operator of data centres across asia-pacific backed by stonepeak. the financing completed on 22 may 2026.

the successful execution of this financing demonstrates continued strong lender confidence in the digital infrastructure sector across the region.

the lender group was made up of clifford capital, deutsche bank, mufg, sumitomo mitsui banking corporation and standard chartered acting as mandated lead arrangers and bookrunners, and bnp paribas and stonepeak credit as mandated lead arrangers.

the harneys team was led by lishi fong, singapore managing partner and head of transactional, with support from lead associate nicole teng, counsel richard griffiths and senior associate jonathan lim, all based in the firm’s singapore office. white & case llp acted as international counsel to the lenders.

lishi commented: “we are pleased to have advised the lenders on this significant transaction for digital edge. the strong appetite from lenders underscores the continued confidence in high-quality digital infrastructure platforms across asia-pacific. it was a privilege to work alongside our clients and white & case, and we look forward to supporting further growth in this dynamic sector.”

the banking & finance practice group at harneys has decades of experience in offshore credit and security legal issues relating to debt finance, including loan finance, debt issuance, lease financing, shariah compliant finance, distressed debt and enforcement of security and derivatives. the team’s deep understanding about the business environment in which their clients operate help build strong networks with industry players and service providers in key markets around the world.

we are delighted to announce that we will be attending fintech on the seas 2026 as a proud gold sponsor. the summit takes place from 22–24 june 2026 on the stunning necker island in the british virgin islands, and we could not be more excited to be part of it.

hosted by bvi finance, this flagship event brings together global innovators, policymakers, regulators and industry leaders for three days of in-depth dialogue on the forces shaping the next era of financial technology. it is a unique opportunity to exchange ideas, forge partnerships and explore the trends that are redefining how financial services operate worldwide.

what to expect

the summit programme covers the full breadth of the modern fintech landscape. delegates can expect focussed discussions on the developments shaping global markets, from blockchain, tokenisation and decentralised finance to ai innovation, virtual asset regulation, dao governance and structuring for web-based projects. the agenda also addresses the practical side, with sessions on compliance strategies and building market resilience in an era of rapid technological change.

why it matters

as the intersection of financial services and technology continues to accelerate, events like this offer a valuable opportunity to stay ahead of the curve.

join us

we would love to see you there. if this sounds like your kind of event, registration is now open.

register here: fintech on the seas 2026 — registration

find out more about the event: fintech on the seas 2026

we look forward to connecting with fellow professionals, clients and collaborators in the bvi this june. do get in touch if you would like to arrange a meeting during the summit — we are always happy to make time for a conversation.

the cayman islands is the world’s leading domicile for hedge funds and alternative investment vehicles. its combination of regulatory pragmatism, tax neutrality, legal certainty and deep service-provider infrastructure makes it the jurisdiction of choice for managers launching funds that accept institutional and sophisticated investor capital.

this guide explains the principal fund structures available, their key features, the formation process, the role of the cayman islands monetary authority (cima), and how cayman compares with competing jurisdictions.

what are cayman islands investment funds?

a cayman islands investment fund is a collective investment scheme organised under cayman law to pool capital from investors and deploy it in accordance with a defined investment strategy. the legislative framework draws primarily on the mutual funds act (as revised) and the private funds act (as revised), which together regulate the two broad categories of fund:

1. mutual funds – open-ended vehicles that issue redeemable interests and are regulated under the mutual funds act.
2. private funds – closed-ended vehicles that issue non-redeemable interests and are regulated under the private funds act.

common legal structures include the exempted limited partnership (the dominant private fund vehicle), the exempted company, the segregated portfolio company (spc) and the unit trust. the choice of structure depends on factors such as investor base, strategy and liability ring-fencing requirements.

key features of cayman islands funds

cayman hedge funds share a set of characteristics that have driven the jurisdiction’s dominance:

• tax neutrality – no income tax, capital gains tax, withholding tax or corporate tax is levied at the fund level, ensuring a single layer of taxation at the investor’s home jurisdiction.
• flexible investment mandates – funds may invest across asset classes, including equities, credit, digital assets, derivatives and real assets, with no statutory restrictions on strategy.
• investor familiarity – institutional allocators, pension funds, endowments and sovereign wealth funds routinely accept cayman fund documentation as market standard.
• deep service-provider ecosystem – a mature network of administrators, custodians, auditors, prime brokers, directors and legal counsel supports the full fund lifecycle.
• robust legal framework – english common law underpins the cayman legal system, providing predictable contract enforcement, experienced courts and a well-developed body of fund-related case law.

benefits of investing in cayman islands funds

the jurisdiction delivers a combination of commercial and structural advantages that benefit both managers and investors:

• speed to market – a standard cayman fund can be launched in two to three months, where documentation is in agreed form and service providers are engaged.
• no exchange controls – capital moves freely into and out of the jurisdiction without restriction, supporting global multi-currency strategies.
• regulatory proportionality – cima applies risk-based supervision tailored to fund type and investor sophistication, avoiding the prescriptive operational requirements seen in onshore regimes.
• global recognition – cayman fund vehicles are widely accepted by us, european and asian counterparties and satisfy the due diligence requirements of major institutional gatekeepers.
• liability segregation options – spcs allow managers to ring-fence assets and liabilities of individual strategies within a single legal entity, reducing cost and complexity for multi-strategy platforms.

how to set up a fund in the cayman islands

the formation process is well-established and follows a predictable sequence:

• structuring and strategy definition – the manager works with cayman counsel to select the appropriate vehicle (exempted limited partnership, exempted company or spc), agree on governance arrangements and confirm the regulatory classification (mutual fund or private fund).
• service-provider engagement – the fund appoints an administrator, an auditor (where required), a custodian/prime broker (where required), and independent directors (where required).
• documentation – core documents include the offering memorandum (or confidential information memorandum), the limited partnership agreement or articles of association, the subscription agreement, and the redemption notice.
• entity incorporation and registration – the vehicle is incorporated or established with the cayman islands registrar of companies or registrar of limited partnerships. an application for registration is then made to cima under the mutual funds act or the private funds act (as applicable).
• anti-money laundering compliance – the fund must appoint an aml compliance officer, a money-laundering reporting officer and a deputy mlro, and implement procedures consistent with the cayman islands’ anti-money laundering regulations.
• economic substance considerations – the fund is classified as an “investment fund” under the international tax co-operation (economic substance) act (as revised) and is therefore not within the scope of such act, and it must file an annual economic substance notification with the cayman tax information authority to that effect annually.

how cayman islands funds compare to other fund jurisdictions

fund managers evaluating domicile options typically compare cayman with luxembourg, ireland and the british virgin islands. each jurisdiction serves a different investor profile and distribution strategy.

1. cayman vs luxembourg – luxembourg offers eu-regulated fund structures (ucits and raifs) with passporting rights across the european economic area. cayman remains preferred for asia or us-facing hedge fund strategies where eu distribution is not required, given its simpler regulatory framework, lower operating costs and faster time to market.
2. cayman vs ireland – ireland competes primarily in the ucits (retail) and qiaif (institutional) space for managers requiring an eu-domiciled product. cayman is more commonly used for non-eu hedge fund strategies, particularly those with us/asian managers and a global (non-eu-centric) investor base.
3. cayman vs bvi – the bvi is a cost-effective alternative for smaller or start-up managers and is frequently used for closed-ended private equity and venture capital structures with a single investment. cayman offers deeper institutional acceptance, a broader range of regulated fund categories and a more developed body of investment-fund case law.

in practice, many global fund platforms maintain both a cayman master or feeder vehicle (for us and non-eu investors) alongside an eu-regulated fund (for eea distribution), reflecting the complementary role that cayman plays in cross-border fund architecture.

role of cima in regulating cayman islands mutual funds

cima is the sole financial services regulator and is responsible for the registration, licensing and ongoing supervision of investment funds. under the mutual funds act, funds fall into one of three regulatory categories:

1. registered mutual funds – the most common category. the fund files prescribed particulars with cima and must have its equity interests listed on a recognised stock exchange, or minimum initial investments of us$100,000 per investor.
2. administered mutual funds – funds whose principal office is in the cayman islands, and which have a licensed fund administrator providing their principal office.
3. licensed mutual funds – funds that hold a full licence from cima, subject to more detailed supervisory conditions.

cima’s supervisory approach includes annual filings, audited financial statement requirements, the power to request information and, where necessary, enforcement action, including the ability to apply to the grand court for the winding-up of a fund. since 2020, private funds (closed-ended vehicles) have been brought within a parallel registration regime under the private funds act, closing a previous regulatory gap.

funds must also comply with international standards on tax transparency, including the common reporting standard (crs), and fatca reporting obligations, economic substance requirements and beneficial ownership reporting under the beneficial ownership transparency act.

typical us manager use cases and common master-feeder structures

us-based hedge fund managers are the single largest group of cayman fund sponsors. most us managers use a cayman vehicle as part of a master-feeder arrangement designed to accommodate the different tax and regulatory profiles of us taxable investors, us tax-exempt investors and non-us investors within a single investment programme.

in the standard master-feeder model, a cayman-domiciled master fund sits at the top of the structure and conducts all trading activity. two or more feeder funds invest substantially all of their assets into the master fund:

• onshore (us) feeder – typically a delaware limited partnership or llc, designed for us taxable investors who require flow-through tax treatment and a us-source schedule k-1.
• offshore (cayman) feeder – a cayman exempted company or exempted limited partnership that accepts subscriptions from us tax-exempt investors (pension plans, endowments, foundations) and non-us investors, both of whom benefit from investing through an offshore blocker that shields them from effectively connected income and unrelated business taxable income (ubti).
• the master fund is almost invariably a cayman vehicle — usually an exempted limited partnership for strategies that benefit from partnership tax treatment at the master level, or an exempted company where a corporate form is preferred. this structure allows the manager to operate a single portfolio while segregating investors by tax and regulatory need.

other common us manager use cases include standalone cayman funds marketed exclusively to non-us investors, mini-master structures (where a single cayman fund accepts both us and non-us investors directly, relying on check-the-box elections for us tax purposes) and parallel fund arrangements where side-by-side cayman and delaware vehicles invest on substantially the same terms without a master fund.

how harneys can help

we are one of the world’s leading offshore law firms and a market leader in cayman islands investment fund formation and structuring. our dedicated funds team advises managers, sponsors, institutional investors and service providers across the full fund lifecycle, from initial structuring and regulatory registration through to ongoing operational matters and restructurings.

our cayman funds practice routinely advises on:

• formation of hedge funds, private equity funds and hybrid vehicles, including master-feeder, parallel and standalone structures.
• cima registration and licensing under the mutual funds act and the private funds act.
• structuring of segregated portfolio companies, exempted limited partnerships and unit trusts.
• drafting and negotiation of offering memoranda, partnership agreements, subscription documents, redemption notices and side letters.
• ongoing regulatory compliance, including aml, economic substance, crs and fatca reporting obligations.
• fund restructurings, migrations, mergers and wind-downs.

with offices across the major offshore jurisdictions, we offer a seamless, multi-jurisdictional service for managers structuring across cayman, bvi, luxembourg and other key fund domiciles. to discuss how we can support your next fund launch or restructuring, please contact our cayman islands funds team.

on 25 march 2026, the british virgin islands financial services commission (bvi fsc) published circular 10 of 2026 to inform the public about the latest financial action task force (fatf) public statement issued on 13 february 2026. these statements identify jurisdictions with strategic deficiencies in their anti-money laundering (aml), counter-financing of terrorism (cft), and counter-proliferation financing (cpf) regimes. compliance with these updates is essential for maintaining international financial standards.

high-risk jurisdictions (call for action)

the fatf has identified jurisdictions with significant deficiencies requiring enhanced due diligence (ecdd) and, in some cases, countermeasures to mitigate risks to the international financial system. key jurisdictions include:

1. dprk (north korea):
   • persistent deficiencies in aml/cft/cpf frameworks.
   • fatf calls for robust countermeasures, including terminating banking relationships and limiting financial transactions.
2. iran:
   • concerns over terrorism financing and proliferation risks.
   • recommended measures include prohibiting new financial relationships and limiting transactions while ensuring humanitarian funds are handled appropriately.
3. myanmar:
   • limited progress on action plan commitments.
   • enhanced due diligence measures are advised, ensuring humanitarian and legitimate activities remain unaffected.

jurisdictions under increased monitoring

• 22 jurisdictions, including kuwait and papua new guinea, are under increased monitoring (commonly referred to as the "grey list").
• these jurisdictions are actively working to address deficiencies. fatf advises a risk-based approach without unnecessary de-risking or cutting off entire customer classes.

guidance for compliance

the bvi fsc advises entities to:

• apply appropriate due diligence measures when dealing with customers or transactions linked to jurisdictions under increased monitoring.
• implement enhanced due diligence and countermeasures for high-risk jurisdictions.
• continuously monitor transactions involving clients from identified jurisdictions for any changes that may require adjustments in due diligence measures.

for detailed statements, visit the fatf public statements here and bvi fsc circular 10 here.

the british virgin islands financial services sector experienced significant growth in 2025, as highlighted in the bvi financial services commission's (fsc) q4 2025 statistical bulletin and recent reports. key developments include:

1. record incorporations: a total of 31,134 new companies were registered in 2025, marking a 14 per cent increase from 2024 and the highest level in four years. q4 2025 alone saw 8,778 incorporations, a 21.4 per cent rise compared to q4 2024. despite this, the total number of active companies slightly declined to 356,256 due to removals and strike-offs.
2. diversification efforts: the bvi has been expanding its financial services beyond incorporations. limited partnerships (lps) saw a 39.5 per cent year-on-year increase in q4 2025, while trademark applications rose by 50 per cent compared to q4 2024. since 2015, nearly 3,000 trademark applications have been filed, reflecting the bvi's efforts to broaden its business base.
3. sectoral trends: the fsc reported robust activity across various financial services, including investment business, fiduciary services, and virtual asset service providers. the licensing and supervisory committee handled 266 matters in q4 2025, underscoring the sector's dynamic regulatory environment.

these developments signal a rebound in the bvi's financial services sector, driven by strategic diversification and a resurgence in company incorporations. the bvi continues to position itself as a global hub for financial services, leveraging its regulatory framework and expanding offerings.

bvi fsc’s statistical bulletin for q4-2025 can be accessed here

on 13 may 2026, the supreme court of new zealand granted leave to appeal in rh & jy trust v worksafe new zealand, and considered whether a trust and/or the trustees of a trust acting collectively constitutes a "person" for statutory purposes.

although the case arises under new zealand's health and safety at work act 2015, the underlying question, whether a trust can bear obligations and liabilities as if it were a distinct legal entity, raises interesting questions about the nature of trusts and trustee liability that are likely to resonate across common law jurisdictions.

background

a tragic accident took place in september 2020, where a young child lost their life as a result of injuries sustained on a farm owned and operated by the rh & jy trust. at the time, the trust had three trustees: two individual trustees (once since deceased), and perpetual trust limited, a corporate trustee appointed only five weeks before the accident.

worksafe new zealand, the workplace health and safety regulator, brought criminal charges under sections 37(1) and 48(1) of new zealand’s health and safety at work act 2015 against both the trust itself and, in the alternative, the trustees collectively. the trustees challenged whether charges could validly be brought against the trust or against them as a collective, as distinct from charges against each trustee individually.

the journey through the courts

the case has produced a striking divergence of judicial opinion at each level.

the district court

in the district court, judge bidois held that no charges could be brought against the trust or the trustees collectively, reasoning that "a trust is not a person and cannot be held liable for the actions or failures of the trustees of the trust". on this view, only the trustees in their individual capacities could be defendants, and the charges against the trust were dismissed.

the high court

harvey j allowed worksafe's appeal in part. he accepted that "notwithstanding the orthodox position that a trust is not a separate legal entity, the position can be displaced by specific legislation" and that "the orthodox position that a trust is not a separate legal entity is relevant but not determinative". he found that it would be a "perverse outcome" if three loosely associated persons carrying out business with an informal structure could collectively be a ‘person conducting a business or undertaking’ (pcbu), but three trustees holding business assets in trust could not be. however, harvey j concluded that the correct defendant was the trustees collectively, not the trust itself, preferring an interpretation that "accords more closely to civil law and to reality".

the court of appeal

the court of appeal's decision was a 2-1 split. the majority (cooke and palmer jj) held that a trust, or its trustees acting collectively, can be a "person" for the purposes of the act; whata j dissented.

cooke j, delivering the majority judgment, acknowledged the force of the argument that "concluding that a trust is a person who can be charged with an offence is apparently inconsistent with well-established principles of trust law". a trust is not a legal person; it is essentially a set of equitable obligations that the trustees have. nevertheless, the majority held that "whilst trust law creates a very strong starting point for addressing the issues of interpretation that arise, it is not determinative".

the majority's reasoning rested on several pillars:

• the definition of "person" in section 16 of the act "includes the crown, a corporation sole, and a body of persons, whether corporate or unincorporate". the majority reasoned that these definitions "extend who can be a pcbu to unincorporated bodies of persons" and that "questions of legal form are not determinative. it depends on who is conducting the business or undertaking as a matter of substance".
• the majority also relied heavily on discount brands ltd v westfield (new zealand) ltd [2005] nzsc 17, where tipping j observed that "by making unincorporate bodies persons for resource management act purposes, parliament seems to have been looking more to substance than to legal existence or form". the court also drew on cometa united corp v canterbury regional council [2007] nzca 560, which held that unincorporated bodies with collective decision-making structures and "pseudo-corporate" features can be prosecuted as "bodies of persons".
• new zealand’s health and safety at work act 2015 prescribes different maximum penalties depending on the type of person who is the pcbu. for individuals who are not pcbus or officers, the maximum fine under section 48 is $150,000; for individuals who are pcbus or officers, $300,000; and for "any other person," $1.5 million. the majority considered it "contrary to parliament's intent to conclude that the maximum penalty in s 48(2)(c) is not available when the collective decision-making body is a trust rather than a company, partnership or similar body".
• the definition of "officer" in section 18 refers to "a body corporate or an unincorporated body, other than a company, partnership, or limited partnership" and to any person occupying a position "comparable with that of a director". the majority held that this "shows parliament's intent to comprehensively address, in a harmonised way, all legal structures that might be employed in the undertaking of businesses to which the duties of the act attach".
• section 29 of new zealand’s health and safety at work act 2015 prohibits indemnification for liability to pay a fine which, in majority's view, was "fatal for the appellants' argument". the majority held that this prohibition would prevent trustees from being indemnified from the assets of a trust. as a consequence the majority held that "trustees cannot be indemnified from the assets of the trust, and they would face personal liability in a way that is inconsistent with trust law principles". the trust assets would be "effectively immune, notwithstanding that it is the trust assets that should be at risk given that the trust has engaged in the business". treating the trust itself as the liable "person" solves this problem: the penalty falls directly on the trust fund.
• the majority further held that either label could be used to identify the collective body: "the trustees could be named in their capacity as the trustees of the trust acting collectively, or the trust itself could be named. the important point is that, if the trustees are named to identify the trust, the trustees are not defendants in any individual capacity".

whata j's dissent was anchored in what he described as "fundamentals" and "rules made over centuries" which he listed as follows:

• a trust is an equitable obligation, not a person.
• trustee liabilities are personal.
• trustees are entitled to be indemnified for expenses paid or liability incurred while discharging trustee responsibilities.

whata j rejected worksafe's substance-over-form argument as a "category mistake": "every action by a trustee using trust assets is premised on the rules of trust law just mentioned. trusts and trustee collective entities do not exist as 'persons'. individual trustees, and only individual trustees, 'conduct' business using trust assets in law and fact. that is a matter of substance, not form".

on the indemnification question, whata j disagreed with the majority, asserting that section 29 prohibits indemnification "by another person" and , as a trust is not a person, the prohibition does not apply: "a trustee is not being indemnified by a person, because the trust is not a person". whata j argued that the trustee is "in no different position to that of the sole trader who invests their own money to pay business related liabilities".

whata j proposed an alternative solution: worksafe may prosecute a defendant "as trustee" with payment of the fine out of the assets of the trust. this approach "gives vent to the statutory purpose, without doing serious violence to orthodox conceptions of individual trustee liability or the nature of trusts". trust law, he argued, "provides a ready built, coherent regime for making trusts pay for doing business – through individual trustees".

the dissent also emphasised the criminal justice dimension: "criminal liability attaches to individual responsibility and individual culpability". trustee liability should be "tied to the individual culpability of the trustee when acting in that capacity," allowing fines to "correspond to the nature and severity of the breach by individual trustees according to their individual level of culpability".

the supreme court's grant of leave

the supreme court granted leave to appeal in a short judgment, framing the approved question with precision: "whether a trust and/or the trustees of a trust acting collectively is a 'person' within the meaning of s 16 of the health and safety at work act 2015?"

commentary

this case arose from deeply distressing personal circumstances for the family involved.

the legal questions that the case itself touches upon are questions of trust law that have long been in the contemplation of offshore practitioners. on one hand, trusts are often used as vehicles to own and operate businesses. on the other hand, the orthodox position is that a trust is not a legal entity but an equitable relationship: it cannot sue or be sued, contract, or incur liabilities in its own name. only the trustees can do these things, and they do so personally (albeit with rights of indemnity from the trust fund).

the majority in the court of appeal effectively argues that this doctrinal position cannot be allowed to defeat the practical operation of a regulatory scheme designed to impose duties on whoever is conducting a business. when a trust "undertakes the business as a matter of substance," it should be treated as the pcbu. whata j's dissent, by contrast, insists that substance and form are not in tension: the substance is that individual trustees conduct business using trust assets, and trust law already provides a "coherent regime" for making trusts pay for doing business.

looking ahead

the supreme court's decision on the substantive appeal will be closely watched. the critical question is whether the court adopts the longstanding approach that a trust cannot, consistent with established principle, be treated as a "person" – or a broader purposive interpretation that prioritises the functional reality of how trusts operate over their doctrinal classification.

if the supreme court affirms the majority, it will represent a significant doctrinal development: a recognition that trusts, when used as vehicles for business, may be treated as persons for the purposes of at least some regulatory and criminal statutes. if the court prefers whata j's approach, it will affirm the continuing primacy of orthodox trust principles, while potentially endorsing the novel concept of prosecution of trustees "as trustees" with recourse to the trust fund.

on 30 april 2026, the european securities and markets authority (esma) published a call for evidence (cfe) presenting a data-driven analysis of the evolution of trading in european equity markets between 2022 and 2025, based on mifir transaction reporting data. the cfe invites stakeholder feedback on observed structural trends and their potential regulatory implications, with responses due by 30 june 2026.

background and rationale

the cfe responds to mounting concerns regarding shifts in european equity market microstructure, in particular, the marked increase in dark trading, a corresponding decrease in lit continuous trading, and a rise in bilateral trading arrangements such as those involving systematic internalisers (sis).

the publication follows two earlier major studies on the subject: one conducted by esma and the other by the european commission, which reached diverging conclusions on the state of liquidity in eu equity markets. esma's stated objective is to provide an independent, transaction-data-based assessment of how liquidity is evolving and how it is distributed across different execution venues and methods.

key findings

esma's headline finding is that european equity markets continue to function well overall, with addressable liquidity remaining stable at around 85 per cent of total trading volume and on-book trading accounting for approximately 75–80 per cent of volume over the period. however, beneath this aggregate stability, the cfe identifies several notable structural shifts:

• regulation enabling dark trading. the cfe identifies that dark trading primarily operates under two waivers provided for under eu regulation 600/2014 on markets in financial instruments (mifir), namely, the large in scale waiver (article 4(1)(c) of mifir) and the reference price (rp) waiver (article 4(1)(a) of mifir). the trading venues applying those waivers allow the execution of trades without pre-trade transparency when certain conditions are met.
• decline in lit continuous trading. lit continuous trading on central limit order books (clobs) has decreased over the observation period, with the reduction being counterbalanced by growth in other on-book trading mechanisms, notably closing auctions and frequent batch auctions (fbas).
• growth of closing auctions. closing auctions on regulated markets and intra-day auctions increased from an average of 18 per cent to 19.3 per cent of trading volume between 2022 and 2025. esma is separately undertaking an analytical study on the impact of evolving closing auction mechanisms on price formation, with results expected within the year.
• doubling of fba volumes. fbas have doubled their relative share of trading volume, from 3.1 per cent in 2022 to 6.2 per cent in 2025. esma presents preliminary evidence suggesting that dark orders may be migrating from the rp waiver venues to fba trading systems following the introduction of the single volume cap (svc).
• impact of the single volume cap. the svc limits trading volume under the rp waiver to 7 per cent per isin across the eu. esma's data shows that the use of the rp waiver decreased following the first svc suspension but returned to previous levels after the second suspension, indicating that the cap's disciplining effect may be limited.

deep dives: sis, benchmark trades, and member preferencing

the cfe dedicates substantial analysis to three areas that raise novel regulatory questions:

• systematic internalisers. esma examines the diverse business models of sis in the context of the revised mifid ii definition, which took effect in september 2025 and replaced the prior quantitative test with a qualitative opt-in framework under article 4(20). esma also flags the enhanced quoting and transparency obligations for sis that commenced on 23 november 2025 and seeks views on whether further regulatory intervention is warranted.
• benchmark transactions. esma raises technical questions around the classification and transparency treatment of benchmark trades under the post-trade transparency framework, including whether such trades should be considered as addressable liquidity or price-forming.
• member preferencing. esma defines member preferencing as the practice whereby an order submitted to a multilateral execution mechanism, such as an auction or continuous order book, is matched with a preferred member's order, bypassing time-priority or even price-priority rules. esma acknowledges that the practice is "relatively widespread" and may have legitimate operational justifications, but raises concerns regarding the potential for unfair treatment of non-preferred participants, its anti-competitive nature, and its resemblance to internalisation rather than genuine on-venue trading. esma is seeking evidence on whether legislative or regulatory intervention is warranted in this area.

relevance to mip negotiations

esma expressly notes that stakeholder feedback gathered through this cfe may inform the co-legislators' discussions in the context of the market integration package (mip) negotiations, including on the applicability of the tick-size regime to periodic auctions. the repeal of the existing q&a on tick-size applicability to periodic auctions is a deliberate step by esma to level the playing field across jurisdictions ahead of those negotiations.

practical implications

the cfe does not propose specific rule changes at this stage, but its scope and the granularity of its questions signal that esma is laying the groundwork for potential regulatory adjustments. market participants, particularly trading venues, investment firms operating as sis, and asset managers reliant on closing auction pricing, should consider responding to the consultation by the 30 june 2026 deadline. esma expects to publish a feedback statement in the second half of 2026.

esma’s news release can be found here and the call for evidence here

a new investment corridor is taking shape between the middle east and china, creating significant opportunities across green energy, technology and infrastructure.

in our latest video, managing partners vicky lord and ian mann explore dubai’s positive outlook, the strategic alignment driving investment between the middle east and china, and why offshore jurisdictions such as the bvi, cayman islands, bermuda and jersey remain trusted, neutral common law platforms for cross-border partnerships.

on 12 march 2026, the jersey financial services commission (jfsc) launched a consultation on phase 1 amendments to its bank licensing policy (blp), which governs the assessment of applications under the banking business (jersey) law 1991 and informs aspects of ongoing supervision. responses are due by friday 12 june 2026, with a feedback summary expected by the end of august 2026.

this is phase 1 of a two-phase programme. phase 1 focusses on modernising and simplifying the existing framework, while phase 2 will examine broader structural questions, including whether legislative changes are warranted and whether tailored regulatory approaches could be developed for lower-risk categories of bank, given that current legislation provides for only a single class.

key proposals

removal of the "top 1,000" restriction

the current blp limits registrations to entities within the global "top 1,000" banking groups by tier 1 capital, or financial services conglomerates of equivalent size. the consultation proposes removing this threshold, while retaining requirements for international activity, financial strength, and a satisfactory supervisory track record. applications from entities that substantially, but not fully, meet these criteria may be considered where depositor risks are clearly mitigated.

this continues a trajectory of relaxation, the threshold was previously reduced from "top 500" in 2014, following the post-crisis shift towards bail-in regimes.

new framework for jersey start-up banks

the consultation introduces, for the first time, a formalised approach to the licensing of de novo banks in jersey:

• assessment criteria include board and management experience, alignment of business model with jersey's risk profile, and stress testing of the business plan against potential financial risks to jersey in failure scenarios.
• existing jersey-based businesses evolving into banks would be assessed on regulatory history and business plans.
• a staged licensing pathway is envisaged: "in-principle" licences to support capital raising, followed by a mobilisation phase under restricted, time-limited conditions.
• restrictions would be lifted only upon evidence of depositor risk mitigation and compliance with prudential and aml/cft/cpf requirements.

removal of managed bank and business continuity provisions

the jfsc proposes removing blp provisions on managed banks and business-continuity-only registrations, on the basis that no such entities currently exist in jersey and such structures are uncommon elsewhere.

proposed removal of the letter of comfort requirements

the letter of comfort regime requiring a jersey-incorporated bank (jib) to obtain a parental letter confirming continuing financial viability is proposed for removal. the jfsc considers this requirement superseded by:

• recovery planning requirements under pillar 2, which now require jibs to demonstrate how they can address solvency events through group support and internal actions.
• resolution planning work by the jersey resolution authority (jra).

financial support will instead be assessed through consideration of recovery plans.

senior officer role

the jfsc is seeking views on the off-island senior officer requirement imposed on all branches under article 11(2) of the banking business (general provisions) (jersey) order 2002. having established through aml/cft/cpf work that senior officers form part of senior management, the jfsc is asking whether clarifying the expectations of the role would better support role holders and affected businesses.

general policy simplification

the consultation also proposes removing general regulatory and application-process material from the blp (to be communicated via the jfsc's website instead) and eliminating duplication of requirements already in the code of practice for deposit-taking business (the banking code). a draft revised blp is provided as appendix a.

responding to the consultation

stakeholders are invited to submit responses via the jfsc's online form by friday 12 june 2026. the consultation poses eight specific questions covering each key proposal.

for more information, the industry update and consultation can be found here

on 20 may 2026, the russia (sanctions) (eu exit) (amendment) regulations 2026 (s.i. 2026/543) came into force, significantly expanding the uk's sanctions regime against russia.

made by the secretary of state under the sanctions and anti-money laundering act 2018, these regulations amend the russia (sanctions) (eu exit) regulations 2019 and introduce a range of new trade and shipping prohibitions.

key measures:

• specified ships. the regulations introduce prohibitions on providing services (including technical assistance, crew, operating, chartering, brokering and financial services) in relation to ships specified by the secretary of state, as well as a ban on chartering or operating such ships.
• processed oil products. it is now prohibited to import oil and oil products falling within commodity code 2710 that have been processed in a third country from russian-origin crude oil (commodity code 2709), together with associated financial, brokering and technical assistance services.
• uranium. new restrictions prohibit the import, acquisition, supply and delivery of uranium originating in or consigned from russia, alongside bans on related financial, brokering and technical assistance services.
• liquefied natural gas (lng). the maritime transportation by ship of russian-origin lng, both from russia to third countries and between third countries, is now prohibited, along with associated financial and brokering services.
• detained transport assets. the acquisition of detained ships or aircraft from designated persons or persons connected with russia is prohibited, and any such transaction is rendered void and ineffective as a matter of contract and property law.
• construction services. construction services have been added to the list of prohibited professional and business services under the 2019 regulations.
• expanded goods controls. additional goods have been added to key schedules, including ancillary chemicals used in advanced chip production, quantum computing and related goods, engineering biology ancillary goods, and further defence and security items.

transitional provisions and exceptions

limited wind-down periods apply. for construction services, contracts concluded before 20 may 2026 may be performed until 20 august 2026, subject to notification to the secretary of state. for restricted goods in the new categories (advanced chip chemicals, quantum computing goods, and engineering biology goods), the wind-down period extends to 20 november 2026.

for lng maritime transportation, long-term contracts concluded before 17 june 2025 benefit from a carve-out until 1 january 2027, subject to conditions. exceptions also exist for uranium activities necessary for the continued operation of nuclear installations in third countries.

licensing and enforcement

new licensing regimes have been introduced for detained transport assets and ships, with associated offences for providing false information or failing to comply with licence conditions. enforcement mechanisms under the customs and excise management act 1979 and the serious organised crime and police act 2005 have been updated to reflect the new prohibitions.

note on the overseas territories and crown dependencies

the new uk regulations will, in many key respects, be automatically implemented into the sanctions regimes in the overseas territories and crown dependencies, as changes to underlying uk sanctions laws are generally given effect to automatically. however, some tailoring of the new sanctions will still be needed to make the provisions fully ‘fit for purpose’ and we would expect these to be implemented through new orders in council (or equivalent) which are still to be issued. we are keeping track of developments and will update this blog in due course.

next steps

organisations with exposure to russian trade, energy, shipping or asset markets should review existing contracts and commercial relationships against these expanded prohibitions as a matter of priority, noting the limited transitional periods available.

the russia (sanctions) (eu exit) (amendment) regulations 2026 can be found here

capital-raising and securities issuance in jersey have historically required regulatory approval under the control of borrowing (jersey) law 1947 and the control of borrowing (jersey) order 1958 (together, cobo).

on 13 april 2026, the control of borrowing (jersey) amendment order 2026 (the amendment order) came into force, delivering a first round of targeted reforms.

the broader objective is to phase out the cobo regime in its entirety, with further legislative action anticipated during the remainder of 2026 and into 2027. these changes form part of the government of jersey and the jfsc's wider competitiveness programme, which is directed at streamlining regulatory processes and reducing administrative burdens across the financial services sector.

who is affected?

the changes are of direct relevance to legal advisers, fund administrators, trust companies, corporate service providers, investment managers, and those involved in structuring non-fund vehicles. key changes several categories of cobo consent have been abolished or significantly curtailed by the amendment order:

• government securities (article 7 deleted): the obligation to seek approval for registering securities issued by governments other than those of the uk, jersey, or guernsey has been abolished.
• unit trusts (article 9 limited): consent is now only required where a unit trust constitutes an "investment fund" as newly defined in article 14(6) of cobo. in practice, most jersey property unit trusts (jputs) are structured as single-asset vehicles that do not meet that definition and therefore no longer need approval. the resulting reduction in lead times should be particularly welcome in real estate transactions, where deal timetables are often compressed.
• non-jersey entities (including ndnfs): offshore vehicles that raise capital through jersey—for example, by holding a jersey bank account—or that maintain a jersey registration no longer need consent, provided they are not investment funds. the change touches a wide range of cobo provisions and covers foreign companies, offshore unit trusts, limited partnerships, limited liability partnerships, and limited liability companies. it will be of particular benefit to corporate groups whose jersey office acts as the administrative hub for foreign spvs and similar structures. where consent had previously been obtained for a unit trust or non-domestic non-fund entity (ndnf) that no longer falls within the regime, that consent is treated as having expired; however, anything done in legitimate reliance on a prior consent continues to be valid.
• offers to professional investors (articles 8, 10(1)(c), 11(1)(c), 11a(1)(c) limited): consent is no longer needed to circulate offers in jersey for interests in foreign companies, unit trusts, limited partnerships, limited liability partnerships, or limited liability companies, except where the offer is directed at retail investors. a new standalone definition of "retail investor" has been added to cobo to draw this distinction. because the overwhelming majority of cobo applications have historically related to professional-investor offerings, this single change is expected to produce the largest overall reduction in consent applications.
• investment business exemption orders (pirs and spib): both the pirs and spib exemption frameworks previously required the entity in question to hold a “relevant consent” under cobo. that condition has been deleted, meaning the exemptions now extend to a broader range of vehicles—including offshore joint ventures, private wealth structures, and discretionary trusts—that were not originally contemplated by the cobo regime.
• collective investment funds (restriction of scope) order 2000: the corresponding approval obligation under this order has likewise been eliminated.

related changes

separately, the companies (general provisions) (jersey) amendment order 2026 (the gpo amendment), effective from 6 march 2026, has reduced the circumstances in which an issuer must produce a prospectus. an equivalent adjustment has been made to certain regulated fund structures by the collective investment funds (certified funds – prospectuses) (jersey) amendment order 2026. together with the amendment order, these instruments represent a significant scaling back of the regulatory requirements applicable to jersey market participants.

what remains unchanged?

consent remains a prerequisite where a foreign prospectus is directed at retail investors in jersey, reflecting the new definition of that term introduced by the amendment order. jersey-domiciled private funds (such as jpfs) and special purpose vehicles, including securities issuance platforms, continue to sit within the existing consent framework. all other categories of cobo application are unaffected. the ability to rely on the registration exemption under the financial services (jersey) law 1998, and on the carve-out from collective investment fund status under the collective investment (jersey) law 1988, is preserved where the relevant conditions are met. obligations under the aml/cft/cpf framework and schedule 2 registration requirements under the financial crime legislation remain in full force.

recommended industry actions

firms should review internal processes to identify any steps that depended on the cobo provisions that have now been removed, update compliance manuals and product governance documentation, determine whether any non-fund or prospectus-related activity continues to fall within the reduced scope of articles 8, 9, 10, 11, and 11a, and classify their investor base where offshore offerings are marketed into jersey. those active in investment management, funds, private wealth, cross-border structuring, or uk-listed sectors should assess existing and pipeline arrangements for opportunities to simplify procedures or adopt alternative structures in light of the changes.

next steps

further practical guidance is expected as the government and the jfsc progress through the remaining stages of the cobo phase-out during 2026 and into 2027.

harneys has been recognised with two awards at the china business law awards 2026: best offshore law firm and structured finance and securitisation

the firm’s highly experienced asia-based team continues to provide exceptional legal advice to clients across international markets.

our shanghai managing partner, vicky lord, commented: “we are honoured to have received these recognitions and would like to thank the china business law awards panel for this acknowledgement, which reflects the talent and dedication of our asia team. we remain firmly focussed on delivering outstanding results for our clients.”

the china business law awards are awarded by the china business law journal, and the evaluation process involves client assessments and feedback from corporate executives, in-house counsel, and legal professionals across the industry in a rigorous, months-long process.

on 26 may 2026, the uk foreign, commonwealth & development office (fcdo) announced 18 new designations under the russia (sanctions) (eu exit) regulations 2019, targeting cryptocurrency exchanges, financial intermediaries, and key individuals linked to russia's sanctions evasion infrastructure.

the package represents one of the uk's most expansive crypto-focussed sanctions actions to date and marks the first application of regulation 17a to crypto asset exchanges. the measures came into force immediately.

key targets

the designations focus on two principal categories of sanctions evasion infrastructure:

• the a7 network. the a7 network is a kremlin-backed system which the uk fcdo described as being designed to bypass western sanctions, finance military procurement, and process funds from the sale of oil to fund russia's war economy. the network claimed to have moved more than us$90 billion last year - equivalent to roughly half of russia's yearly military expenditure. the package targets key a7-linked individuals who are said to be using a kyrgyz bank suspected of facilitating payments for the network.
• crypto asset exchanges. the designations also hit major global cryptocurrency exchanges that the uk government has stated have channelled over us$1.5 billion to russia. three georgian companies operating russia-focussed exchanges seeking to evade sanctions are also targeted.

the most prominent of the new exchanges listed being:

• exmo exchange limited, operating through exmo.com and exmo.me
• nueva crytologia, s.a.s. de c.v. of el salvador, operating as abcex through abcex.io
• arvix llc of the republic of georgia, operating through arvix.pro and exnode.ru
• rapira group llc of the republic of georgia, operating through rapira.io (and other derivations)
• alistera limited / alistair limited with operations in russia and operating through alistera.ru
• bitpapa ic fzc llc of ajman, uae operating through bitpapa.com and bitpapa.org
• aifory llc of the republic of georgia
• huobi global s.a. of panama, operating as htx and operating htx.com

uk/ukot-connected persons holding crypto assets through designated exchanges should seek legal advice in relation to their holdings to understand the implications of these new sanctions.

wider context

the uk government has stated that these measures demonstrate it is "moving faster and further than ever before" to clamp down on these routes and adapt its approach to stay ahead of suspected russian evasion. to date, the uk has sanctioned over 3,300 individuals, businesses, and ships, with russia's war economy having lost over us$450 billion due to international sanctions.

practical significance

• the package represents a notable shift in the uk's sanctions enforcement, moving to directly designate cryptocurrency infrastructure used for sanctions circumvention.
• the simultaneous targeting of the a7 network's corporate structure, its banking conduit in kyrgyzstan, and the crypto exchanges facilitating its flows reflects an end-to-end approach aimed at dismantling the full payment chain, rather than individual nodes.
• compliance teams at uk-regulated financial institutions should promptly screen counterparties and transaction flows against the updated uk sanctions list, which now includes the 18 newly designated persons – including the prominent exchanges named above.
• the uk has indicated it is leading international efforts to disrupt these financial networks, working with allies to protect the integrity of the international financial system. firms with cross-border exposure should therefore anticipate coordinated designations from allied jurisdictions.
• the full list of designations is available on the uk sanctions list.

uk’s press release can be found here and the sanctions notice here

the companies (amendment no. 2) (jersey) law comes into force on 1 june 2026. the amendments represent the most significant package of reforms to the companies (jersey) law 1991 in recent years, designed to modernise routine corporate procedures, reduce unnecessary regulatory friction and bring jersey's framework more closely into line with international best practice, while preserving core shareholder and creditor protections.

set out below is a summary of the key changes.

share capital and contributions

companies with par value shares are no longer required to state authorised share capital in their memorandum of association. a new ability to make capital contributions (added to any account or reserve other than the nominal capital account) has been introduced, and the process for converting shares, including currency conversions, has been expanded and clarified.

redemptions and repurchases

the requirement that shares be fully paid before redemption has been removed, as has the requirement for a class of non-redeemable shares to be in issue. a new ratification process allows redemptions or repurchases to be validated where a solvency statement was inadvertently omitted. shareholder approval for repurchases is no longer required where the repurchase involves subsidiary shares or is for nil consideration.

capital reductions and distributions

capital reductions now take effect immediately upon the passing of the special resolution, rather than upon filing with the registry. ratification of unlawful distributions may now be achieved without a court application.

share transfers and certificates

articles of association may now provide for a method of transferring shares that does not require a traditional share transfer form or written instrument, paving the way for electronic transfers of non-market traded shares. share certificates are confirmed not to be required as a matter of law, and members may waive their right to receive one (although share certificates remain relevant for financing transactions involving jersey share security).

class rights

a variation that increases a benefit to a share class will no longer constitute a variation of class rights. articles may now specify what does and does not constitute a variation.

shareholder meetings and voting

the amendments codify the ability to hold shareholder meetings via electronic or other communication facilities, and introduce a new direct voting facility allowing shareholders to cast votes by submitting a form rather than attending in person or appointing a proxy, where the articles permit.

filing of shareholders’agreements

the requirement to publicly file shareholders' agreements that conflict with the articles has been removed, provided the agreement contains a clause stipulating that it prevails and the articles will be amended.

private vs. public company classification

the "30 member rule" has been abolished. a private company will only be deemed public if it circulates a prospectus or is a market-traded company.

group reorganisations - merger relief

a new optional merger relief regime, based on the corresponding uk provisions, has been enacted to assist groups restructuring their shareholdings without encountering share premium complications.

directors' duties, indemnification and disqualification

companies now have broader authority to indemnify directors across civil, criminal, administrative and investigative proceedings, and may advance funds for legal expenses subject to a repayment undertaking. new disqualification provisions allow directors to be removed from office if subject to director disqualification sanctions, including those imposed under uk legislation.

listed companies and audit requirements

overseas listed companies are no longer required to file audited accounts complying with jersey law if equivalently regulated and admitted to trading on a relevant regulated market, eliminating an unnecessary double audit burden.

schemes of arrangement

the "headcount test" for shareholder schemes of arrangement has been abolished. shareholders voting in favour are no longer required to represent a majority in number (only value). the test is retained for creditor schemes.

mergers and migrations

shareholders no longer need to receive consideration for a merger if their shares are not converted into shares of the merged body. the creditor objection threshold has been raised from £5,000 to £25,000 (liquidated claims only). for migrations, if there are no known creditors, notice is no longer required.

winding up

a company being wound up summarily may now transfer assets to another person (other than an individual) in exchange for shares, debt instruments, securities or other similar interests.

other general provisions

a company may now change its name by resolution of the directors (if authorised in the articles), taking effect immediately. electronic seals have been clarified, and share register rectifications no longer require a court application where no person is adversely affected.

what should you do now?

boards, investors and advisers should review their articles of association, shareholder arrangements and transaction checklists ahead of 1 june 2026 to take advantage of the new flexibility from day one. our jersey corporate team would be happy to assist you in reviewing your existing structures and advising on any updates required.

harneys has been named the winner of the m&a advisor award in the specialist wealth management category by wealthbriefingasia for the second consecutive year. winners were announced at wealthbriefingasia’s prestigious awards ceremony, held in singapore on thursday 28 may.

the wealthbriefingasia awards recognise excellence, innovation, and outstanding achievement across asia’s wealth management, private client, and family office sectors. an independent panel of industry experts selects winners through a rigorous and impartial judging process.

commenting on the win, lishi fong, singapore managing partner at harneys, said: “we are delighted to receive this recognition for the second year running. it is a testament to the strength of our team, the quality of our legal expertise, and our unwavering focus on delivering exceptional outcomes for our clients. we extend our sincere thanks to wealthbriefingasia and our clients for their continued trust and partnership.”

the corporate team at harneys advises on complex cross-border transactions involving british virgin islands, bermuda, cayman islands, cyprus, jersey, and luxembourg corporate vehicles. the team’s significant track record includes advising on high-profile private equity transaction, landmark ipos, and public and private m&a and joint ventures. the private wealth team complements this by delivering tailored, pragmatic advice, working closely with clients and their tax and legal advisors to manage intricate assets and acquisitions, from businesses and fine art to property and private islands.

on 11 may 2026, the european union's foreign ministers reached a unanimous agreement to impose restrictive measures on israeli settlers and settler organisations over violence against palestinians in the occupied west bank. the sanctions arise against the backdrop of escalating tensions in the west bank.

whilst the foreign ministers reached a political agreement on 11 may, technical and legal work remains before the sanctions are formally adopted and published in the official journal of the european union. the list of designated persons and entities will need to be finalised, following which the sanctions will be legally binding across all eu member states.

businesses and financial institutions should monitor the publication of the formal sanctions listings closely and ensure that their compliance frameworks are updated accordingly. as the regulatory landscape continues to evolve, proactive engagement with sanctions compliance will be essential to mitigating legal and reputational risk.

the bvi recently enacted the mutual legal assistance (tax matters) (amendment) act 2026 (the 2026 amendment). this vital piece of legislation formally aligns local law with the updated common reporting standard (crs) approved by the organisation for economic co-operation and development (oecd) in june 2023. the 2026 amendment was gazetted on 5 march 2026.

purpose of the 2026 amendment

the primary goal of the 2026 amendment is to integrate digital money products into existing frameworks, enhance overall reporting requirements, and clarify specific terms and due diligence obligations. by adopting the latest oecd standards, the bvi maintains its position as a highly regulated financial centre.

definition amendments

the 2026 amendment updates several key definitions under section 21 to modernise financial compliance, for example:

• “non-reporting financial institutions”: the definition now explicitly accounts for the maintenance of central bank digital currencies.
• “account classifications”: the definition updates the thresholds for a "pre-existing account" (maintained as of 31 december 2025 under the new rules) and a "new account" (opened on or after 1 january 2026).
• “bvi residency”: the definition introduces a precise definition for "resident in the virgin islands". this includes entities incorporated or established in the bvi, those with a place of effective management in the bvi, or those subject to local financial supervision.

implementation and timelines

section 26a of the 2026 amendment confirms that the crs amendments officially take effect on 1 january 2026.

to ease the transition, the 2026 amendment includes practical data provisions. for reportable accounts maintained as of 31 december 2025, financial institutions are only required to report the specific roles of controlling persons or equity interest holders where that information is already captured in electronically searchable records. this means financial institutions are not obliged to conduct retrospective data remediation exercises for legacy accounts – this will be a welcomed relief for institutions with large pre-existing client books.

strengthened anti-avoidance

the 2026 amendment takes a strict stance on compliance evasion by entirely replacing section 34. under the new rules, if a person or entity enters an arrangement where the main purpose is to bypass reporting obligations, the authorities will treat the situation as if the arrangement never took place.

given the immediate application of these new legal provisions. we recommend that bvi-regulated entities operating in the bvi review their compliance frameworks promptly to ensure alignment with the updated crs requirements and anti-avoidance provisions.

the mutual legal assistance (tax matters) (amendment) act, 2026 can be found here

pursuant to the bvi business companies act, revised edition 2020 and related regulations, the financial services commission (the fsc) in the british virgin islands (bvi) may approve the incorporation of a company, or the registration of an existing company, as a segregated portfolio company (spc) if the company will be licensed as an insurer under the insurance act, revised edition 2020, as a mutual fund or private investment fund under the securities and investment business act, revised edition 2020 (siba) or for more general unregulated use under the segregated portfolio companies (bvi business company) regulations, revised edition 2020. this guide focuses on mutual funds set up as spcs.

an spc is a single company with the benefit of statutory segregation of assets and liabilities between segregated portfolios (segregated portfolios) established within the company. the assets and liabilities of each segregated portfolio are legally segregated from (a) the assets and liabilities of any other segregated portfolio of the company and (b) the assets and liabilities of the company which are not held within or on behalf of any segregated portfolio (the general assets). a segregated portfolio does not constitute a legal entity separate from the spc.

the spc is a popular vehicle in the context of multi-class or umbrella investment funds in which two or more segregated portfolios use different investment strategies, including different levels of leverage that create potentially substantial liabilities to third parties.

regulation of spcs

the prior approval of the fsc is required to register any fund as an spc. open-end funds can apply to be registered as spcs on the basis that the entity seeking permission is or will, upon incorporation be recognised or registered as a fund under siba.

to grant approval to a fund recognised or registered under siba, the fsc must be satisfied that the applicant has, or has available to it, the knowledge and expertise necessary for the proper management of segregated portfolios. the application for approval must contain the designation of the segregated portfolios that are to be initially created and for which approval is sought.

additional requirements applicable to siba mutual funds set up as spcs include:

• an offering memorandum (or investment warning for incubator or approved funds) must be submitted for each segregated portfolio for which approval is sought
• the spc must appoint an administrator, investment manager and custodian and may appoint an investment adviser. the fsc can exempt a fund from appointing a manager and/or custodian but all mutual fund spcs must appoint an administrator. the instrument under which any such functionary is appointed must specify in respect of which segregated portfolio(s) the functionary is appointed and the responsibilities and duties in respect of each segregated portfolio
• an spc that is a private, professional or public fund must have an auditor and the audited financial statements must be filed with the fsc within six months of the end of its financial year. incubator and approved fund spcs must prepare and submit their financial statements in accordance with siba but do not have to appoint an auditor.

special features of an spc

duty of directors

it is the duty of the directors of an spc to establish and maintain procedures to segregate and keep segregated, segregated portfolio assets separate and separately identifiable from general assets and other segregated portfolios and where relevant to apportion or transfer assets and liabilities between segregated portfolios and the general assets.

segregation of assets

each segregated portfolio’s assets are only to be made available and used to meet liabilities to the creditors of the spc who are creditors in respect of that segregated portfolio and who are thereby entitled to have recourse to the specific assets attributable to that segregated portfolio.

segregation of liabilities

segregated portfolio assets are not to be used to meet liabilities to creditors of the spc who are not creditors in respect of that segregated portfolio. these assets are “absolutely protected from” such creditors who are not entitled to have recourse to the segregated portfolio’s assets attributable to that segregated portfolio.

creditors

where a segregated portfolio is liable to a person, that person is entitled to recourse only firstly to the segregated portfolio assets attributable to such segregated portfolio and secondly to the general assets, to the extent that the segregated portfolio assets are insufficient to satisfy the liability and attributable to the spc.

liquidation

the court may make a portfolio liquidation order in respect of a specific segregated portfolio if it is satisfied that the assets attributable to a segregated portfolio are or are likely to be insufficient to discharge the claims of creditors in respect of that segregated portfolio and the making of the order will achieve the purpose of the orderly closing down of the business of the segregated portfolio and the distribution of the assets attributable to the segregated portfolio to those entitled to recourse thereto.

shares

segregated portfolios may issue shares in more than one class and a class of shares may be issued in more than one series. there is however no requirement to state in the spc’s memorandum of association the classes of segregated portfolio shares that the spc is authorised to issue. dividends and distributions paid in respect of segregated portfolio shares can only be made by reference to the assets and liabilities attributable to that segregated portfolio in respect of which the shares were issued.

spc’s financial statements

the financial statements of an spc must take account of the segregated nature of the company and include an explanation of the purpose of the spc, how the segregation of the assets and liabilities of the spc impacts on the members of the spc and persons with whom the spc transacts and the effect that any existing deficit in the assets of one or more segregated portfolios of the spc has on the general assets of the spc.

spc ongoing regulatory requirements

in addition to the ongoing requirements applicable to all bvi mutual funds, the segregated portfolio companies (mutual funds) regulations, revised edition 2020 stipulate that the following need to be observed:

• an spc which is a public, incubator or approved fund is required to obtain the prior written approval of the fsc before it can create a new segregated portfolio
• in relation to private and professional funds, a prior written approval is not necessary where the spc has its principal place of business in a “recognised jurisdiction” or the persons who will be appointed to act as functionaries of the new segregated portfolio are the same persons notified to the fsc on the initial application of the spc. private and professional funds are nevertheless required to notify the fsc, in the approved form, of the creation of a new segregated portfolio within 14 days of the creation of the segregated portfolio
• the spc must not create a new segregated portfolio unless it has previously issued an offering document with respect to the segregated portfolio (or an investment warning for incubator or approved fund spcs) and a copy of the offering document/investment warning is submitted to the fsc

costs

a fee of us$1,305 is payable to harneys corporate services limited for the incorporation of an spc. an annual fee of us$1,530 is also payable in advance to harneys corporate services limited for providing the spc’s registered office and acting as its registered agent.

a fee of us$550 is payable to the bvi registry of corporate affairs for the incorporation of an spc. annual fees of $550 are also payable to the bvi registry of corporate affairs.

an application fee is payable to the fsc for approval to incorporate a mutual fund company as an spc, comprising us$1,500 in respect of the spc and us$350 in respect of each segregated portfolio included in the application. annual fees of us$1,500 in respect of the company and us$350 in respect of each segregated portfolio are payable to the fsc.

an application and recognition fees totalling $2,050 are payable to the fsc in respect of a professional or private funds and an annual fee of $1,200 must be paid thereafter. an application fee of $2,000 is payable to the fsc in respect of approved and incubator funds and an annual fee of $1,200 must be paid thereafter.

timing

in our experience, it generally takes between two and four weeks from receipt of a draft offering document/investment warning to prepare the memorandum and articles of association for the spc, settle the form of the offering document/investment warning and to be in a position to submit the application for approval to the fsc to register as an spc. this period can, however, be shorter or longer depending on the particular circumstances of the fund.

once the application for approval to register as an spc is submitted it generally takes five to seven business days for the fsc and the registry of corporate affairs to deal with the application for approval and to incorporate the company.

registration of public funds is a more involved and, typically, considerably longer process.

the jersey financial services commission updated its sanctions list, which includes measures implemented and enforced by jersey. these sanctions are categorised by country and specific regimes, providing an overview of the legal acts, latest news, and jersey's enforcement regime.

recent updated:

• global irregular migration and trafficking: latest news as of 5 may 2026, with revisions on 6 may 2026.
• russian federation: updated on 21 may 2026.
• afghanistan: latest news on 14 may 2026.
• sudan: latest news on 28 april 2026, revised on 29 april 2026.
• global human rights: updated on 16 april 2026.

the sanctions cover a wide range of areas, including counter-terrorism, cyber-attacks, global anti-corruption, and human rights. each category provides detailed information on the measures and their implications.

for more details, visit the jersey’s fsc sanctions page.

this guide provides an overview of the powers, duties and obligations of a director of an exempted company incorporated under the companies act of the cayman islands (companies act) which is registered with the cayman islands monetary authority (cima) as a fund (fund).

this guide is limited to those funds registered with cima under section 4(3) or 4(4)(a) of the mutual funds act (a mutual fund) and those funds registered with cima under the private funds act (a private fund) as well as the law and practice of the cayman islands. other duties, obligations and potential liabilities may also arise under the laws of other jurisdictions.

who are the directors of a fund?

there is no precise definition of a ‘director’ under cayman islands law. the directors of a fund may be individuals or corporate bodies and they are the persons with ultimate responsibility for the management and conduct of the fund's affairs.

the first directors of a fund (whether described as ‘executive’ or ‘non-executive’) are typically appointed by the initial subscribers to the fund or otherwise in accordance with the articles of association of the fund (articles). the register of directors maintained by the fund will be prima facie evidence of the identity of the directors from time to time.

a person undertaking the activities of a director without being formally appointed may be found to be acting as a ‘de facto director’. also, if the duly appointed directors of a fund are found to be acting in accordance with the directions or instructions of another person then that person may be found to be acting as a ‘shadow director’. a person is not deemed to be a shadow director however by reason only that the directors act on advice given by such person in a professional capacity, so that an investment adviser of a fund making recommendations to the directors as to the purchase or sale of investments should not usually constitute a shadow director.

executive directors, non-executive directors, shadow directors and de facto directors are all subject to the duties and obligations set out in this guide.

should i agree to act as a director of a fund?

when deciding whether or not to act as a director of a fund, the following points should be considered:

• who will be the other directors of the fund? will your fellow directors have the ability to work with you to properly coordinate the proper oversight and management of the fund?
• any other interests you may have in the overall structure of the fund and its advisers or service providers. if you are a connected person (for example, a principal of the fund's investment manager) you may want to consider either not sitting on the board of the fund or making sure that you are in a minority position. these measures will reduce the potential for conflicts of interest to arise which could increase the risk of your actions later being challenged by the investors of the fund as not being in accordance with your duties to the fund.
• the expectations of the fund's key investors. they may be comfortable with a board of directors comprised of connected persons or they may require the fund to have one or more directors independent of the fund's investment manager. this is something that you may wish to discuss further with the fund’s representatives and the fund’s current or proposed key investors before agreeing to accept any appointment as a director.
• you need to have sufficient and relevant knowledge and experience to discharge your duties as a director. it is up to you to acquire and maintain sufficient knowledge to enable you to carry out your role. you should use the fund's professional advisers to provide advice on any areas or transactions of which you are unsure. in particular, you should ensure that you are able to properly read and understand the financial information relating to the fund, including its financial statements. if there is anything that you do not understand, then you should promptly obtain professional advice.
• whether the fund has in place, or will be obtaining, any directors and officers insurance policy that would provide appropriate coverage for you.
• you need to have sufficient time to carry out your duties and this should be reflected in your remuneration.
• even if you are also an employee or principal of the investment manager or any other connected party, your duties as a director of the fund remain the same as an independent director. you should ensure that you are wearing the right ‘hat’ when turning your mind to the affairs of the fund and be aware of actual and potential conflicts of interest. any actual and potential conflicts of interest should then be disclosed in any prospectus, offering document or private placement memorandum issued by the fund (offering document).

please note that it is not mandatory under either the mutual funds act or the private funds act for a section 4(4)(a) mutual fund or a private fund to issue an offering document, and references in this guide to an offering document are only applicable to a section 4(4)(a) mutual fund or a private fund if it has issued a prospectus, offering document or private placement memorandum.

what are the powers and authority of the directors of a fund?

the powers and authority of a director are derived from, and constrained by, the fund’s memorandum of association (memorandum) and the articles. the memorandum sets out the capacity and powers of the fund and the articles set out the manner in which the fund is to be operated.

the directors will need to ensure that the fund is operated in accordance with the terms of any offering document issued by the fund to its investors from time to time. whilst the terms of the offering document do not fetter the powers of the directors of the fund, the offering document forms a collateral contract between the fund and its shareholders and so the directors should ensure that they regularly review, and are familiar with, the contents of the offering document.

in practice, the articles will almost certainly allow the directors to delegate their powers to service providers. the directors of a mutual fund must appoint an auditor and will typically appoint an investment manager, an administrator and a custodian/prime broker, amongst other service providers. the directors of a private fund must appoint an auditor and a custodian (unless exempt) and may also appoint an independent third party or administrator to perform certain functions set out in the private funds act.

in deciding to appoint a service provider the directors will need to be diligent and careful in their selection, forming the reasonable opinion that the service provider is competent to carry out the relevant function(s) on behalf of the fund.

once service providers have been appointed, the directors are entitled to trust (to a reasonable extent) the competence and integrity of the service provider in discharging its functions. the directors remain subject, however, to a continuing duty to supervise and monitor the activities of the service provider on a high-level basis. if a director is found to be in breach of this duty, they may be found guilty of wilful neglect or default, thereby potentially voiding the indemnity provisions in the articles and also the terms of any directors and officers insurance policy that the director may have in place – meaning that the director could potentially become personally liable for the breach.

what are a fund director’s duties?

the duties of a director of a fund arise as a consequence of the fiduciary relationship between the director and the fund and are based on a combination of english and commonwealth common law, as applied in the courts of the cayman islands, statute and regulatory guidance. there is, however, no statutory codification in the cayman islands of the general directors’ duties, obligations and liabilities (although, see below on regulatory guidance under the section headed “cima rule and statement of guidance on corporate governance for funds”).

directors’ duties will ordinarily be owed to the fund but can, in particular circumstances, be owed to creditors or individual shareholders.

in the ordinary course of business, the interests of the fund mean acting in the best interests of the fund's shareholders as a whole. however, if the fund becomes financially distressed then the directors’ fiduciary duty to the fund to act in its interests is modified to include a duty to act in the interests of creditors as a whole.

directors are also obliged to comply with various statutory obligations regarding the management and operation of the fund. the principal obligations applicable to the fund and to the directors arise under the companies act, the mutual funds act (for mutual funds), the private funds act (for private funds) and the proceeds of crime act.

directors’ key duties can be summarised as follows:

fiduciary duties

• to act bona fide in what the director considers to be the best interests of the fund
• to exercise their powers under the articles for the purposes for which they are conferred
• to avoid conflict between the interests of the fund and the director’s personal interests and duties or (where such conflicts are permitted by the articles, as is common) making sure that any such conflicts are properly disclosed
• to exercise the director’s powers as a director independently, without subordinating their powers to the will of others (except to the extent that such powers have been properly delegated) not to make secret profits from acting as a director of the fund

duties of skill and care

• to acquire and maintain a sufficient knowledge of the business of the fund on a continuing basis
• to supervise the discharge of functions which have been delegated to advisers and service providers (see “what are the powers and authority of the directors of a fund?” above)

directors are obliged to undertake these duties with care, diligence and skill. directors are subject to a minimum objective standard as a director of the fund, but the expected standard will be raised if a particular director has more knowledge, skill or experience than would ordinarily be expected of a director in their position. directors will also have the relevant contractual duties and obligations set out under any service agreements that they may enter into with the fund.

statutory obligations

directors of a fund are obliged under cayman islands legislation:

• to maintain the fund’s register of members, the register of directors and officers and the register of mortgages and charges
• to maintain a register of beneficial owners although funds are likely to be able to rely on an alternative route to compliance by providing details of an authorised contact person to the competent authority in the cayman islands instead of having to maintain a full beneficial ownership register. (see our guide to the cayman islands beneficial ownership regime for more details on beneficial ownership registers and alternative routes to compliance that can apply)
• to maintain proper books of account for the fund
• to maintain a registered office in the cayman islands for the fund
• to comply with the anti-money laundering regulations (aml regulations) issued under the proceeds of crime act
• to ensure that the offering document issued by the fund describes the shares in all material respects, and contains such other information as is necessary to enable a prospective investor in the fund to make an informed decision whether or not to invest
• to update the offering document to take account of any material changes
• to file any material changes to the information previously filed with cima, including an amended offering document, within 21 days of the change
• to ensure that the fund is audited on an annual basis
• to comply with reporting obligations including, without limitation, notifying the registrar of companies (registrar) of any changes in the directors, officers or registered office of the fund, arranging for the filing of the fund's annual return and exempted company declaration with the registrar and filing the offering document and annual audited financial statements with cima
• to comply with the requirements of the director registration and licensing act (drl act) (see “directors registration and licensing” below)

offering document obligations

cima has issued a rule for the contents of offering documents for mutual funds and a rule for the contents of marketing materials for private funds, which set out the specific content to be included in offering documents for each type of fund.

where one is prepared or is required, as well as the requirements set out in the applicable rule, cima expects a market standard offering document which properly and adequately describes the main features of the fund (including investment structure and strategy, role and functions of service providers, disclosure of interests, risk factors, and fee information) and provides all of the information that would reasonably be considered material to investors to make an informed investment decision.

automatic exchange of information and aml obligations

a fund also has reporting obligations under cayman islands legislation which implements the united states foreign account tax compliance act (fatca) and the organisation for economic co-operation and development’s common reporting standard (crs, and together with fatca, aeoi legislation).

full details of the ongoing reporting obligations of mutual funds and private funds can be found in our guide to continuing obligations of mutual funds and our guide to continuing obligations of private funds respectively.

in practice, the maintenance of statutory registers, the establishment of policies and procedures in accordance with the aml regulations and cayman islands sanctions regime, reporting under aeoi legislation and compliance with statutory filing obligations will be delegated by the directors to the registered office provider and/or administrator or another service provider of the fund. however, whilst the directors may be entitled to delegate these functions, the directors are still obliged to supervise the appointed service providers’ discharge of them.

segregated portfolio company funds

if the fund is a segregated portfolio company (spc), the directors will also have additional duties under the companies act. these include:

• the duty to establish and maintain the segregation of the assets and liabilities attributable to each segregated portfolio from the assets and liabilities attributable to each other segregated portfolio and the general assets and liabilities of the fund
• the duty to ensure that the fund states the capacity in which it is contracting (ie which segregated portfolio it is acting for) when entering into contractual documentation

in particular, proper oversight by a director of the proper maintenance of the segregation of assets and liabilities between the segregated portfolios in an spc is important to demonstrate the proper discharge of the director’s duties in respect of that spc under the companies act. such oversight should minimise the prospect of any potential cross-contamination of liabilities within the segregated portfolios of the spc. please see our guide to cayman islands segregated portfolio companies for further details.

cima rule and statement of guidance on corporate governance for funds

in 2023, cima published a rule (the rule) and a statement of guidance (sog) on corporate governance which applies to mutual funds and private funds. the rule and sog set out best practices and establish certain minimum corporate governance standards for governing bodies of funds.

rule

the rule requires a fund to establish, implement, and maintain a corporate governance framework which provides for sound and prudent management oversight of the fund’s business and protects the legitimate interests of relevant stakeholders. under the rule, the governing body of the fund is responsible for implementing a corporate governance framework that addresses, at a minimum:

• objectives and strategies of the fund
• structure of the governance of the governing body
• appropriate allocation of oversight and management responsibilities
• independence and objectivity
• collective duties of the governing body
• duties of individual directors of the governing body
• appointments and delegation of functions and responsibilities
• risk management and internal control systems
• conflicts of interest and code of conduct
• remuneration policy and practices
• reliable and transparent financial reporting
• transparency and communications
• duties of senior management relations with cima

sog

the sog does not impose a strict or all-encompassing code of conduct on governing bodies or operators of funds but expects the oversight, direction and management of a fund to be conducted in a fit and proper manner. the sog establishes an overall framework for good corporate governance within which funds should operate. the sog does not contain specific restrictions on investments, risks or strategies, nor does it attempt to direct, prescribe or constrain the management or business activities of funds.

the sog includes the following:

structure

directors should make sure that the governance structure of the fund is appropriate and suitable for effective oversight of the fund, looking at the fund’s size, complexity, structure, nature of business and risk profile of its operations including the level of assets under management, number of investors and nature of its investment strategy. directors should make sure that the fund’s constitutional documents and offering document comply with cayman islands law.

oversight and compliance function

the directors of a fund are ultimately responsible for overseeing and supervising the activities of the fund. they should regularly monitor and take steps to ensure that the fund and its service providers are conducting the affairs of the fund in compliance with the fund's defined investment criteria, investment strategy and restrictions as well as with all applicable laws, regulations and other rules. directors should receive regular reporting from the investment manager, administrator and other service providers to ensure they are able to make informed decisions and to adequately oversee and supervise the fund.

the directors should regularly ask for confirmation from the service providers that they are acting in accordance with the fund’s constitutional documents and offering document, including regularly monitoring whether the investment manager is acting in accordance with the fund’s investment criteria, strategy and restrictions. what constitutes ‘regular’ in this context will very much come down to the nature of the particular fund structure, strategy and service provider relationships and therefore must be looked at on a case by case basis. as part of this function, directors should also be mindful of cima’s outsourcing sog as described and defined below.

the directors should act in a transparent and honest manner with cima, always disclosing any matter which would materially and adversely affect the fund’s financial soundness and any non-compliance with applicable laws. if in doubt, professional legal advice should be obtained prior to making any disclosure to cima.

this is particularly important for private funds that have engaged service providers to undertake the core requirements of valuation, custody and cash monitoring set out in the private funds act.

conflicts of interest and risk

directors of a fund must ensure that the fund's offering document adequately and accurately discloses conflicts of interest and ensure that the fund has adequate measures in place to identify, disclose, monitor and manage any conflicts of interest. directors should ensure that they provide suitable risk management oversight and that risks are appropriately managed and mitigated.

this is particularly important for private funds where valuation, title verification or cash monitoring is being performed by a related party.

meetings

the board of directors of a fund should meet at least once a year, in person or by telephone or video conference call, and more often depending upon the circumstances or size, nature and complexity of the fund. service providers should also attend and provide reports to board meetings. full, accurate and clear written records must be kept of such meetings and all resolutions passed at such meetings, including agenda items, circulated documents, a list of attendees and if they were present physically or by telephone or video conference, all matters considered and decisions made and information requested from and provided by service providers and advisers.

duties

directors of funds:

• are responsible for the appointment, removal, monitoring and supervision as well as the contractual terms of service providers including notifying investors and cima of any changes to the fund’s service providers and making appropriate updates to the fund’s offering document.
• should communicate adequate information to the fund's investors, including where enhanced disclosure to investors is appropriate, making relevant enquiries when issues are raised and be satisfied that appropriate action is being taken.
• must have sufficient capacity to apply their minds to overseeing and supervising each fund in accordance with relevant laws, regulations, rules, statements of principles and the provisions of the sog and other relevant statements of guidance issued by cima. no specific limits are set on the number of directorships that can be accepted by an individual or corporate director, although under the drl act if the number of directorships exceeds 20 or more covered entities (as defined below), then the professional director licensing requirement will apply, see “directors registration and licensing” below.
• should ensure that the offering document contains such information as is necessary to enable a prospective investor to make an informed investment decision, including clear descriptions of the investment strategy and conflicts of interest policy.
• should exercise independent judgment, act in the best interests of the fund, take into account the interests of investors as a whole, and should operate with due skill, care and diligence and act honestly and in good faith at all times, making sure they have sufficient and relevant knowledge and experience to carry out their duties.
• must exercise the care, skill and diligence of a reasonably diligent person with such general knowledge, skill and experience.
• should at all times be fully aware of the fund’s investment activities, performance and financial position and review and approve the fund’s financial statements.
• should also regularly monitor the fund’s net asset valuation policy and that the fund’s net asset value is being calculated in accordance with the policy at the relevant intervals.

internal controls

in 2023, cima published a rule and statement of guidance on internal controls which applies to mutual funds and private funds. they are intended to ensure that the fund: (a) is able to carry on its business in an orderly and efficient manner, (b) safeguards its assets, (c) maintains proper records and produces reliable financial, operational and regulatory reports and (d) complies with applicable law and regulation.

the new internal controls requirements entail:

• a robust control environment
• a dynamic and iterative risk identification and assessment process
• control activities which are documented in policies and procedures
• segregation of duties commensurate with the size, complexity, structure, nature of business and risk profile of the fund's operations and where segregation of duties is not reasonably practical, establishing and implementing appropriate alternative control activities
• systems that provide information across the operation of the fund that are relevant, reliable, timely, accessible, and provided in a consistent format
• continuous monitoring and evaluation of internal control systems considering changing internal and external conditions
• effective and comprehensive audits of the internal control system carried out by operationally independent, appropriately trained, and competent staff
• reporting internal control deficiencies in a timely manner to the appropriate parties for corrective action

outsourcing arrangements

in terms of outsourcing arrangements to service providers, directors should also be mindful of cima’s policy in its statement of guidance on outsourcing regulated entities issued in 2023 (the outsourcing sog) that provides guidance to regulated entities on the establishment of outsourcing arrangements (including sub-outsourcing) and the outsourcing of material functions or activities. the outsourcing sog is not intended to be prescriptive or exhaustive, rather it sets out cima’s minimum expectations on the outsourcing of material functions or activities and outsourcing arrangements.

the outsourcing sog provides guidance to regulated entities (including sub-contractors where applicable) on the following matters:

• appropriate due diligence of service providers
• contents of outsourcing agreements
• materiality assessments of outsourcing arrangements (ie impact of outsourcing arrangements on the entity and its finances, reputation and operations)
• confidentiality and disclosure of information
• what boards of directors of regulated entities are expected to do with respect to the outsourcing of material functions or activities
• termination and exit strategies
• expectations with respect to a regulated entity’s relations with cima regarding the outsourcing of material functions or activities

the guidance notes on the prevention and detection of money laundering and terrorist financing issued by cima also detail how funds may outsource or delegate anti-money laundering (aml) compliance, provided the fund has designated natural persons as their aml compliance officer, money laundering reporting officer and deputy money laundering reporting officer.

directors registration and licensing

the drl act imposes obligations on directors of mutual funds and certain securities investment businesses (covered entities) to register with cima prior to being appointed as a director of a covered entity.

directors of private funds are not subject to the drl act.

the definition of “director” also includes managers of covered entities which are formed as limited liability companies in the cayman islands under the limited liability companies act. the registration fee is currently us$854 per director which is a natural person who acts as a director for less than 20 covered entities. licences are required for ‘professional directors’, being natural persons appointed to the boards of 20 or more covered entities and for corporate directors of covered entities. licence fees for professional and corporate directors are currently us$3,659 and us$9,756, respectively. annual fees of the same amount are also payable to cima by 15 january each calendar year to maintain registration/licensing.

please see our guide to the cayman islands drl act for further details.

what practical considerations should be taken into account during the life of a fund?

the grand court of the cayman islands provided a detailed analysis of the scope of an independent director's duties toward an offshore fund in its first instance decision in weavering macro fixed income fund (in liquidation) v peterson [2011] 2 cilr 203. although that decision with respect to liability was over-turned by the cayman islands court of appeal in [2015] 1 cilr 45, the first instance judge’s division of the life of a fund into three distinct phases provides helpful commentary when considering the performance of the directors: (1) establishment, (2) ordinary course of business and (3) financial crisis. much of the commentary from the first instance decision in the weavering case was subsequently reflected in the sog by cima.

establishment

before the launch of a fund the directors will need to make sure that they review and approve the fund’s documents, in particular the offering document. this will include being satisfied that the overall structure of the fund and service providers is reasonable and consistent with industry standards, confirming the investment strategy and restrictions, confirming the valuation, custody and cash monitoring functions of a private fund are being satisfactorily handled, making sure that statements can be verified, risk factors are appropriate and conflicts of interest are fully disclosed, in particular where the valuation, custody and cash monitoring functions of a private fund are being performed by a related party.

as a practical matter, if a director’s role is limited to that of an independent director then the director will not be expected to be involved in detailed negotiations with service providers. however, when taking on a role as independent director it is sensible to ask that before any agreements are signed, the investment manager or whoever is negotiating them lets the counterparties know that the directors will want to review them and approve them and that they may have comments or questions following their review.

launch board minutes or resolutions of the fund should also include approval of delegation of agreed functions to the various service providers and the directors should make sure that the appointments actually happen on terms that are consistent with industry practice, among other launch matters. at the establishment stage, directors should be thinking about potential investors when considering their duties to act in the best interests of the fund.

ordinary course of business

after launch of a fund, cima expects the oversight, direction and management of a fund to be conducted in a fit and proper manner, in line with the principles set out in the sog, as described above. during the ordinary course of business of a fund, the directors should properly minute board meetings, maintain records of board resolutions and keep evidence of enquiries made to service providers, such as emails or records of telephone conversations that take place outside of board meetings. as a fund has six months from its financial year end to finalise its audited financial statements and to file them with cima, directors should ensure that they are provided with the draft financial statements in plenty of time to review them and ask any relevant questions. for a fund of funds, for example, this is particularly important because it might not be possible to finalise the audit until very late in the six month period.

if there are changes to arrangements with service providers, then the approval of these changes should be properly minuted, with directors reviewing and approving any relevant amendments to contractual documentation with existing service providers or new contractual documentation with new service providers.

if the fund is a party to side letters undertaking to carry out certain actions, the directors should review them and be comfortable with their commercial terms. for example, if the side letter imposes extra investment restrictions, can these be carried out, and does agreeing to these impact on the rest of the fund's strategy as reported to investors? it is not enough simply to know that legally they can be entered into by the fund. if the investment manager has been given delegated authority to negotiate and execute side letters on behalf of the fund, this should form part of the regular reporting to the board and the scope of such authority should be agreed – including ensuring that the investment manager obtains prior board approval if necessary. other common provisions in side letters include additional information rights, statements of general intent as to exercise of powers, the ability to transfer shares, the ability to disclose information received from the fund (whether to satisfy public disclosure or other legal requirements or to upstream investors in a fund of funds), and provisions that relate to the tax, legal or regulatory status of an investor. we would generally recommend that professional legal advice be obtained prior to entering into any side letter arrangements as they are a potential liability minefield for directors and as they can increase the prospect of an inadvertent breach of a director’s duty. any side letter provisions that would seek to impose an obligation upon a fund to treat an individual investor preferentially and which would adversely affect the other investors (such as changes in cost sharing or indemnity arrangements) would usually be unacceptable.

ongoing monitoring and crisis management

throughout the life of a fund, directors should be pro-active in ensuring that the investment manager is required to provide information on an ad hoc basis which might require urgent action by the board. in addition to standard regular reporting requirements, directors should be asking the investment manager and any other relevant service providers whether there is anything that should be brought to the attention of the board. a non-exhaustive list of the issues that would fall under this heading are:

• is there any actual, pending or threatened litigation against the fund?
• are there any disputes with investors or counterparties that will fall short of actual litigation?
• will outstanding redemption requests have a significant impact on assets under management at the next dealing day; if so, could such redemptions de-stabilise the fund or adversely affect the liquidity of the fund?
• will accepting subscriptions in respect of erisa/pension assets have an impact on existing investors? are market or other conditions having or likely to have a material impact on the trading strategies of the fund?
• is there any significant counterparty risk for ‘over the counter’ transactions to which the fund is a party?
• has there been any change to or movement away from the investment strategy, policy or restrictions set out in the offering document?
• has there been any reduction in the investment manager's holding in the fund?
• have there been or are there likely to be any material changes of staff at the investment manager (for example, triggering ‘key-man’ events) or at any other service provider?
• has the valuation function been suitably performed in accordance with the fund’s policies and the law?
• are there any issues with title verification or cash monitoring in a private fund?

if the fund does find itself in difficulties, directors cannot sit back and assume that other service providers, and in particular the investment manager, will rescue the fund without significant oversight from the directors of the fund.

the directors are entitled to rely on the advice of suitably qualified third-parties and, in respect of areas where they do not have expertise, may be considered negligent if they make a decision without obtaining expert advice on behalf of the fund.

it is essential that directors seek advice from the fund's legal advisers as soon as they become aware of any circumstances that could have a material adverse effect on the management and operations of the fund or the interests of the fund's investors.

what are the consequences of a director not discharging its duties?

breach of statutory obligations

the companies act, the mutual funds act, the private funds act and the proceeds of crime act (among others) impose certain obligations on directors of a fund. some of these obligations are sanctioned by criminal penalties and, on conviction, are punishable by a potentially substantial fine and (in relation to certain offences) a custodial sentence. it is also important to note that if a fund is in breach of a statutory obligation, the relevant legislation may also impose penalties on any ‘operator’ or ‘officer’ of the fund (which includes a director) who is ‘in default’. for these purposes, directors will be ‘in default’ if they knowingly and willingly authorise or permit the default, refusal or contravention that constitutes the breach.

cima also has the power under the monetary authority act to impose significant administrative fines of up to ci$1 million (us$1.2 million) for each breach of certain provisions of the aml regulations and other cayman islands laws and regulations, including the mutual funds act, the private funds act, securities investment business act and the drl act. the level of an administrative fine will depend on various factors including whether the breach is committed by an individual or a body corporate and if the breach is classified as minor, serious or very serious.

breach of fiduciary duty

if directors breach their fiduciary duties to the fund they may be found personally liable to the fund in damages.

negligent mis-statement

in circumstances where a director has been negligent in making a statement, for example in the offering document, such director may be liable for a claim in damages brought by a person who has suffered loss in reliance on that statement.

deceit

if a director is fraudulent in misrepresenting facts by making a statement in the knowledge that it is false, or by being reckless as to whether or not the statement is true or false, for example in the offering document, the director could be found liable in damages to an investor or purchaser who is deceived by the statement.

the penal code

if a director publishes (or concurs in publishing) a written statement or account which to its knowledge is or may be misleading, false or deceptive in any material particular with intent to deceive shareholders or creditors of the fund then the director will be guilty of an offence, punishable on conviction by up to seven years imprisonment.

recent changes to the penal code also now require reporting of suspicion of overseas tax evasion as part of the aml framework in the cayman islands. this offence, together with obligations under the mutual funds act, the private funds act, and the liabilities described at paragraphs ‘negligent mis-statement’ and ‘deceit’ above, are of particular relevance to statements made in the offering document.

contempt of court

if a director is aware that the fund has been ordered by any court of competent jurisdiction either to do or refrain from doing something, or that the fund has given an undertaking to the court to do or refrain from doing something, then the director is under a duty to take reasonable steps to ensure that the order or undertaking is complied with. if a director wilfully fails to do so, with the result that the order or undertaking is breached, the director can be punished for contempt of court. turning a 'blind eye' to the breach may still result in liability for contempt, even if the director does not actively participate in the breach.

fraud on, or prior to, winding-up

the companies act provides for a range of statutory offences relating to the actions of the directors prior to, or in connection with, a winding-up of the fund.

ultra vires

the memorandum sets out the capacity and powers of the fund and the articles prescribe the manner in which the fund is to be operated.

if the directors of the fund purport to enter into any transaction that is outside the objects set out in the memorandum, the transaction will be ultra vires and the fund will be without capacity to enter into the transaction. similarly, if the directors enter into a transaction on behalf of the fund that is ultra vires their powers under the articles, the directors are without capacity to bind the fund.

in either circumstance, the companies act steps in to ensure that any such transaction with a third party is not invalid by such lack of capacity. the fund may however bring a claim against the directors for any loss caused or damage suffered as a consequence of the ultra vires act.

note that actions taken by the directors that are ultra vires their powers under the articles may be capable of ratification by the shareholders. actions taken by the directors that are ultra vires the objects in the memorandum are not capable of ratification however. this is often not an issue in practice as funds typically have very broad general objects clauses in the memorandum.

indemnification

the articles may provide for the indemnification of a director or an officer for breach of duty, save in limited circumstances such as where the director has been fraudulent or dishonest or where there has been wilful neglect or wilful default in the fulfilment of fiduciary duties. re city equitable fire insurance [1925] ch 407 defined what is meant by wilful neglect or default as:

"[a]n act, or an omission to do an act, is wilful where the person of whom we are speaking knows what he is doing and intends to do what he is doing. but if that act or omission amounts to a breach of his duty, and therefore to negligence, is the person guilty of wilful negligence? in my opinion that question must be answered in the negative unless he knows that he is committing, and intends to commit, a breach of his duty, or is recklessly careless in the sense of not caring whether his act or omission is or is not a breach of duty."

the cayman islands court of appeal adopted the re city equitable definition in peterson v weavering macro fixed income fund ltd (in liquidation) [2015] 1 cilr 45 (cica). whether a director is guilty of wilful neglect or default, so that they would be unable to rely on an indemnification provision in the articles, depends on the facts and evidence in any specific case.

funds may also obtain directors and officers insurance.

the luxembourg government is introducing comprehensive reforms to modernise the governance and operations of the commission de surveillance du secteur financier (cssf) and the commissariat aux assurances (caa). these changes align with the transposition of the european directive crd6 and aim to enhance the independence and effectiveness of financial oversight bodies.

a key aspect of the reform is the strengthening of governance practices. measures include stricter conflict-of-interest management, such as restrictions on post-tenure employment for directors, and limits on the duration of mandates,14 years for cssf directors and 15 years for caa directors. these steps are designed to ensure greater transparency and accountability.

the leadership structures of both institutions are also being expanded. the cssf will see an increase in its director count from four to six, alongside the general director, to address emerging challenges in the financial sector, such as crypto-assets and electronic payments. similarly, the caa will now have between two and four directors, in addition to its general director, to strengthen its operational capacity.

another significant change involves the handling of financial sanctions. under the new framework, funds collected from sanctions imposed by the cssf will be redirected to the state treasury, ensuring a clear separation between regulatory activities and financial penalties.

the reforms also emphasise the importance of financial education. a legislative proposal seeks to formalise the cssf’s role in promoting financial literacy, with efforts underway to integrate this mission into the broader legal framework. lawmakers are pushing for swift implementation to benefit the public.

lastly, discussions are ongoing regarding the role of the european securities and markets authority (esma) in financial supervision. while some eu member states advocate for a stronger esma role, luxembourg supports maintaining financial oversight at the national level through authorities like the cssf.

for more information the news release can be found here

segregated portfolio companies (spcs) are well recognised and popular corporate vehicles and the british virgin islands (bvi) has seen increasing demand for them over recent years. to the bvi business companies act, revised edition 2020 (bca). these changes expanded the uses of spcs, which are now available for more general, non-regulated purposes, as well as their traditional use in the regulated funds and insurance sectors.

how do spcs work?

an spc is a single company with the benefit of statutory segregation of assets and liabilities between segregated portfolios (segregated portfolios) established within the company. the assets and liabilities of each segregated portfolio are legally segregated from the assets and liabilities of any other segregated portfolio of the company and of the assets and liabilities of the company which are not held within or on behalf of any segregated portfolio (the general assets). a segregated portfolio is not a separate legal entity from the spc. a bvi company can be incorporated as an spc or an existing bvi company can convert into an spc using a procedure set out in the bca. the spc has only one set of constitutional documents, one board of directors and, importantly, one set of annual license fees. although it should be noted that there are incremental license fees associated with each new segregated portfolio, subject to an aggregate cap.

when can we use bvi spcs?

bvi spcs can now be used for a wide range of purposes:

• funds: spcs can be used for funds registered or recognised as closed-ended private investment funds or open ended private, professional public incubator or approved funds under the securities and investment business act, revised edition 2020 (siba). the spc is a popular vehicle for multi-class or umbrella investment funds in which two or more segregated portfolios use different investment strategies, including different levels of leverage, without risking cross contamination across the segregated portfolios.
• insurance: spcs can be used for companies which will be licensed as an insurer under the insurance act, revised edition 2020 (the insurance act).
• general unregulated purposes: the bvi can also offer an unregulated version of the spc, which allows for increased flexibility and scope for these vehicles greatly. under the segregated portfolio companies (bvi business company) regulations, revised edition 2020, spcs can be used for unregulated businesses including:
  • holding assets for high net worth persons
  • operating multiple businesses or types of business which require segregation from the general business of the spc
  • engaging in property development and management, including in real estate, ships, aircraft and other property
  • bankruptcy remote vehicles in structured finance and capital markets transactions
  • performing other duties, responsibilities and investments that are not inconsistent with any restriction under the bca.

we have seen increasing demand for these structures amongst family office clients, and bvi spcs can also be attractive for use in employee benefit schemes, and for carried interest vehicles to facilitate use as a carry partner in multiple underlying fund structures.

are there any restrictions on using spcs?

spcs cannot be used for bvi companies which are licensed to undertake investment business under siba, such as broker dealers and investment managers, or companies which are licensed to carry on any activity regulated under the banks and trusts companies act, company management act or financing and money services act. spcs also cannot be used for companies which are licensed to act as an insurance manager or insurance intermediary.

how do i register an spc in the bvi?

spcs can be registered in the bvi with the written approval of the financial services commission (the fsc). the application procedure and supporting documents required vary depending on whether the spc is a regulated fund, insurer or general unregulated spc. each segregated portfolio of an spc must include the words “segregated portfolio” in its name. to approve an application the fsc needs to be satisfied that the applicant has, or has available to it, the knowledge and expertise necessary for the proper management of segregated portfolios. once the fsc has approved an application, the company can apply to the registrar of corporate affairs (registrar) to be incorporated as an spc (or registered if an existing company).

fees are payable to the registrar and fsc, on incorporation and annually, including fees for each additional segregated portfolio established, with the level of fees depending on the spc’s purpose.

please see our more detailed guide to mutual funds established as spcs in the bvi here for further information on setting up a mutual fund spc or contact your usual harneys contact for further details on setting up a general unregulated or insurance spc.

what are the key features of spcs?

shares: spcs can issue shares in each segregated portfolio in more than one class and a class of shares can be issued in more than one series. distributions and dividends paid on segregated portfolio shares can only be made by reference to the assets and liabilities of the segregated portfolio in respect of which the shares are issued.

contracts: any contract or other agreement or similar arrangement which is intended to be binding on or for the benefit of a segregated portfolio must explicitly state that it is executed by the spc for and on behalf of that segregated portfolio. the recent amendments also now specifically allow segregated portfolios to enter into contracts or other agreements with another segregated portfolio in the same spc or with a segregated portfolio of another spc.

directors’ duties: the directors of an spc are under a duty to establish and maintain procedures to keep the segregated portfolio assets separate from the general assets and assets of other segregated portfolios and, where appropriate, apportion assets and liabilities between segregated portfolios and the general assets.

creating a new segregated portfolio: an spc will either need the prior approval of the fsc or to notify the fsc when creating a new segregated portfolio, depending on whether the spc is a licensed insurer, regulated fund, or used for more general unregulated business, it will either need the prior approval of the fsc or notify the fsc when creating a new segregated portfolio.

service providers: under siba, regulated funds set up as spcs must have an administrator, manager, auditor (if a private investment fund, professional fund, private fund or public fund) and custodian, unless an exemption has been granted by the fsc. a bvi insurer spc must have an insurance manager and an auditor and may have one or more insurance intermediaries or loss adjusters. all spcs must also have a registered agent in the bvi, like other bvi companies.

financial statements: an spc’s financial statements must take account of the segregated nature of the company and include an explanation of the purpose of the spc, how segregation of the assets and liabilities impacts the spc’s members and those with whom the spc transacts, and the effects that any deficit in the assets of one or more segregated portfolio has on the general assets.

where the spc is a regulated fund or insurer, further ongoing obligations apply under siba or the insurance act and related regulations, please contact us for more details.

how can harneys help?

harneys’ investment funds and corporate teams are well-versed in all aspects of the new spc laws, so please contact your usual harneys contact if you would like more information on bvi spcs or have any other questions. you can also contact us here.

the perpetuities act (2025 revision) marks an important moment for cayman islands trust law. for settlors of new trusts, the legislation offers the power to opt out of any perpetuity limitation at inception. for those who administer existing structures, it creates a streamlined, court-supervised route to convert a fixed-term trust into one of unlimited duration.

in march 2026, in what is understood to be the first successful application of its kind under the new statutory jurisdiction conferred by section 20 of the perpetuities act (2025 revision), harneys successfully obtained an order from the grand court, disapplying the rule against perpetuities for a discretionary family trust. the order empowered the trustee to execute a deed of variation replacing the trust's fixed-term period with an indefinite duration.

the reforms to the perpetuities act in brief

prior to the amendment effected by act 7 of 2024 (which came into force on 22 august 2024), cayman islands discretionary trusts were subject to a statutory perpetuity period of 150 years from the effective date of the relevant instrument. part 3 of the 2025 revision, which consolidates the 2024 amendment, changes the landscape in three material ways.

first, for new trusts created on or after 22 august 2024, the instrument itself may simply provide that the rule against perpetuities does not apply (provided the trust does not hold cayman land or any interest in cayman land). the land carve-out is narrow in that it does not extend to income from cayman land or to the proceeds of sale of cayman land, and a trust that has opted out of the rule may still hold an interest in an entity that owns cayman land for the purposes of its business.

second, for existing trusts (whenever created), section 20 permits a trustee, settlor, enforcer, power-holder, or beneficiary to apply to the grand court for an order declaring that the rule does not apply. the court may grant the order where it is satisfied that doing so would not be to the detriment of the beneficiaries.

third, trusts of unlimited duration governed by a foreign law that has no perpetuity rule may change their governing law to cayman without re-introducing any duration limit.

the application to disapply

harneys acted for a professional trustee of a discretionary family trust seeking to give effect to the dynastic objectives of the settlor through the grant of a court order.

in the absence of cayman authority on the exercise of the section 20 jurisdiction, the court was invited to approach its discretion by reference to persuasive bermudian case law under section 4 of bermuda's perpetuities and accumulations act 2009, a materially analogous provision to section 20 of the perpetuities act (2025 revision).

principles

the application before the grand court drew on judicial guidance from the supreme court of bermuda that establish clear principles guiding the exercise of the statutory power to disapply the rule against perpetuities. the bermudian authorities establish that:

• the court must not function as a "rubber stamp": disapplication will only be granted where it facilitates the continued efficient administration of a family trust, where no beneficiary is materially prejudiced, and where the relief accords with the best interests of the trust as a whole.
• a forced distribution at the end of a perpetuity period could give rise to significant tax liabilities and premature dissipation of assets to the detriment of future generations—this is a strong justification for disapplication.
• the potential dilution of existing beneficiaries' economic interests as a result of extending the duration of a trust will ordinarily be an irrelevant consideration.

distilling and drawing from these bermudian principles, the cayman islands grand court will therefore likely exercise its discretion in favour of granting relief where disapplication would: (a) accord with the settlor's wishes and the objectives of the trusts; (b) serve the best interests of those beneficially interested as a whole; (c) avoid an unwanted obligation to make enormous distributions at the end of the perpetuity period; and (d) facilitate the lawful preservation of existing and future tax benefits.

comment

section 20 of the act provides a clear, court-supervised route to perpetual duration for existing trusts and our recent experience in successfully obtaining an order demonstrates yet again that the grand court of the cayman islands takes a pragmatic approach to such trust applications. we anticipate the streamlined, court-supervised route will be welcomed by settlors (as well as by a trustee, enforcer and a person with a beneficial interest in the trust who all have standing to make an application) of existing trusts to convert a fixed-term trust into perpetuity in order to preserve and distribute wealth across generations.

harneys partner charles moore and associate harriet green acted for a professional trustee in confidential sealed proceedings and successfully obtained an order to this effect.

on 12 march 2026, the european securities and markets authority (esma) released findings and proposed actions to enhance the retail investor journey, based on its 2025 call for evidence. the initiative aims to address barriers faced by retail investors in accessing eu capital markets, focussing on both regulatory and non-regulatory challenges.

key areas of focus:

• simplifying disclosures: current disclosures are criticised for being lengthy, complex, and not user-friendly, particularly for digital-first investors. esma plans to streamline these requirements, introducing clearer, layered, and mobile-friendly formats.
• reducing complexity in assessments: suitability and appropriateness assessments, while valuable for investor protection, are seen as burdensome. esma aims to simplify these processes, especially for straightforward products and digital channels, while addressing the complexity of integrating sustainability preferences.
• addressing non-regulatory barriers: issues such as lack of trust, high fees, limited product comparability, low financial literacy, and complex cross-border taxation were highlighted. esma emphasises the need for broader reforms, including financial education and tax alignment across member states.

esma will use these insights to guide updates to mifid ii guidelines and provide technical advice for the retail investment strategy (ris). consumer testing will play a critical role in validating improvements, ensuring they meet the needs of diverse investor profiles, including mobile-first users.

esma’s news release can be found here

on 27 april 2026, the jersey financial services commission (fsc) introduced "focus examinations" as part of its 2026-2030 strategy to adopt a more risk-based and proportionate supervisory approach. these examinations are designed to assess compliance with regulatory requirements in specific, clearly defined areas, offering a streamlined alternative to full-scale examinations.

key features:

• minimal documentation: only essential document extracts are required, reducing administrative burden.
• short onsite duration: typically, lasting half a day, minimising disruption to business operations.
• interactive format: firms can demonstrate controls and processes directly, avoiding extensive written submissions.
• tailored feedback: specific feedback is provided to highlight strengths and areas for improvement.
• industry insights: anonymised observations will be shared to promote good practices and address common challenges.
• proportionality: ensures reduced disruption while maintaining regulatory assurance.
• cross-sector assessment: enables evaluation across various industry sectors.

implementation:

focus examinations will begin in june 2026, with the initial topic being targeted financial sanctions. selected entities will be notified via email with further details on the process and required information.

the industry update can be found here

these extremely popular and flexible funds are governed by the securities and investment business (incubator and approved funds) regulations, revised edition 2020, as amended (the regulations) and the incubator and approved funds guidelines. the british virgin islands (bvi) has often been described as the “home” of the emerging manager and these two fund products further reinforce that message.

the incubator fund is aimed at start-up managers looking to establish a track record and test a strategy in the most cost- efficient manner. the approved fund is aimed at managers looking to establish a fund for a small, private and longer-term offering in a tested and respected funds jurisdiction.

in order to qualify as an incubator or approved fund, a fund must fall within the requisite thresholds regarding (i) the number of investors, (ii) the maximum value of its net assets and (iii) the minimum initial contributions by each investor (incubator funds only). an approved fund is also required to appoint an administrator to ensure suitable oversight of its operations.

the key features of incubator & approved funds

• rapid approval times by the financial services commission (the commission) ensuring that the fund can be launched within a timescale that meets the manager’s requirements
• light regulation and minimal ongoing regulatory obligations
• limited mandatory information to be contained in an offering document means that the fund can operate using a short-form term sheet, keeping legal costs and time associated with set-up to a minimum
• stripped back requirements for mandatory functionaries to be appointed (other than the appointment of an administrator for an approved fund). the manager can therefore elect to only appoint functionaries they believe the fund requires from the outset
• no requirement to conduct an audit or file audited financial statements
• the incubator fund has a two-year validity period (with the possibility to extend this by a maximum of 12 months on application to the commission), which gives the manager time to test their strategy and determine whether the fund is viable before committing to operate as a private, professional or approved fund
• option to convert to a private or professional fund at a later date, should the fund outgrow the applicable restrictions
• ability to commence business within two business days of lodging a complete application for approval with the commission

criteria for the incubator & approved funds

• number of investors: incubator and approved funds must have no more than 20 investors. once this limit is met, the regulations allow a reasonable time to upgrade the fund to the next level, ensuring a smooth continuity of operation
• minimum investment: for incubator funds only, each investor must be a “sophisticated private investor”, which simply means that they were invited to invest in the fund and must make a minimum initial investment of us$20,000. there is no prescribed minimum investment amount for approved funds
• total assets: the net assets of an incubator fund must not at any time exceed us$20 million. the net assets of an approved fund must not at any time exceed us$100 million
• valuation policy: the fund is required to maintain a clear and comprehensive policy for the valuation of its assets (fund property) with procedures that are sufficient to ensure that the valuation policy is effectively implemented. the valuation policy shall:
  • be appropriate for the nature, size, complexity, structure and diversity of the fund and the fund property
  • be consistent with the provisions concerning valuation in its constitutional documents and term sheet/offering document
  • require valuations to be undertaken at least on an annual basis
  • include procedures for preparing reports on the valuation of the fund property
  • specify the mechanisms in place for disseminating valuation information and reports to investors
• minimum investor disclosures: each investor must be provided with a written warning (either in a prominent place in the offering document or in a separate document) that:
  • the fund is an incubator or approved fund, as applicable
  • the total number of investors in the fund is limited to a maximum of 20
  • the fund is suitable for sophisticated private investors (incubator funds only)
  • the fund is limited to the value of its net assets not exceeding us$20 million or us$100 million, as applicable
  • the fund is not subject to supervision by the commission and that the requirements considered necessary for the protection of investors that apply to public funds do not apply to an incubator or approved fund, as applicable
  • an investor is solely responsible for determining whether the fund is suitable for his or her investment needs
  • investment in an incubator or approved fund may present a greater risk to an investor than investment in a public fund
  • the incubator fund is limited to an initial period of two years and may, thereafter, unless it decides to terminate its business, apply to the commission to be recognised as a private or professional fund or approved as an approved fund

application process

the applicant must submit an application in the approved form to the commission and provide the following:

• a copy of the applicant’s constitutional documents which must state that the applicant is an approved or incubator fund
• a copy of the applicant’s offering document which must include the investment warning and a description of the applicant’s investment strategy. where there is no offering document, the investor warning and description of the applicant’s strategy must be provided separately
• a copy of the applicant’s subscription agreement
• details of the money laundering reporting officer of the applicant
• a resume or curriculum vitae for each director of the applicant or of the applicant’s general partner (as appropriate) as well as for the money laundering reporting officer
• a copy of the applicant’s valuation policy
• a copy of the applicant’s anti-money laundering and countering the financing of terrorism policies and procedures
• the application fee of us$2,000 (including the fee for obtaining an original certificate of recognition from the commission)

the applicant is deemed to be an incubator or approved fund upon submission of a complete application and may commence business two business days after receipt by the commission of the application.

if the commission considers the application to be incomplete, it will advise the applicant within two business days of receipt of the application and will outline any further requirements. the applicant will then have seven days (subject to any extension being granted by the commission) to provide the further information, after which time the application will be considered abandoned.

regulatory considerations

incubator and approved funds also have the following regulatory obligations under bvi law:

• mlro: appoint a single money laundering reporting officer in accordance with the fund’s obligations under the british virgin islands anti-money laundering regulations, revised edition 2020 and the british virgin islands anti-money laundering and terrorist financing code of practice, revised edition 2020. this person is often a representative of the administrator who is conducting the onboarding of investors on behalf of the fund.
• fatca & crs: register and report with the bvi international tax authority (ita) to meet the fund’s automatic exchange of information obligations under the united states foreign account tax compliance act (fatca) and the oecd common reporting standard (crs) as implemented in the bvi.
• investor aml: for incubator funds, put in place procedures for investor on-boarding which address typical investor identification requirements and the reporting of suspicious activities to the bvi financial investigations agency, and documenting how the fund complies with bvi anti-money laundering procedures. for approved funds this will typically be done by the administrator.

conversion of an incubator or approved fund

an incubator or approved fund may continue as such for so long as it remains within the relevant thresholds under the regulations. an incubator fund is subject to a validity period of two years, unless extended with approval from the commission by a maximum of 12 months.

if an incubator or approved fund exceeds the restrictions in relation to the value of its net assets or the number of investors for two consecutive months, within seven days of the end of the second month (unless at the time of notification it no longer exceeds the threshold), the fund must choose whether to:

• apply for recognition as a private or professional fund
• in the case of an incubator fund, apply for approval as an approved fund
• take steps to amend its constitutional documents to remove its redemption provisions and references to being an incubator or approved fund and cease to operate as a mutual fund
• commence the process of liquidating the fund

an application for recognition as a private or professional fund must be accompanied by an audit of the fund’s current financial position and its compliance with the regulations.

if any of the restrictions in relation to the value of its net assets or the number of investors are exceeded by the fund in contravention of the provisions of the regulations (ie proper notice is not provided to the commission and/or the fund does not voluntarily take the steps outlined above), the commission may require the fund to take one of the steps outlined above.

ongoing obligations

incubator and approved funds must:

• have an authorised representative in the bvi at all times
• have at least two directors (one of whom must be an individual) at all times
• in the case of an approved fund, have an administrator at all times
• pay an annual fee of us$1,200 to the commission for renewal of its approval as an incubator or approved fund
• submit financial statements (which do not need to be audited), approved and signed by a director or the general partner of the fund (as relevant), to the commission within six months of the end of the financial year to which they relate
• submit to the commission, no later than 31 january in each year, a statement that it is not in breach of the requirements of the regulations that allow it to continue as an incubator or approved fund
• incubator funds must submit to the commission a semi-annual return no later than 31 january and 31 july in each year for the periods ending 31 december and 30 june respectively, containing the following information:
  • the number of investors in the fund o the total investments in the fund
  • the aggregate subscriptions to the fund
  • the aggregate redemptions paid to investors
  • the net asset value of the fund
  • any significant investor complaint received by the fund and how the complaint was dealt with

approved funds are required to submit the same information to the commission, but on an annual basis only, by 31 january for the previous calendar year.

• notify the commission:
  • immediately if the authorised representative ceases to represent the fund and take necessary steps to replace the authorised representative within 21 days of the date that the authorised representative ceased to act for the fund
  • immediately if the number of directors falls below two and take necessary steps to bring the number of directors to two within 21 days from the date that the requirement was not complied with
  • of any change to the information provided to the commission with its application, including a written declaration stating whether the change complies with the requirements of the regulations, within 14 days of any such change occurring
  • of any matter related to the conduct of the business activities or affairs of the fund which may have a material impact on the fund (for example, a suspension of redemptions or the fund becoming subject to any legal or regulatory proceedings)

harneys is pleased to announce that harriet green has been called to the cayman islands bar, following the successful completion of the firm's articled clerk training programme. harriet was admitted in a ceremony before the honourable chief justice on 30 march, with her application moved by harneys partner jessica williams.

harriet completed her undergraduate studies at the university of york, followed by her postgraduate lpc and llm studies at the university of law (london), before returning home to the cayman islands to undertake her articles at harneys under the supervision of her principal, charles moore. during her training, harriet gained a range of experience, particularly across the firm's private wealth, litigation & insolvency, and restructuring teams. in her private wealth seat, harriet was involved in a range of trust applications, including beddoe relief, disclosure applications, and public trustee v cooper category 2 blessing applications under section 48 of the trusts act (2021 revision).

she also gained experience in mistake-based relief under the section 64a framework and applications to disapply the perpetuity period under section 20 of the perpetuities act (2025 revision). in her litigation, insolvency & restructuring seat, harriet worked as part of a team on an eight-week trial involving a high-value commercial dispute concerning the beneficial ownership of substantial funds. harriet also gained broader experience in service outside the jurisdiction and under the hague service convention, statutory demands and winding-up petitions, and a variety of interlocutory proceedings before the grand court.

harriet commented: “following such enriching experiences during my training at harneys, i'm delighted to be joining the private wealth, litigation & insolvency, and restructuring teams as an associate."

harneys provides a comprehensive training programme for articled clerks, offering the opportunity to work alongside top offshore practitioners in the cayman islands and across the firm’s global network. the programme includes rotations in litigation & insolvency, restructuring, banking & corporate, funds & asset management, and private wealth practice groups. it emphasises both the technical aspects of the law and essential soft skills, such as presentation, networking, and commercial awareness, tailored to practising in cayman and the wider offshore market.

charles moore, partner and director of the articled clerk training programme at harneys, commented: “we are committed to supporting caymanians as they build their careers, and harriet’s progress is a great example of what’s possible through hard work and dedication. she’s shown real commitment throughout her training, and i look forward to seeing her make her mark as she embarks on the next stage of her legal journey.”

harneys is committed to providing opportunities to talented students looking for a successful start to their legal careers. harneys awards legal scholarships to bright and ambitious caymanian students pursuing law degrees, postgraduate conversion courses, and postgraduate qualifying courses such as the professional practice course, the legal practice course, and the bar professional training course. for more information on the firm’s student and graduate programmes, visit harneys’ careers page or contact cayhr@harneys.com.

on 27 march 2026, the european commission initiated infringement procedures against several eu member states for failing to fully transpose key eu directives into their national laws by the required deadlines. these actions aim to ensure compliance with eu legislation and safeguard harmonisation across the eu.

key directives and actions:

1. european single access point (esap) omnibus directive:
   • aimed at centralising corporate public information for investors.
   • deadlines for transposition: july 2025 (phase 1) and january 2026 (phases 2 & 3).
   • non-compliance by 19 member states, including cyprus and luxembourg.

2. sixth capital requirements directive (crd6):
   • focusses on the carrying out of banking activity by third country banks in the eu, reverse solicitation, requirements for third country branches in the eu, and integrating environmental, social, and governance (esg) risks.
   • deadline: january 2026.
     22 member states, including cyprus and luxembourg.

3. e-evidence directive:
   • establishes mechanisms for judicial authorities to access electronic evidence across borders.
   • deadline: february 2026.
   • non-compliance by 22 member states, including cyprus and luxembourg.

next steps:

the eu commission issued formal notices, granting member states two months to address the deficiencies. failure to comply may result in the issuance of reasoned opinions, escalating the enforcement process.

the press release can be found here

on 22 april 2026, the cssf announced updated procedures for cross-border management notifications and de-notifications for luxembourg-domiciled investment fund managers (ifms) operating under a european passport. these changes, effective from 22 april 2026, aim to enhance efficiency and transparency in the notification process using digital platforms.

key details:

the updated procedures apply to:

ucits management companies:

• those authorised under chapter 15 of the law of 17 december 2010 (the 2010 law) to manage ucits in other eu member states.
• this includes activities conducted via branch establishment or under the freedom to provide services (fps), as well as the management of ucits established in other member states (articles 114 and 115 of the 2010 law).

authorised aifms:

• those operating under article 5 of the law of 12 july 2013 (the 2013 law) to manage eu aifs (authorised or not) in other member states, either directly (fps) or through branch establishment.
• this also includes providing services outlined in article 5(4) of the 2013 law (article 32 of the 2013 law).

new submission methods:

• edesk portal: all notifications and de-notifications must now be submitted via the cssf’s edesk portal. this platform centralises the submission and monitoring of cross-border management activities.
• cssf application programming interface (api) transmission: alternatively, submissions can be made using the cssf api solution, which leverages s3 technology for secure file transfers.
• monitoring: ongoing monitoring of notifications will be conducted exclusively through the edesk portal.

obligations for ifms: ifms are reminded of their obligation to notify the cssf of all cross-border activities and services they intend to provide, regardless of whether these are conducted under the freedom to provide services or through branch establishment.

support and assistance: for any questions or technical support, ifms can contact the cssf helpdesk at edesk@cssf.lu.

why this matters: these updates reflect the cssf’s commitment to modernising regulatory processes and ensuring compliance with eu directives. by leveraging digital tools like the edesk portal, the cssf aims to simplify administrative procedures, reduce processing times, and enhance the overall efficiency of cross-border fund management operations.

cssf’s communique can be accessed here and comprehensive guidance is provided in the user guide: ifm guidelines on cross-border management notification and de-notification procedures.

the edesk portal is here.

as a recognised fund, your private investment fund (pif) is regulated by the british virgin islands (bvi) financial services commission (the fsc). this note provides a quick reference to your pif’s ongoing bvi obligations.

pifs are recognised under the securities and investment business act, revised edition and are subject to the private investment fund regulations, revised edition 2020.

the board and officers

a pif must

• at all times have at least two directors, at least one of whom must be an individual
• appoint an appropriately qualified and independent individual as money laundering reporting officer (mlro) for the fund who may, in practice, be a person provided by one of the functionaries to the fund (see below for more detail on anti-money laundering obligations), or otherwise outsourced
• appoint a foreign account tax compliance act (fatca) responsible officer and a principal point of contact for the bvi international tax authority (ita)(see below for more detail on obligations under fatca and crs)
• have an “appointed person” designated as having responsibility for undertaking each of (i) the management of fund property; (ii) the valuation of fund property; and (iii) the safekeeping of fund property (including the segregation of fund property)

notice requirements

on the happening of certain events, a pif is required to notify the fsc. the table below summarises these notification requirements and the timeframe for providing notice.

annual regulatory and government requirements

there are various reporting and payment deadlines for a pif throughout the year.

*us$550 for companies authorised to issue up to 50,000 shares and us$1,350 for companies authorised to issue more than 50,000 shares.

fund policies and arrangements

a pif is required to maintain a valuation policy setting out the applicable procedures for the valuation of fund property, the preparation of reports on the valuation and setting out the mechanisms for sharing valuation information with investors (valuation policy). a pif must ensure that the person appointed as its valuation “appointed person” values fund property in accordance with the valuation policy.

a pif should also have a safekeeping policy and adequate arrangements in place for the safekeeping of fund property (safekeeping policy).

on an annual basis, a pif should review its valuation policy and safekeeping policy to ensure compliance with bvi legislation.

maintenance of records and financial statements

a pif must maintain records that are sufficient to show and explain its transactions, to enable its financial position to be determined with reasonable accuracy at any time, to enable it to prepare financial statements and make returns and, if applicable, to enable its financial statements to be audited.

a pif must prepare financial statements for each financial year that comply with:

• the international financial reporting standards, promulgated by the international accounting standards board
• uk generally accepted accounting principles (gaap)
• us gaap
• canadian gaap; or
• internationally recognised and generally accepted accounting standards equivalent to the accounting standards referred to above

anti-money laundering obligations

the bvi anti-money laundering (aml) regime applies to all funds as they are classified as “relevant persons” under the anti-money laundering regulations, revised edition 2020. in addition to appointing an appropriately qualified and independent individual as mlro (as mentioned above), a fund will be required to:

• put in place investor on-boarding procedures which address typical “know your client” requirements.
• put in place and maintain a written and effective system of internal controls which provides appropriate policies, processes and procedures for forestalling and preventing money laundering and countering the financing of terrorism (the manual). the manual should be reviewed annually to ensure compliance with aml regime in the bvi.
• report suspicious transactions to the financial investigation agency (fia) in the bvi
• report the identity of its appointed mlro to the fia

the bvi rules do provide for funds to outsource all and any of these obligations to functionaries based outside of the bvi, such as an administrator or investment manager. any outsourcing must, however, be documented in writing.

obligations under fatca and crs?

pifs are required to register for a global intermediary identification number (giin) with the us internal revenue service. funds are also required to enrol with the ita. enrolment for fatca and crs reporting is made through the ita’s online portal, called the bvi “financial account reporting system”. funds must also pay an annual enrolment fee of us$185 to the ita through the ita’s online portal.

pifs will need to identify reportable accounts and start to report the necessary information to the ita. the reporting deadline for fatca and crs is 31 may.

the information that must be reported under fatca and crs is broadly similar and includes: the name, date of birth, tax identification number (for specified us persons where available); national insurance number (for specified uk persons, where available); jurisdiction of residence (for reportable persons under crs only); the account number; name and giin of the reporting financial institution; and the account balance (some minimums apply under fatca).

a crs additional information form must also be filed via the ita’s online portal by 30 september.

beneficial ownership regime

the bvi business companies (amendment) act 2024 and the bvi business companies and limited partnerships (beneficial ownership) regulations 2024 introduced a requirement for bvi business companies and limited partnerships to file beneficial ownership information with the registry via the registry’s online filing system “virrgin”.

pifs are exempt from the requirement to file beneficial ownership information with the registry, provided that the fund’s beneficial ownership information can be provided to the registrar within 24 hours of request by the fund’s authorised representative (or another person licensed by the fsc that has a physical presence in the bvi).

where a pif qualifies for the exemption, its bvi registered agent must still submit an exemption filing on behalf of the fund via the registry’s online filing system “virrgin”.

on 16 february, the british virgin islands financial services commission (bvi fsc) published industry circular 5 of 2026, highlighting the critical importance of ongoing customer due diligence (cdd) and transaction monitoring for financial institutions (fis) and designated non-financial businesses and professionals (dnfbps). while initial cdd establishes a foundational understanding of customer profiles and risks, the bvi fsc underscores that ongoing cdd is essential to address changes in customer circumstances or activities.

key elements of ongoing cdd include:

• transaction monitoring: systems must be in place to detect unusual or suspicious activities, flag them for examination, and take appropriate action.
• customer screening: regular screening is required to identify changes in customer status, such as becoming a politically exposed person (pep) or being subject to sanctions.
• updating cdd information: customer data must be reviewed and updated regularly, particularly for higher-risk customers or upon specific trigger events.

the bvi fsc encourages fis and dnfbps to strengthen compliance by maintaining updated policies, training staff, and utilising available guidance, including faqs and monitoring frameworks.

if any fis or dnfbps require a review of their internal policies and procedures to ensure that they meet the regulatory requirements, please do get in touch with us. we can also provide general regulatory advice to ensure that any fis or dnfbps mitigate any deficient cdd areas in their business to offset any breaches being detected.

for more information, fsc circular 5 of 2026 can be found here

the virgin islands data protection act 2021 (the act) is now in force. the act imposes a number of obligations upon investment funds in relation to the processing of personal data that they will inevitably collect as part of the investor onboarding procedure.

in order to ensure compliance with the act, investment funds should:

• provide investors with a privacy notice
• update their offering and subscription documentation
• revisit service agreements with third parties, most importantly, the fund administrator

overview

the act governs how a data controller may process, use and retain personal data. anyone who falls within the definition of a data controller (of which an investment fund domiciled in the bvi clearly does) must now comply with the seven principles in the act in relation to any personal data processed by the fund. where a data controller engages a third party (such as an administrator or investment manager) to process personal data on its behalf (defined in the act as a data processor), the data controller must ensure the data processor has appropriate safeguards in place in respect of the personal data.

in addition to governing how a data controller processes, uses and retains personal data, the act also sets out the rights of individuals to control their personal data and implements a series of offences and enforcement measures designed to ensure compliance. the act is broadly designed to reflect the general data protection regulation (gdpr) and the cayman islands data protection act (both of with which many clients will already be familiar), however there are a number of differences that you should be aware of.

application of the act to investment funds

any investment fund structured as a bvi company or partnership, or any foreign company registered in the bvi that acts as a general partner of an investment fund will be subject to the act and will be a data controller.

investors in a bvi investment fund will routinely provide certain personal identifying information to the investment fund such as their name, address, date of birth, bank details etc and this is to be regarded as personal data.

although the persons whose data is gathered under the act (data subjects) have to be natural individuals, the act will still apply in connection with corporate investors who provide personal data for their beneficial owners, directors, employees and members.

the individual to which the personal data relates does not need to be in the bvi or a citizen of the bvi in order for the act to apply.

what must an investment fund do to comply with the act?

as a data controller, an investment fund must ensure that it complies with the seven data protection principles contained in the act. see our guide bvi introduces data protection regime for further information.

in practical terms, an investment fund can demonstrate compliance with the data protection principles by taking the following actions:

• send a privacy notice to existing investors, whether as a separate document or part of an update to the offering document
• update subscription documents to include a privacy notice for new investors as well as obtain certain acknowledgements, representations and warranties
• update offering documents
• update agreements with any third parties that would be regarded as a data processor on the basis that they process personal data on behalf of the data controller

privacy notices

if the investment fund is already subject to gdpr then it may have already adopted a gdpr compliant privacy notice. if that is the case, then a few amendments to the privacy notice to reflect the act are all that are needed.

if the investment fund has not yet adopted a privacy notice, then it should prepare one in order to communicate the required information to its investors and we would be happy to assist with this drafting where required.

in either case, the privacy notice should be sent to existing investors and/or made available on an investor or fund administration portal.

subscription documents

the subscription agreement of the investment fund will also need to be updated to include the privacy notice and certain acknowledgements from the investor. it should also contain representations and warranties from investors that they have been provided with the privacy notice and they in turn have given it to any person whose data has been supplied. you should also consider whether your documents need consent provisions for specific activities prescribed under the act, such as the processing of sensitive personal data if applicable.

importantly, the act places significant weight on the concept of the data subject’s “express consent” to the processing of their personal data, and subscription documents should be worded accordingly. funds familiar with the gdpr and/or the cayman islands data protection act should note that the act does not provide a "legitimate interest" basis for processing personal data, and therefore the express consent of the data subject will be required for certain back or middle office functions which involve the processing of personal data.

offering documents

offering documents should be updated to include a brief disclosure and overview of the act. if no update to the offering documents is scheduled or the investment fund is currently closed to new investment, then an investor circular with the privacy notice should be prepared and sent to investors or made available on an investor or fund administration portal.

third party agreements

an investment fund’s service providers (such as administrators and investment managers) will usually fall into the act’s regulatory orbit as data processors. there is a duty on the investment fund, as data controller, to ensure that such third parties:

• provide sufficient guarantees in respect of the technical and organisational security measures governing the processing to be carried out
• take reasonable steps to ensure compliance with those measures

this duty applies regardless of whether the third party provider is outside of the bvi.

service agreements with the relevant third parties should therefore be updated to ensure that appropriate obligations are imposed on the providers.

assistance with the necessary updates

although the act is in force, the bvi supervisory authority (the information commissioner) has not yet been appointed and no formal guidance has been issued. we expect that monitoring and enforcement of the act will increase over the coming months, and it is therefore important that funds put the relevant documentary framework in place as soon as possible.

this guide provides an overview of the british virgin islands’ approved manager regime. the regime came into effect on 10 december 2012 with the investment business (approved managers) regulations, revised edition 2020 (the regulations) and the approved investment managers guidelines (the guidelines). it introduces a less onerous regulatory regime for bvi domiciled investment managers and investment advisers and compliments the more heavily regulated investment business licensing regime under part i of the securities and investment business act, revised edition 2020 (siba).

the key features of the new regime are:

• for eligible managers and advisors, an alternative to licensing under part i of siba
• the applicant must be a bvi company or limited partnership
• application form provides for self-certification of “fit and proper” status of the applicant
• the approved manager can commence business seven days after filing a short and simple application with the financial services commission (the commission) pending formal approval
• the approved manager can act as manager or advisor to any number of incubator, approved, private or professional funds recognised under siba, as well as funds domiciled outside of the bvi in a recognised jurisdiction (as defined below) and closed ended funds domiciled in the bvi or in a recognised jurisdiction, if they have the key characteristics of a private or professional fund
• the approved manager is subject to caps of (i) aggregate assets under management of us$400 million for open ended funds and (ii) aggregate capital commitments of us$1 billion for closed ended funds
• annual return and unaudited financial statements to be filed with the commission
• no capital adequacy or professional indemnity insurance requirements and no requirement to appoint a compliance officer. the regulatory code does not apply

at this point in time, a recognised jurisdiction for these purposes means:

argentina, australia, bahamas, bermuda, belgium, brazil, canada, cayman islands, chile, china, curacao, denmark, finland, france, germany, gibraltar, greece, guernsey, hong kong, ireland, isle of man, italy, japan, jersey, luxembourg, malta, mexico, netherlands, new zealand, norway, panama, portugal, singapore, spain, south africa, sweden, switzerland, united kingdom and the united states of america.

criteria for approved managers

an approved manager may carry on business (defined as “relevant business” in the regulations) as an investment manager or investment adviser to:

1. one or more incubator, approved, private or professional funds recognised under siba (or funds domiciled outside the bvi but in a recognised jurisdiction)
2. one or more closed ended funds which are domiciled in the bvi and have certain key characteristics of a private or professional fund
3. one or more open ended or closed ended funds which are domiciled in a recognised jurisdiction and have certain characteristics of a private or professional fund
4. one or more non-bvi funds (open ended or closed ended) investing a substantial part of its assets in a fund described in (a), (b) or (c) above
5. one or more persons who are affiliated (as defined in the guidelines) to a fund described in (a) or (b) above
6. such other person(s) as the commission may approve on a case by case basis (the most common application under this section being for the purposes of providing some form of management advice to “managed accounts”)

application process – timeframe

an applicant must submit its application in the prescribed form to the commission at least seven days prior to the intended date of commencement of the “relevant business”. after the expiry of the seven day period (or such shorter period as the commission may approve), the applicant may commence and carry on “relevant business” for a period of up to 30 days (such period being extendable for a further period of 30 days by the commission). during this 30 day (or extended) period, the applicant will be deemed to have been approved under the regulations.

should the commission not grant approval to an applicant or reject the application, the applicant is required to cease carrying on the “relevant business”.

application process – documentation

the applicant must submit an application to the commission using the prescribed form and provide the following:

1. a copy of the applicant’s constitutional documents
2. brief details of each director or general partner and senior officer of, and each person who owns or holds an interest in, the applicant
3. a written declaration by the applicant that each director or general partner and senior officer and each person who owns or holds a “significant interest” in the applicant is “fit and proper” in accordance with schedule 1a of the regulatory code (for these purposes “significant interest” shall have the meaning ascribed to it in siba – broadly speaking a ten per cent or greater interest)
4. details of the funds that the applicant intends to act for upon commencement of “relevant business” (including total assets or, for new funds, target size) and a copy of the investment management or advisory agreement to be entered into between the applicant and the relevant fund(s)
5. details of the individuals who will carry out the day-to-day investment business functions of the applicant
6. details of any person to whom the applicant proposes to delegate any of its investment business functions together with details of any individuals within the delegate’s organisation who will be carrying out the delegated function
7. details of the money laundering reporting officer of the applicant
8. a resume or curriculum vitae for each director and senior officer of the applicant as well as each individual mentioned in paragraphs (e), (f) and (g) above
9. a copy of the applicant’s anti-money laundering and countering the financing of terrorism policies and procedures
10. a written declaration by the applicant’s authorised representative or legal practitioner that the application for approval as an approved manager is complete

the application must also include the application fee of us$1,200.

limits on assets under management of approved managers

a key feature of the approved manager regime is that the approved manager is subject to a limit on the size of the funds which it manages or advises. open ended funds cannot exceed an aggregate of us$400 million assets under management and closed ended funds cannot exceed us$1 billion of capital commitments. if the limits are exceeded, the approved manager must inform the commission within seven days.

within three months of the limit being breached, the approved manager must either have submitted an application for a licence under part i of siba or the funds which it manages or advises must have decreased back below the limits. otherwise, the approved manager must immediately cease carrying on relevant business on the expiry of the three month period.

ongoing obligations of an approved manager

an approved manager must:

• have an authorised representative (certified under section 64 of siba) and at least two directors (one of whom is an individual) at all times
• notify the commission of any change to the information provided by the approved manager in connection with its application within 14 days of such change occurring
• submit financial statements (which do not need to be audited), a director’s certificate and a report on the affairs of the approved manager to the commission within six months of the end of each financial year
• submit an annual return to the commission by 31 january each year. the information to be provided in the annual return must include:
  • a statement that the approved manager is not in breach of the regulations
  • confirmation that each director, general partner and senior officer of, and shareholder with a significant interest in, the approved manager is fit and proper
  • details, as 31 december of the preceding year, of the assets under management of each fund for which it acts, the number of investors in each fund; and any “significant complaints” received by the approved manager
• submit an anti-money laundering/countering the financing of terrorism return to the commission on or before 31 march each year, in respect of the previous calendar year

pay an annual fee of us$1,800 to the commission for renewal of its approval as an approved manager.

harneys is pleased to have acted as cayman islands counsel to reap technologies holdings limited in connection with payward, inc.’s proposed us$600 million acquisition of reap, comprising a mix of cash and payward stock for 100 per cent ownership.

the transaction highlights the continued growth and consolidation across fintech, payments, and digital assets businesses globally, as well as the central role cayman islands structures continue to play in complex cross-border m&a transactions.

harneys advised reap on the cayman islands aspects of the acquisition, including the merger structure, transaction documentation, and implementation mechanics.

the transaction was led by harneys singapore managing partner lishi fong, with support from senior associate jonathan lim and associate edwin tan.

lishi commented: “asia continues to produce highly scalable fintech businesses with global relevance. this transaction reflects the growing convergence between payments and digital assets infrastructure, and the increasing sophistication of cross-border m&a involving cayman islands vehicles.”

we were pleased to support reap on this significant transaction alongside an experienced international adviser group.

use our cayman islands regulatory compliance calendar to stay on top of your key filing and reporting obligations.

the calendar highlights the principal cayman compliance dates and deadlines you need to be aware of, helping you plan ahead and maintain good standing.

cayman islands regulatory deadlines table

we want to remind you that the details in this calendar are not comprehensive and should not be considered legal counsel. therefore, they should not replace tailored advice for unique situations. some deadlines are subject to change by the tax authorities.

have questions about these regulatory deadlines? contact us to learn more.

the income tax (amendment) law 2026 (the income tax amending law) was officially published in the gazette of the republic of cyprus on 6 march 2026. the income tax amending law introduces amendments to the existing income tax law 2002, as amended (the income tax law), with the following key provisions:

1. introduction of new tax exemption (section 8 amendment)

a new subsection (21b) has been added to section 8 of the income tax law, providing a 25 per cent tax exemption on income from employment or business profits in cyprus, capped at €25,000 per tax year. this exemption applies under the following conditions:

• the individual must be a resident of cyprus, starting employment or business activity in cyprus between 1 january 2025 and 31 december 2030.
• during the first 12 months of employment or business activity, the individual must have earned over €30,000 in income.
• the individual must not have been a resident of cyprus for the seven tax years preceding the start of employment or business activity.
• the individual must have been a resident of cyprus at least once prior to the seven-year period mentioned above.
• the individual must meet at least one of the following criteria:
  • hold a recognised university degree and have worked full-time outside cyprus for a non-cypriot employer for at least 36 months within the last 84 months.
  • have worked full-time outside cyprus for a non-cypriot employer for 84 consecutive months prior to starting employment or business in cyprus.

additional notes:

• the exemption is granted for the year employment or business activity begins and the subsequent six tax years, provided annual income exceeds €30,000.
• this exemption cannot be combined with the exemption under subsection (21a).
• the exemption is granted once per lifetime for eligible individuals.

this exemption is part of the "minds in cyprus" initiative, a strategic framework designed to attract skilled professionals and entrepreneurs to cyprus, leveraging their global expertise to contribute to the country’s economic growth.

2. other tax exemptions for relocating/returning individuals

in addition to the new 25 per cent tax exemption under section 8(21b) of the income tax law, two other tax exemptions are currently in force to encourage individuals to relocate or return to cyprus:

a. 20 per cent exemption (section 8(21a))

under section 8(21a), individuals may claim a 20 per cent exemption from income tax, up to a maximum of €8,550 per tax year, on emoluments from their first employment in cyprus, provided that:

• they have not performed any employment in cyprus for the last 15 years; and
• they were employed outside cyprus by a non-cypriot employer for the 3 years immediately before starting their first employment in cyprus.

this exemption is granted for 7 years, starting from the year following the commencement of employment. it is applicable for employment starting on or before 31 december 2027.

b. 50 per cent exemption (section 8(23a))

under section 8(23a), individuals may claim a 50 per cent exemption from income tax on emoluments from any employment exercised in cyprus, provided that:

• they have not been a tax resident of cyprus or exercised any employment in cyprus for at least 15 consecutive years immediately before starting their first employment in cyprus; and
• their employment emoluments for the first or second year of employment in cyprus exceeded €55,000.

this exemption is granted for 17 years. however, if this exemption is granted, the tax exemptions provided in sections 21, 21a, 21b and 23 do not apply.

3. non-domicile (non-dom) regime and section 8(21b)

the non-dom regime operates independently of section 8(21b). under the non-dom regime, individuals are exempt from paying special defence contribution (sdc) on income derived from dividends and interest.

in contrast, section 8(21b) provides an income tax exemption on remuneration from employment exercised in cyprus or profits from a business carried out in cyprus.

these two exemptions are not mutually exclusive and may be claimed simultaneously, allowing eligible individuals to benefit from both regimes concurrently.

4. effective date

the amendments are retroactively effective from 1 january 2025.

the income tax amending law can be found here

the court of appeal of england and wales has dismissed an appeal in logix aero ireland limited v siam aero repair company limited, holding that the voluntary acts of fraudsters broke the chain of causation between an assumed breach of a confidentiality clause and the claimant’s loss.

the decision restates the principles of legal causation in contract and clarifies the limited reach of london joint stock bank v macmillan. although the decision is one of english law, the causation principles applied are common law principles regularly cited in the cayman islands and other international financial centres (ifcs).

background

logix agreed to purchase two aircraft engines from siam aero under a letter of understanding (loi). the loi was predominantly non-binding. however, certain clauses – including a confidentiality provision – were expressly stated to be legally binding.

unknown fraudsters intercepted email correspondence between the parties. they registered domain names differing from the genuine addresses by a single character and began altering emails before forwarding them on. among the changes, they substituted their own vietnamese bank account details for siam aero’s thai account in draft purchase agreements and invoices.

logix paid the balance of the purchase price to the fraudsters’ account believing it was paying siam aero. logix took no independent step to verify the bank details. the fraud came to light days later when siam aero informed logix by telephone and whatsapp that it had not received payment, by which point the funds had already left the fraudsters’ account.

logix commenced proceedings in england. it initially alleged siam aero’s complicity in the fraud but dropped that allegation after forensic investigation. the claim was narrowed to a single ground: that siam aero’s four emails to the fraudsters breached the confidentiality clause and caused logix’s loss.

the issues

at first instance, mrs justice williams struck out the proceedings under cpr 3.4(2)(a), holding that the claim was “bound to fail”. she accepted it was arguable that siam aero breached the confidentiality clause by unwittingly “disclosing” documents and information to the fraudsters. she held, however, that it was not arguable that any such breach caused logix’s loss.

lord justice males granted permission to appeal solely on causation. on appeal, logix argued that the judge wrongly failed to follow macmillan. in that case, a firm had drawn the cheque negligently, leaving gaps in the figures and words that the clerk exploited to increase the amount from £2 to £120. the house of lords held that, notwithstanding the intervening fraud, the firm’s negligence in drawing the cheque facilitated the forgery and was the effective cause of the loss. as such, the firm was precluded from recovering its loss from the bank on the basis that “forgery is not a remote but a very natural consequence of negligence of this description”.

siam aero opposed the appeal on the ground it was not arguable that its actions breached the confidentiality clause at all.

the judgment

lord justice phillips (lord justice peter jackson and lady justice cockerill agreeing) dismissed the appeal.

it was common ground that the “but for” test of factual causation was satisfied. the question was whether siam aero could be held liable despite the intervention of the fraudsters. the court identified three principles by which the chain of causation may be broken:

1. first, the breach may not be the “effective” or “dominant” cause of loss but merely the opportunity or occasion for it (galoo v bright grahame murray; armstead v royal & sun alliance). the same distinction has been applied in the cayman islands. in omni securities v deloitte & touche, the court of appeal considered the galoo test in the context of auditors’ negligence and held that whether a breach was the “effective cause” of loss, or merely the “occasion” for it, was to be resolved by “the application of the court’s common sense”.
2. second, the loss may not be of the type for which the contract breaker assumed responsibility (the achilleas).
3. third, the loss may not arise “in the usual course of things” (hadley v baxendale).

the court held that macmillan did not establish a free-standing rule that intervening fraud never breaks the chain of causation. that decision rested on three features specific to the banker-customer relationship: (i) the breach was the effective cause of the loss; (ii) the loss was within the scope of the duty assumed (preventing the very type of fraud that occurred); and (iii) forgery was “not a remote but a very natural consequence” of the customer’s negligence in drawing the cheque.

applying those principles to the facts, the court found that the fraud was both the cause of, and an intervening cause after, siam aero’s assumed breach. the fraud preceded any assumed breach by siam aero. the first assumed breach was in fact logix’s own response to the initial doctored email. siam aero’s assumed breach was merely one stage in the overall scheme, brought about by the fraudsters as part of it. the final stage (deception and mistaken payment) occurred without any involvement by siam aero.

the case was properly distinguished from macmillan. the confidentiality clause was concerned with protecting the parties from commercial damage caused by information reaching competitors, not with preventing fraud by persons gaining sight of otherwise anodyne information. it would also have been open to the judge to find the loss outside the scope of duty and too remote.

lord justice phillips added that logix’s claim would have faced further obstacles at trial. it was far from clear that siam aero was in breach of the confidentiality clause by “disclosing” its own information (including its own bank details) to a third party. there was also a question over whether siam aero could have relied on logix’s own breach of the clause by way of circuity of action.

key takeaways

the reasoning in logix is familiar in the cayman islands. in primeo fund v bank of bermuda (cayman) ltd, the grand court dismissed claims against a custodian and administrator whose contractual breaches had given the claimant fund the opportunity to remain invested with madoff. the breaches satisfied the “but for” test, but the court held that they were not the effective cause of primeo’s losses: the ponzi fraud was. that finding was ultimately upheld by the privy council. a breach that merely provides the setting for a third-party fraud will not ground a claim in damages.

the case of arnage holdings v walkers raised a similar question. there, clients alleged that a law firm’s disclosure of confidential cayman court documents to brazilian proceedings caused them loss, but the causal link turned on contested questions about the meaning and effect of those brazilian proceedings. the cayman islands court of appeal held that “the issues of causation were substantial and could not be dismissed without trial”. however, as the break in the chain was obvious on its face in logix, the court determined that it could resolve the causation point without a trial.

on the basis of macmillan, claimants will need to show that the duty breached was directed at preventing the very type of fraud that caused the loss. a general confidentiality clause will not suffice.

both parties here unwittingly corresponded with the fraudsters. the court treated it as wholly artificial to attribute the loss to one side’s emails alone.

on email fraud losses, the analysis may turn on what the breached duty was for. a confidentiality clause aimed at protecting commercial information from competitors is unlikely to support a damages claim where the loss is caused by third party payment fraud.

parties to cross-border transactions (including those involving vehicles incorporated in the cayman islands, bermuda or the bvi) should not assume that a breach of a boilerplate confidentiality obligation will sound in damages for losses caused by third-party fraud. independent verification of payment details, such as call-back procedures before any wire transfer is made, can be sensible in order to avoid such fraud.

note: harneys does not practise the laws of england and wales. english decisions can be persuasive in ifc courts and are therefore of interest.

on 10 april 2026, the cssf issued a communication to the investment fund industry regarding the activation of the "liquidity management tool (lmt)" module. this follows the implementation of additional liquidity management requirements introduced by the law of 3 march 2026, which transposes directive (eu) 2024/927.

key points include:

1. lmt activation module launch: effective from 16 april 2026, luxembourg-domiciled ucits, their management companies, and luxembourg-authorised aifms managing open-ended aifs were required to begin notifying the cssf of the activation or deactivation of:

• • suspensions of subscriptions, repurchases, and redemptions.
  • liquidity management tools (lmts) as specified in the relevant laws, when not in the ordinary course of business.
  • side pockets, with prior notification to the cssf within a reasonable timeframe.

2. scope: the requirements also apply to open-ended funds under part ii of the 2010 law, specialised investment funds, and investment companies in risk capital, provided they do not qualify as aifs or are not managed by luxembourg-authorised aifms.
3. notification process: notifications must be submitted via the cssf's edesk platform. information provided is shared with relevant authorities, including esma and, where applicable, the esrb.

for further details, the cssf’s communiqué can be found here.

our previous blog post on this matter, referring to the cssf's communiqué of 18 march 2026, is available here.

cssf circular 26/910 on esma liquidity management tools guidelines

on 15 april 2026, the cssf published circular cssf 26/910, informing that it applies the esma guidelines on lmts of ucits and open-ended aifs (esma34-671404336-1364), published on 12 march 2026, and is integrating the guidelines into its administrative practice and regulatory approach with a view to promoting supervisory convergence at european level.

scope

the circular applies to luxembourg management companies under chapter 15 and article 125-2 of chapter 16 of the 2010 law, luxembourg branches of ifms under chapter 17, ucits investment companies which have not designated a management company, aifms authorised under chapter 2 of the 2013 law, and internally managed aifs.

summary of the guidelines

the guidelines are divided into four main sections addressing:

1. general principles
2. quantitative-based lmts (suspension of subscriptions, repurchases and redemptions; redemption gates; extension of notice periods; and redemptions in kind)
3. anti-dilution tools (adts) (redemption fees, swing pricing, dual pricing, and anti-dilution levy)
4. side pockets.

the general principles emphasise that the primary responsibility for liquidity risk management, as well as for the selection, calibration, activation and deactivation of lmts, remains with the investment fund manager (ifm). ifms should give due consideration that the selected lmts will allow effective management of the fund’s liquidity risk under both normal and stressed market conditions and that the selection is as comprehensive as possible to address different circumstances.

in the selection of lmts, the guidelines provide that ifms should consider the merit of selecting at least one quantitative-based lmt and at least one adt, while also considering selecting one lmt to use under normal market conditions and one lmt to be used under stressed market conditions. ifms may choose to select more than the mandatory two lmts.

ifms should be able to demonstrate at the request of the cssf that the calibration and activation of the selected lmts are in the best interest of all investors and are appropriate and effective considering the market conditions and relevant characteristics of the fund.

entry into force

the circular with the guidelines applied as from 16 april 2026. by way of derogation, for funds existing before the date of application, the guidelines apply twelve months from that date (i.e. 16 april 2027).

for more details, the cssf’s circular 26/910 can be accessed here

the british virgin islands financial services commission (bvi fsc) successfully concluded its 2026 "meet the regulator" (mtr) forum series, fostering robust dialogue and engagement across key global markets. the series began in the bvi on 17 february 2026, with over 200 stakeholders from various financial sectors, including trust services, insurance, and virtual assets.

subsequent forums were held in panama, london, and hong kong, attracting significant participation. notably, the panama forum featured the announcement of a new latam representative office, set to open by the end of 2026. the london session gathered over 50 stakeholders from the uk and europe, while the hong kong forum concluded the series with over 100 attendees.

the mtr forum series highlighted key regulatory updates and initiatives. a major focus was on the implementation of the beneficial ownership (bo) regime, which aims to enhance transparency and align with international aml/cft standards. the bvi fsc reported significant progress, with over 86 per cent of companies and 63 per cent of limited partnerships filing bo information as of february 2026.

additionally, the fsc emphasised its commitment to risk-based supervision, enhanced compliance inspections, and the integration of new technologies like the virtual integrated registry regulatory general information network (virrgin), reflecting its role in maintaining a transparent regulatory framework.

bvi fsc’s press release 5 of 2026 can be found here and the presentation slides detailing areas of discussion here

in the recent decision of the trustees v ab and ors (re the d trust) the cayman grand court granted relief under section 64a of the trusts act (2021 revision) (the act) to set aside a deed of exclusion (deed of exclusion) executed by previous trustees in reliance on erroneous uk tax advice.

the decision adds to the growing body of authority on the statutory hastings-bass jurisdiction in the cayman islands, and includes guidance on the good faith requirement, standing by successor trustees, notification to tax authorities, and whether section 64a applications should be dealt with on the papers.

background

the d trust is a cayman islands discretionary trust with a broad class of beneficiaries. it was originally governed by new zealand law, but its proper law and forum were changed to the cayman islands in november 2019.

the trust formed part of a wider estate planning structure. when the d trust was settled in 2011, the settlor transferred non-uk situs property into it. a connected trust (the h trust, governed by guernsey law) borrowed those funds to purchase a residential property in england. the arrangement was designed to ensure the loan owed by the h trust to the d trust remained “excluded property” for uk inheritance tax (iht) purposes, shielding the value of the uk property from any charge on the settlor’s death.

in early 2017, proposed changes to the iht regime threatened to undermine that planning. the previous trustees instructed a specialist london firm, which recommended (among other options) executing a deed of exclusion to declare the settlor an “excluded person” under the trust deed. the deed of exclusion was executed on 30 march 2017, shortly before the new rules took effect on 6 april 2017.

in january 2025, a different london firm reviewed the arrangements and concluded that the original advice had been incomplete and in places erroneous. it had failed to consider: (i) the risk that section 102 of the uk finance act 1986 would treat the settlor as having incurred the h trust’s liabilities; (ii) whether the charge over the uk property was an “incumbrance created by a disposition made by [the settlor]” within section 103 of that act; and (iii) how the general anti-abuse rule might apply to the 2017 arrangements. the d trust faced the very iht exposure the deed of exclusion was supposed to prevent.

the issues

the current trustee applied by originating summons for a declaration that the deed of exclusion was void ab initio under section 64a of the act. the application was dealt with on the papers. the principal issues were: (i) whether the current trustee had standing; (ii) whether the statutory conditions in section 64a(2) were satisfied; (iii) the scope of the court’s residual discretion (including the good faith requirement and notification of hmrc); and (iv) whether it was appropriate to determine a section 64a application without an oral hearing.

the judgment

the applicable law

justice segal adopted the analysis of justice kawaley in maples trustee services v ab (in re settlements), describing it as “a clear and authoritative summary of the applicable law”. justice kawaley had identified three strands of the statutory language:

1. the power must be a fiduciary power;
2. but for the mistake the power would not have been exercised in the same way, at the same time, or at all; and
3. the person exercising the power must have failed to take into account relevant considerations, or taken into account irrelevant ones.

justice segal adopted justice kawaley’s tentative view (that section 64a contains an implied good faith requirement), reasoning that such a qualification is necessary to keep the jurisdiction within proper bounds and avoid what lord neuberger extrajudicially described as giving trustees a “get out of jail free card”.

he disagreed, however, with justice kawaley’s observation that the circumstances required for section 64a relief are “likely in many (if not most) cases to be indistinguishable (legal labelling apart) from having to establish a breach of the fiduciary duty of due deliberation in conceptual terms.” instead, justice segal considered this “unwise and potentially misleading” because section 64a(4) makes clear there is no need to allege or prove a breach of trust.

erroneous tax advice

justice segal addressed the position where trustees have relied in good faith on wrong tax advice. although the trustees did “take into account” tax issues, the authorities treat them as having failed to consider the relevant matters because they did not take into account the true consequences of their action. as lloyd lj put it in sieff v fox: if the trustees had received correct advice, they would not have acted as they did.

standing

justice segal confirmed that a current trustee has standing to apply under section 64a in respect of a fiduciary power exercised by its predecessors. section 64a(5) permits an application by “any trustee,” which must include a successor trustee. there was no need to join the previous trustees.

decision on the merits

the conditions in section 64a(2)(a) and (b) were satisfied. the previous trustees had exercised the power of exclusion without the benefit of complete advice and would not have done so had they been properly informed. the court was satisfied that both the previous trustees and the current trustee acted in good faith.

notification of hmrc

the trustee did not notify hmrc on the basis that the relief would not give rise to any live tax issues, since any iht charge would arise only on the settlor’s death. justice segal accepted this but left open the question whether notice should be given as a matter of course in future cases.

paper applications

justice segal noted that other section 64a applications have been dealt with on the papers (including in re settlements) and acknowledged that the practice saves costs. he observed, however, that the presiding judge will benefit from oral explanation and suspected applications may be dealt with “more expeditiously” at a hearing. he cautioned that there should be no suggestion these applications will be granted “without careful scrutiny and as a rubber-stamping exercise” and invited attorneys to pause for thought before applying on the papers.

key takeaways

section 64a does not require proof of breach of trust and its jurisdiction should not be treated as importing a requirement to establish facts analogous to a breach of fiduciary duty. the statutory conditions are self-contained.

good faith is an implied requirement for relief under section 64a, and evidence addressing the applicant’s good faith should be a standard feature of any section 64a application.

erroneous tax advice can ground relief even where the trustees “considered” tax. the relevant question is whether the trustees took into account the correct position, not merely whether they turned their minds to tax at all. trustees who follow professional advice in good faith remain protected, but the quality of that advice is what determines whether the statutory conditions are met.

a current trustee may apply under section 64a to set aside the exercise of a fiduciary power by its predecessors. this is a practical reading of the statute and confirms that changes in trusteeship do not deprive beneficiaries of a remedy.

it is also worth noting that the court may consider an oral hearing to be of more assistance than seeking section 64a relief ‘on the papers’, particularly where the factual background is detailed or the legal points are not straightforward.

the court has also left open the question of whether notice should be given to a tax authority, in this case because no tax liability existed. this point may be decided in future applications to the court.

on 13 march 2026, the cyprus securities and exchange commission (cysec) issued circular 759, to inform relevant entities about the adoption of the european securities and markets authority’s guidelines on outsourcing to cloud service providers (the esma guidelines). this replaces circular 457 from july 2021.

key points include:

• scope revision: the esma guidelines now exclude financial entities covered under the digital operational resilience act (dora) regulation. they focus on depositaries of alternative investment funds (aifs) and undertakings for collective investment in transferable securities (ucits) not subject to dora.
• purpose: the esma guidelines aim to ensure consistent supervisory practices and uniform application of requirements for cloud outsourcing. they address risks and challenges in areas like outsourcing decisions, provider selection, activity monitoring, and exit strategies.

this update ensures the esma guidelines remain relevant and applicable to entities outside dora's scope without altering their content or requirements.

cysec’s circular 759 can be accessed here

on 6 march 2026, luxembourg's commission de surveillance du secteur financier (cssf) issued updates regarding the anti-money laundering and countering the financing of terrorism (aml/cft) data collection exercises for 2026. these updates aim to streamline processes and align with european standards.

on 16 march 2026, the cssf issued a further circular letter confirming that the final relevant documents for the aml/cft standardised data collection have now been made available by amla and can be accessed via edesk. the circular letter is addressed to credit institutions, investment firms, investment fund managers (including registered aifms, luxembourg branches of investment fund managers, siag, fiaag and investment funds which did not designate an investment fund manager), payment institutions and electronic money institutions, virtual asset service providers, crypto asset service providers, and central securities depositories incorporated under luxembourg law. it also applies to all luxembourg branches of the above-listed entities having their registered office in an eu country or a third country.

key highlights

1. aml/cft data collection update

the launch of the 2026 aml/cft standardised data collection campaign was initially delayed due to ongoing revisions by the european authority for anti-money laundering (amla). however, the cssf has since confirmed that the final documents have been made available by amla. for additional information and frequently asked questions, the cssf has directed entities to a recorded webinar held by amla and the corresponding slides.

2. adoption of amla templates

the cssf will use amla-developed templates for data collection, replacing its usual annual questionnaire for most supervised entities. this approach ensures consistency and reduces the reporting burden.

3. revised submission deadlines

for entities included in the amla data calibration sample, the deadline was updated to 22 april 2026.

for entities not included in the amla data calibration sample, the deadline is 22 may 2026.

specialised professionals will continue using cssf’s standard questionnaire.

4. submission requirements

the questionnaire must be submitted via the cssf edesk platform by the compliance officer in charge of compliance with the professional obligations (the rc) or the person responsible for compliance with the professional obligations (the rr). the completion of the questionnaire may be assigned within the edesk platform to another employee of the entity or a third party; however, the ultimate responsibility for the adequate completion of the questionnaire shall remain with the rc or the rr. this implies that the relevant person and the potential delegate hold an edesk account, which requires a luxtrust authentication.

5. entity-specific requirements

selected entities are participating in amla's calibration exercise, focussing on ml/tf risk assessments. non-selected entities must report ml/tf risks using amla templates.

these measures reflect the cssf's alignment with eu aml/cft methodologies while ensuring effective risk management and compliance. for more information, the cssf's publication and the circular letter can be found

for more information the cssf’s publication can be found here and here

harneys advised on two spac ipos that closed less than five days apart. harneys advised rre ventures acquisition corp. (rre) on the closing of its us$250 million initial public offering, which closed on 1 may 2026, and advised quantum leap acquisition corp. (quantum leap) on its us$200 million initial public offering, which closed on 4 may. both spacs are incorporated in the cayman islands, and harneys acted as cayman island counsel to the issuers.

rre offered 25,000,000 units at a price of us$10.00 per unit. each unit consists of one class a ordinary share of the company and one-third of one redeemable warrant. each whole warrant entitles the holder thereof to purchase one class a ordinary share of the company at a price of us$11.50 per share, subject to adjustment. once the securities comprising the units begin separate trading, the class a ordinary shares and warrants are expected to be listed on the nasdaq under the symbols “rrev” and “rrevw,” respectively.

quantum leap offered 20,000,000 units at an offering price of us$10.00 per unit. the units began trading under the ticker symbol "qlepu" on the new york stock exchange (nyse) on 1 may 2026. each unit consists of one class a ordinary share and one redeemable warrant. each whole warrant entitles the holder thereof to purchase one class a ordinary share of the company at a price of us$11.50 per share, subject to certain adjustments. once the securities comprising the units begin separate trading, the ordinary shares and the warrants are expected to be traded on nyse under the symbols "qlep" and "qlepw," respectively.

harneys acted on instructions from latham and watkins on rre and from sichenzia ross ference carmel llp on quantum leap.

global head of corporate george weston commented: “2026 has picked up where 2025 left off with a steady deal flow for spac ipos, and our ability to execute two deals in this short space of time demonstrates how our outstanding team continues to improve market share. we congratulate the teams at rre and quantum leap on their successful closings, and we look forward to working with them both on the next stages of their development”.

the corporate team at harneys has a leading equity capital markets practice with substantial experience in all aspects of capital raising by offshore companies, including ipos and secondary offerings, rights issues, equity linked securities, including convertible and exchangeable bonds, spacs, and business combinations, as well as private placements, take-privates, takeovers, and spin-offs. the firm’s ecm expertise lies in advising entities listed or listing on all major stock exchanges, including the new york stock exchange, nasdaq, the london stock exchange, aim, the hong kong stock exchange, the shanghai stock exchange, and the luxembourg stock exchange.

in the recent decision of lim yew cheng v guanghua ss holdings limited, the bvi court of appeal dismissed an appeal against a first instance refusal to stay bvi recognition and enforcement proceedings pending the outcome of litigation in hong kong.

the judgment is a useful restatement of the demanding test that an applicant must satisfy where it asks the court to put its own proceedings on hold to await the resolution of foreign litigation.

background

in april 2022, guanghua ss holdings limited (guanghua) obtained a hong kong high court judgment arising out of two us$80 million loan facilities personally guaranteed by mr lim and his son, lin minghan. in june 2024, guanghua commenced recognition and enforcement proceedings in the bvi, which mr lim sought to stay, first relying on pending separate hong kong proceedings (the hong kong proceedings) and, subsequently a further claim issued in hong kong and derivative proceedings brought in the bvi. mithani j (ag.) refused both the stay and a related adjournment application, and mr lim appealed.

the threshold for a case management stay

the central question on appeal was whether mithani j, when considering whether it was appropriate to grant stay of the enforcement proceedings on case management grounds, had applied the wrong test by failing to follow athena capital fund sicav-fis sca v secretariat of state for the holy see. ward ja accepted that the single test is whether, in the particular circumstances, it is in the interests of justice to grant a stay. however, drawing on the analysis of males lj in athena capital, the court emphasised that the presence of “rare and compelling circumstances” remains a highly relevant factor where the stay sought is to await foreign proceedings.

the court held that, while the “rare and compelling circumstances” formulation is not itself the legal test, “it is only in rare and compelling circumstances that it will be in the interests of justice to grant a stay on case management grounds to await the outcome of foreign proceedings”, describing this as a ”high threshold” and noting that the usual function of the court is to decide cases, not decline to do so.

the appeal

the court observed that while the first instance judge did not expressly articulate the test he applied, the factors he relied upon were “plainly relevant” to the interests of justice question under the applicable test. these included the facts that (a) the hong kong judgment had not been appealed, (b) no application had been made to stay the hong kong judgment in hong kong, which would have been an obvious and effective way to bring a halt to the bvi enforcement proceedings, and (c) the relief sought in the hong kong proceedings did not seek to set aside the hong kong judgment. in those circumstances, there was no reason to regard the hong kong judgment as not final and no reason why the judge could not proceed with the recognition and enforcement claim.

the appellant, mr lim, also sought to make much of the judge’s statement that he had not considered his late evidence in great detail. the court noted, however, that the judge had been deluged at the eleventh hour with over 100 pages of evidence and more than 2,000 pages of exhibits, comprising allegations yet to be proven at trial in support of the appellant’s stay application. the court found nothing to suggest that the judge had failed to appreciate the appellant’s case for a stay; to the contrary, the judge’s recital of the background showed that he was well acquainted with the case.

accordingly, nothing before the judge amounted to “rare and compelling circumstances”, and his decision sat comfortably within the generous ambit of his case management discretion.

the decision is a clear signal that bvi courts will not lightly stay recognition and enforcement of a final foreign judgment to await collateral foreign proceedings, particularly where no stay has been sought in the originating jurisdiction and the foreign challenge does not directly seek to set the judgment aside. litigants seeking such relief must come armed with genuinely exceptional circumstances and substantive evidence.

representation

harney westwood & riegels (jayesh chatlani, james petkovic, eunice lau, mark wells, and isobel mcnaught) act on behalf of guanghua in the bvi proceedings, alongside king & wood who represent the company in hong kong. before the court of appeal, guanghua was represented by alex barden kc of fountain court chambers, together with mark wells of harneys.

further to our blog post on eu russia sanctions, please find below an updated table of sanctions.

on 23 april 2026, the council of the european union formally adopted its 20th package of restrictive measures against the russian federation in response to russia's ongoing war of aggression against ukraine. it features 120 additional individual listings, the largest number in two years, and multi-layered economic sanctions

the measures specifically target strategic sectors underpinning russia's military and economic resilience, including the energy sector, financial services (notably with an expansion on crypto-asset restrictions), international trade networks, and the military-industrial complex. these sanctions aim to further isolate russia from global markets, restrict access to vital resources and revenue streams, and close critical compliance gaps exploited via third countries. these regulations will require global compliance frameworks to evolve in several critical areas.

energy revenues and the shadow fleet

the new measures include 36 designations across the russian energy sector, covering everything from oil extraction to transport.

key updates include:

• shadow fleet bans: an additional 46 vessels face port access and service bans, bringing the total restricted shadow fleet to 632 vessels.
• lng and port restrictions: the package bans maintenance services for russian lng tankers and ice-breakers. it also blocks transactions with specific ports used to bypass the oil price cap, including murmansk, tuapse, and the karimun oil terminal in indonesia.
• maritime services: the framework lays the groundwork for a future ban on maritime services for russian crude oil and petroleum products.

financial services and digital assets

the eu has extended its transaction ban to 20 russian banks, bringing the total number of excluded russian financial institutions to 70.

furthermore, the measures impose transaction bans on four financial institutions in third countries, including kyrgyzstan, laos, and azerbaijan, identified as facilitating the circumvention of eu sanctions or supporting the russian system for transfer of financial messages. given russia's increasing reliance on cryptocurrencies for international transactions the package implements a total sectoral ban on exchanges and transactions with any russian crypto asset service provider, as well as decentralised platforms enabling crypto trading.

the package enforces new crypto measures including:

• a total sectoral ban on crypto-asset service providers and exchanges established in russia.
• designation of a kyrgyz entity operating a platform used to trade the government-backed stablecoin a7a5 (previously prohibited under the 19th package), and a prohibition on the rubx digital currency pegged to the rouble.
• a complete ban on eu support for the development of the russian digital rouble.

trade limits and the military-industrial complex

the eu has designated 58 companies and individuals involved in producing military goods, such as drones. additionally, 16 entities based in third countries including china, the uae, uzbekistan, kazakhstan and belarus now face restrictions for supplying dual-use goods. new export bans to russia on goods, from rubber to tractors, worth over eur 365 million.

furthermore, a new restriction prohibits the provision of cybersecurity services to russia.

unprecedented anti-circumvention measures

for the first time, the eu activated its dedicated anti-circumvention tool. authorities applied this mechanism directly against kyrgyzstan to stop the re-export of critical telecommunications equipment and computer numerical control machines. the package also lists 60 entities as providing direct or indirect support to russia's military industrial complex or engaged in sanctions circumvention.

accountability and legal protections

beyond economic controls, the package targets severe human rights and legal violations. the eu added 120 new individual and entity listings across multiple categories. among these, the package specifically targets individuals enabling the forced transfer of ukrainian children, the looting of cultural heritage, and the spread of state propaganda.

these sanctions are complemented by new legal safeguards bolstering the protection of eu companies from illegitimate expropriation, abusive litigation, and intellectual property infringements brought before russian courts or enforced in third countries. the measures empower member state courts to impose fines on russian entities that initiate abusive lawsuits and enable eu businesses to seek damages arising from enforcement of such judgments in jurisdictions outside russia.

belarus

certain provisions of the package have been mirrored in the belarus sanctions regime, including trade, finance, services, and legal protection measures. for the first time, a chinese state-owned entity has been designated under the belarus sanctions regime for its role in the production of belarusian military goods. the belarus sanctions regime has been extended by the eu council until 28 february 2027.

the european council’s press release can be found here and the european commission’s press release here

the organisation for economic co-operation and development (oecd) released its 2025 update to the model tax convention on income and on capital on 18 november 2025, introducing significant changes that will reshape the international tax landscape. these updates provide critical guidance on the taxation of cross-border remote work and income from natural resource extraction, aiming to offer greater certainty for governments and businesses alike.

for multinational corporations, tax professionals, and policymakers, understanding these changes is paramount. this post breaks down the key updates, explores their implications, and offers actionable recommendations for navigating this new era of international tax policy.

key updates in the 2025 oecd model tax convention

the 2025 update introduces several pivotal changes designed to modernise international tax rules. the core amendments address four main areas: the rise of remote work, the taxation of natural resources, dispute resolution, and transfer pricing.

1. taxation of cross-border remote work

the global shift towards remote work arrangements has created significant uncertainty regarding tax obligations. the new guidance provides much-needed clarity on when a home office or other remote workspace constitutes a "permanent establishment" (pe) for a business, thereby creating a taxable presence in another country.

• the 50 per cent threshold as safe harbour: a central feature is a new benchmark specifying that, in general, a home office will not be considered a place of business for an enterprise if the employee works from there for less than 50 per cent of their total working time in a 12-month period. this introduces a practical safe harbour for businesses monitoring remote work arrangements. if this threshold is exceeded, whether the enterprise has a place of business at such location will be determined by the facts and circumstances, including consideration of whether there is a commercial reason for the activities.
• commercial reason test: the update introduces the concept of a "commercial reason" for an individual’s presence in a specific country. if an employee’s location facilitates key business activities, such as direct client engagement, management of local suppliers, or access to business-critical resources, this increases the likelihood of a taxable presence. in contrast, remote work solely for employee convenience, cost-saving, or retention generally does not create a pe.
• clarity for employers and employees: this framework enables organisations and staff to better manage tax risk and minimise the possibility of unexpected tax liabilities or double taxation.

2. a new framework for natural resource taxation

for decades, allocating taxing rights over income from natural resources like oil, gas, and minerals has been a complex issue, particularly for developing nations. the 2025 update introduces a new alternative provision that strengthens the taxing rights of the country where the resources are located (the source country).

• reinforcing source-country rights: the new provision ensures that income from activities carried on in connection with the extraction and exploitation of extractable natural resources is taxed where those activities occur. this measure is especially significant for resource-endowed developing economies, helping them secure a fairer share of revenue from their finite resources.
• lower “permanent establishment” threshold: the alternative provision establishes a lower threshold for creating a pe for extractive industries. non-resident enterprises will be deemed to have a taxable presence after operating in a country for a bilaterally agreed period, which is often shorter than the standard pe threshold.
• gains from asset disposal: the update also clarifies rules for taxing gains from the sale of assets related to extractive activities, including shares in companies whose value is derived from natural resources.

3. enhancing dispute resolution and tax certainty

tax disputes between countries can be lengthy and costly. the 2025 update strengthens the mutual agreement procedure (map) under article 25 to improve the efficiency and effectiveness of dispute resolution.

4. refining transfer pricing and financial transactions

transfer pricing remains a major focus for tax authorities. the updates to article 9 provide clearer guidance on financial transactions.

• interest deductibility: the commentary clarifies how domestic interest deduction limitation rules, such as those recommended under the beps action 4 report, interact with tax treaty provisions. this helps prevent companies from using excessive interest payments to erode their taxable base.
• debt vs. equity: the update addresses the re-characterisation of debt as equity, giving tax administrations a stronger basis for challenging financing arrangements that are not commercially sound. this ensures that the allocation of profits reflects the true economic substance of the transactions.

5. exchange of information

the 2025 update includes important changes regarding the exchange of information between tax authorities.

• use of exchanged information: information received through an exchange can be used for tax matters concerning persons other than those in respect of which the information was initially received.
• taxpayer access and disclosure: the update reflects agreed interpretative guidance on taxpayer access to exchanged information and the disclosure of reflective non-taxpayer specific information about or generated on the basis of exchanged information. such reflective information may be disclosed to third parties if it does not reveal taxpayer's identity

implications for stakeholders

these updates carry significant implications for governments, multinational enterprises, and developing countries.

for governments:
the new rules offer enhanced tools to protect their tax base and ensure fair taxation of cross-border activities. the guidance on remote work provides a modern framework, while the provisions on natural resources empower source countries to claim a greater share of revenue.

for businesses:
while the updates provide welcome clarity, they also introduce new compliance challenges. companies must review their remote work policies, transfer pricing strategies, and operations in the extractive sector to align with the new standards. proactive planning will be essential to manage tax risks and avoid disputes.

for developing economies:
the focus on source taxation for natural resources is a major victory. by adopting these new provisions in their tax treaties, developing nations can significantly bolster their revenue streams from the extractive industries, providing vital funds for public services and infrastructure.

recommendations for a smooth transition

to effectively adapt to the 2025 oecd model tax convention update, consider the following oecd-supported actions:

• review and update cross-border employment policies: businesses should carefully assess existing remote work arrangements and cross-border employment contracts to ensure alignment with the new permanent establishment thresholds and the "commercial reason" test introduced by the oecd.
• analyse extractive industry operations: for companies involved in the extraction of natural resources, it is essential to evaluate projects and service agreements under the revised, lower permanent establishment thresholds, ensuring activities are structured in compliance with the updated guidance. companies should note that the provision covers both offshore and onshore activities
• incorporate updates into bilateral tax treaties: governments are encouraged by the oecd to adopt the revised model tax convention provisions in their bilateral tax treaties, enhancing consistency and legal certainty in cross-border tax matters.

the 2025 oecd model tax convention update is a landmark development in international taxation. by providing clarity on modern economic challenges, it sets a new standard for fairness and cooperation. as a full-service offshore law firm, we are uniquely positioned to help you navigate these changes and ensure your operations remain compliant and strategically optimised.

for more information, the oecds press release can be found here and the publications here and here.

harneys acted as cayman islands counsel to the buyer consortium, which includes trustar capital, in connection with the acquisition and take-private of smart share global limited (nasdaq: em), known commercially as energy monster, a leading mobile device charging services provider in china, for approximately us$327 million.

the transaction was structured as a merger between smart share global limited and mobile charging merger limited, a wholly owned subsidiary of mobile charging group holdings limited. following completion of the merger, smart share global limited ceased to be a publicly listed company on the nasdaq.

the take‑private transaction was led by counsel denise chan and legal manager jane chan, with support from corporate partner raymond ng, head of litigation (hong kong) paula kay and associate irene lai also advised the consortium. davis polk and weil gotshal acted as us legal counsel to the consortium, while skadden, arps, slate, meagher & flom llp acted as counsel to the special committee of smart share global limited.

paula commented: "we were delighted to be instructed by the buyer consortium on this transaction. the possibility of shareholders dissenting following a take-private transaction, and the potential impact on the transaction or the business cannot be ignored even during the transaction. being involved at an early stage allows the consortium to be fully informed, minimise risk, and be strategically positioned if such a risk eventuates, supporting a smooth path to completion.”

raymond commented: “we are delighted to have advised the buyer consortium on this significant going-private transaction. the matter required close collaboration between our corporate and dispute resolution teams, demonstrating harneys’ ability to deliver comprehensive offshore legal services across practice areas. we are proud to have supported our client through to a successful completion.”

harneys has world-class expertise in advising on take-private transactions involving us-listed, cayman islands-incorporated companies with operations in the people's republic of china (prc). the firm has acted in nearly half of all fair value proceedings filed under section 238 of the cayman islands companies act since 2013. this unrivalled experience extends to guiding prc corporates through the highly resource-intensive section 238 process, including managing substantive discovery, navigating prc data protection law, and strategically positioning clients against dissenting shareholders and value arbitrage investors. harneys has achieved landmark wins in section 238 proceedings, including establishing the shareholders' meeting date as the valuation date, securing privy council authority that a minority discount applies, and dispelling the theory that us-listed prc corporates are systematically undervalued on the us markets.

on 13 april 2026, the bermuda monetary authority (bma) announced the phased introduction of a new regulatory filing platform, submit, which will replace the current integra® system for submissions under the investment funds act 2006. submit is designed to enhance user experience with a more intuitive and streamlined process, while also improving supervisory efficiency.

although the specific modules for the initial release are yet to be confirmed, the bma aims to provide stakeholders with early notice to prepare for the transition. detailed guidance, timelines, and transition arrangements will be shared in due course to ensure a smooth migration.

the notice can be found here.

in the recent decision of state house trust v friend media technology systems the jersey royal court allowed an appeal against the master’s refusal to exclude an opinion from english counsel filed in support of a summary judgment application.

commissioner sir michael birt (who is also a justice of appeal of the cayman islands court of appeal) held that there was no requirement to obtain the leave of the court to obtain evidence from a single expert witness, but that in this instance the opinion was inadmissible, and used the occasion to call for the introduction of a rule equivalent to english cpr 35.4. his analysis of the absence of a requirement for leave raises questions that cayman islands attorneys will recognise, because it is not clear that the position under the grand court rules is materially different.

background

the proceedings arise out of a shareholder dispute in which three defendants applied for summary judgment and filed an opinion from english counsel (the opinion) in support. the plaintiffs sought to exclude the opinion – the master refused, and the plaintiffs appealed.

the judgment

commissioner sir michael birt, hearing the appeal afresh, addressed three issues:

1. whether leave was required;
2. whether summary judgment must be decided on admissible evidence; and
3. whether the opinion was admissible.

he answered yes to the second and no to the first and third issues. it is the first issue – the requirement for leave – that has the most significance for the cayman islands.

the plaintiffs argued that royal court rule 6/20(2)(d), which allows the court to “order that not more than a specified number of expert witnesses may be called”, read with practice direction 17/09, created a leave requirement. the commissioner rejected that submission. the rule merely empowers the court to limit the number of experts; it does not require leave. the wording is similar to, and commissioner birt decided has the same meaning as, the former english supreme court rules order 38, rule 4, which the english court of appeal in sullivan v west yorkshire passenger transport executive held gives jurisdiction only to limit numbers, not to exclude expert evidence entirely. the absence of language equivalent to the english cpr 35.4(1), which expressly requires leave, confirmed the position.

commissioner birt added that he had not reached the conclusion on leave with “any great enthusiasm”. he recommended the introduction of a provision equivalent to cpr 35.4, which would impose a simple requirement to obtain the court’s leave to submit expert evidence, and this would allow the court to consider admissibility and case management at an early stage.

the cayman position

gcr o38, r4 is the cayman analogue, in materially similar terms to jersey’s rcr 6/20(2)(d): it empowers the court to limit expert numbers rather than imposing a leave requirement. on a strict reading of the gcr, no express leave requirement appears to exist. o38, r36(1) restricts expert evidence unless one of four conditions is satisfied: (i) leave of the court; (ii) agreement of all parties; (iii) an application for a disclosure direction under r37 or r41; or (iv) compliance with automatic directions under o25, r8(1)(b). the third and fourth routes are procedural steps concerning the form and timing of disclosure; they are not applications for permission to call an expert. the party-agreement route is, in particular, difficult to reconcile with a blanket leave requirement.

fsd guide b5.1(a) provides that “[a]ny application for leave to call an expert witness or to serve an expert’s report should be made at a case management conference or on a summons for directions”. the use of “any” rather than “an” is conditional: it addresses what should happen if such an application is made, not that one must be made. the guide also uses “should” rather than “must”, and as a practice guide issued under the inherent jurisdiction of the court (not a statutory instrument or rule of court made under the grand court act), it cannot create a jurisdictional requirement that the rules themselves do not impose. justice parker stated in re qunar cayman islands at [47] that “[t]he court in its discretion may give leave for a party to be allowed to call expert evidence” and that “[t]he court may also limit expert evidence by o38, r4”. that language is permissive: it describes a power the court possesses, not a mandatory step.

other provisions of the fsd guide can be read both ways. b5.3(a)(iv) provides that the expert's report “must be limited to matters relevant to the issue or issues in the list of issues to which the relevant expert evidence relates and for which leave to call such expert evidence has been given by the court”. that language assumes leave has been granted. but the standard pre-trial directions at b4.1(6) offer two alternative formulations: (i) where parties “are to be at liberty to call expert witnesses at the trial” (with no apparent leave required), and (ii) where parties “are to be at liberty to apply to call” expert witnesses, with a specified deadline for the application. the fact that the fsd guide presents these as alternatives suggests the court has discretion to impose a leave requirement as a case management direction on a case-by-case basis, but that the requirement is not inherent in the rules.

the common assumption that leave is required in the cayman islands therefore appears to rest on inference and established practice rather than on positive law. commissioner birt’s analysis of the identically worded jersey provision may apply equally to gcr o38, r4. whether the grand court would reach the same conclusion remains an open question, but the textual case is strong.

there is, however, a realistic prospect that the grand court would not follow that analysis. a leave requirement would allow the court to manage expert evidence from the outset, controlling cost and relevance before reports are commissioned and served. a court minded to preserve that control might read o38, r36(1) purposively, treating the four conditions as aspects of a general restriction that is only lifted with court approval, rather than as true alternatives to leave. whether the grand court would take that approach, or whether the case against a leave requirement would prevail, remains an open question.

key takeaways

the leave question in cayman may be open

in jersey, commissioner birt has confirmed that there is no leave requirement: the sole control is the admissibility test. in the cayman islands, the gcr contain no express leave requirement either. the common assumption that leave is required rests on fsd guide b5.1 and established practice rather than on the rules themselves. the grand court may, however, prefer a purposive reading that preserves case management control from the outset.

planning the evidential strategy early

whether or not the leave requirement is freestanding, proposed expert evidence faces scrutiny before trial: whether through leave, case management directions, or an admissibility challenge. attorneys in both jurisdictions should consider at an early stage whether each piece of evidence relied upon will survive that scrutiny, and plan accordingly.

on 19 march 2026, the cayman islands government published amendments to three key legislative acts to establish a clear regulatory framework for tokenised investment fund structures. these amendments were enacted through the mutual funds (amendment) act, 2026, the private funds (amendment) act, 2026, and the virtual asset (service providers) (amendment) act, 2026.

effective from 24 march 2026, these changes provide regulatory certainty for fund professionals and investors by confirming how tokenised investment fund structures should be considered. previously, the lack of explicit statutory provisions created ambiguity, particularly regarding the applicability of the virtual asset (service providers) act (vasp act), to digital tokens representing ownership interests in funds.

the mutual funds (amendment) act, 2026 introduces specific provisions to ensure that tokenised mutual funds are subject to the same regulatory oversight as traditional mutual funds. this amendment reduces the risk of a more onerous compliance burden by aligning tokenised fund structures with established compliance and reporting standards.

the private funds (amendment) act, 2026 extends regulatory requirements to tokenised private funds, ensuring that these innovative structures adhere to the same governance, operational, and transparency principles as conventional private funds. this amendment aims to safeguard investor interests while supporting the growth of tokenised fund offerings by providing certainty as to the compliance and regulatory requirements.

the virtual asset (service providers) (amendment) act, 2026 clarifies the scope of the virtual asset (service providers) act, explicitly confirming that the issuance of digital tokens representing ownership interests in funds is not considered to be an “issuance of virtual assets” or “virtual asset issuance”. this amendment resolves prior uncertainties and aligns the cayman islands’ regulatory framework with international standards for virtual assets.

together, these legislative updates aim to foster innovation while maintaining robust regulatory oversight.

for more information the industry advisory can be found here

on 30 march 2026, the british virgin islands financial services commission (bvi fsc) announced the launch of the legitimate interest (li) transaction functionality, effective 1 april 2026. registered agents are advised to adhere to the prescribed timelines and requirements for processing requests to inspect the beneficial ownership (bo) register.

the li framework enables third parties to request inspection of beneficial ownership registers maintained by the bvi registry, subject to a structured process with prescribed timelines.

key timelines:

• notice of objection: file within 5 days of receiving a request.
• application opposing disclosure: file within 5 days after the objection.
• intent to appeal: file within 3 days of the registrar’s decision.
• notice of appeal: file within 21 days of the intent.

if no objections are raised, the li transaction processing timeline is 12 days.

filing and notifications:

• agents must provide a dedicated email address for notifications to avoid delays.
• general filings include notices and appeals related to bo information disclosure.
• supporting documents must be in english (or translated) and submitted in pdf format.

extensions and compliance:

• filing links for bo, rom, and other registers are extended until 31 may 2026.
• local companies and npos must comply with bo and rom filing requirements to avoid penalties.

penalties:

• transitional penalties for non-compliance start at us$600 and increase to us$1,400 after six months.
• filing fees for bo registration after 31 march 2026, are us$125.

for further details, circular 11 of 2026 can be found here

on 10 april 2026, the jersey financial services commission (fsc) published revised appendix d2 of its aml/cft/cpf handbook. this appendix identifies countries and territories associated with higher risks of money laundering, terrorism financing, proliferation financing, and sanctions, based on reliable external sources such as the fatf, un, oecd, and others.

key changes:

• added to the list: kazakhstan, maldives, philippines, são tomé and príncipe, timor-leste.
• removed from the list: armenia, brunei, brazil, saint kitts and nevis.
• source updates: adjustments include additions and removals of specific countries across various risk sources.

implications for businesses:

• review and update internal policies, procedures, and customer relationships to align with these changes.
• exercise caution when relying on entities based in newly listed high-risk jurisdictions.
• engage with supervisors to address any concerns and implement additional risk mitigation measures if required.

for detailed amendments, refer to the industry update here and the amendments log

on 27 april 2026, the british virgin islands financial services commission (the bvi fsc) published an update setting out its 2026 compliance inspection programme, a clear signal of where supervisory attention will be focussed from march 2026 to february 2027. the programme explains how the bvi fsc will use inspections to assess risk, test controls, and drive higher standards across the bvi’s financial services sector.

the message for licensed entities is straightforward: expect more inspections, deeper testing of how your controls work in practice, and continued focus on aml/cft/cpf effectiveness, alongside prudential resilience where relevant.

a bigger inspection programme (and a sharper risk focus)

the bvi fsc’s compliance inspection unit will run a mix of thematic, focussed, follow-up, and full-scope inspections. building on 40 inspections in 2025, the bvi fsc expects to initially target 50 licensees in 2026, a 25 per cent increase.

the initial focus will be on higher-risk areas, particularly:

• trust and corporate service providers (tcsps)
• investment business (ib)
• virtual asset service providers (vasps)

all 50 inspections will include an aml/cft/cpf component. in addition:

• 17 of the 50 will undergo a full-scope aml/cft/cpf review, reflecting elevated risk.
• 18 inspections will include prudential assessments (for sectors with elevated operational/prudential risk), including banking, investment business, money services business, and financing business.

the bvi fsc has also flagged that 10 or more additional licensees may be added during the cycle if new or evolving risks emerge, particularly in light of insights from the revised tcsp annual return, which has helped identify additional elevated-risk areas.

who will the bvi fsc choose to inspect?

the bvi fsc will continue to apply a risk-based supervisory approach. in practical terms, that means inspection selection and intensity will be driven by the risk profile of the licensee and sector, informed by a broad set of considerations including:

• the licensee’s inherent ml/tf/pf and prudential risks
• compliance history, including outcomes from desk-based reviews and past inspections
• sector risk identified through jurisdictional risk assessments
• published typologies (including those affecting legal persons and legal arrangements)
• the bvi fsc’s risk-based approach to supervision framework (including inspection frequency expectations)
• concerns arising from ongoing monitoring and engagement, including post-inspection monitoring
• prior enforcement history and financial crime-related investigations involving relevant individuals
• the bvi fsc’s and the jurisdiction’s aml/cft/cpf policies and strategies (including the fsc’s 2025 to 2027 strategy and the jurisdictional 2024 to 2026 strategy)
• relevant reports from other competent authorities and law enforcement agencies

in short: inspections are not random, and prior issues, especially repeated weaknesses, are likely to elevate supervisory attention.

what inspectors will test in 2026: design and effectiveness

a key theme in the bvi fsc’s 2026 messaging is that it is not enough to have policies “on paper”.

the bvi fsc will assess both:

1. the design of internal controls and governance arrangements; and
2. their effectiveness in real operational conditions.

the bvi fsc highlights several core areas of assessment:

1) internal controls (aml/cft/cpf frameworks)

expect scrutiny of whether you have comprehensive aml/cft/cpf policies and procedures aligned with current legislative requirements and the amltf code, including whether controls are tailored to the size, nature, and complexity of the business. particular attention will be on:

• sanctions screening
• suspicious activity reporting mechanisms
• risk-based controls that actually operate as intended

2) internal audit and independent review

the bvi fsc will examine whether you run regular, sufficiently independent reviews of your frameworks, including whether:

• controls are tested for effectiveness
• deficiencies are identified promptly
• remedial actions are implemented and tracked through to completion
• senior management and the board provide meaningful oversight

3) staff training and competence

training is not treated as a “tick-box” exercise. the bvi fsc will look for:

• training tailored to staff roles and responsibilities
• adequate training records
• evidence that staff understand policies, procedures, and emerging risks

sector-specific vulnerabilities the bvi fsc is targeting

the fsc has identified vulnerabilities that it views as the most challenging to compliance, based on monitoring, supervisory engagement, desk-based reviews, and prior inspections.

trust and corporate service providers (tcsps)

the fsc notes onboarding frameworks are often strong for collecting cdd information, but highlights recurring gaps in:

• beneficial ownership verification, especially for legal persons and legal arrangements
• applying enhanced cdd where required
• consistency in risk classification frameworks

expect inspectors to test whether beneficial ownership checks are not only present, but reliable and consistently applied.

investment business (ib)

onboarding is generally described as sound, but the fsc wants improved capability to manage transactional complexity. inspections will focus on:

• transaction monitoring sophistication and the ability to detect and investigate atypical activity
• the strength of suspicious activity reporting frameworks
• sanctions compliance
• prudential soundness (including governance and capital adequacy)

banking

banking is described as systemically important, with sound onboarding practices. supervisory concerns span both financial crime and prudential risks, including:

• customer risk classification
• enhanced due diligence and transaction monitoring effectiveness
• credit risk management and asset classification
• weaknesses in loan origination and risk modelling that may affect accurate exposure classification and recognition of expected credit losses

financing business

given sector growth, the fsc will focus on prudential soundness, including:

• lending practices
• capital adequacy
• resilience to economic fluctuations and market stress

money services business

inspections will focus on operational risk controls, including:

• oversight mechanisms
• reconciliation processes
• safeguards for customer funds

virtual asset service providers (vasps)

vasps remain a major supervisory focus due to heightened ml/tf/pf risk. inspections will assess:

• travel rule implementation
• customer due diligence and risk classification
• enhanced due diligence in higher-risk scenarios
• transaction monitoring effectiveness
• investigation and reporting procedures
• sanctions compliance

insurance

for insurance, the fsc indicates the ml/tf/pf risk is lower, so desk-based reviews will be used, focussing on prudential resilience such as:

• capital adequacy
• liquidity management
• effectiveness of reinsurance arrangements

what “good” compliance will look like: implementation, not just documents

the bvi fsc’s expectations for 2026 center on demonstrating that controls are embedded and operate effectively. inspections will involve engagement with senior management, system demonstrations, and detailed testing of client files and transactions. where repeated deficiencies or non-compliance are identified, the fsc states it may take proportionate and dissuasive enforcement action.

the practical takeaway for licensees is that the fsc will be looking for evidence of day-to-day execution: consistent file quality, functioning monitoring and escalation, clear ownership of risk decisions, and governance that can demonstrate oversight rather than formality.

what happens after inspections?

at the end of the inspection cycle, the fsc intends to share aggregate information on findings and recommended actions with industry. this is intended to help the market understand common shortcomings and raise standards across the board.

how harneys can help

harneys supports bvi-regulated businesses in preparing for, managing and responding to bvi fsc compliance inspections. this can include conducting pre-inspection “health checks” of aml/cft/cpf frameworks and governance arrangements, helping remediate gaps (for example around beneficial ownership verification, edd triggers, sanctions screening, and sar processes) and assisting with inspection readiness materials such as policies, procedures, training records and file testing evidence.

we also advise on engagement with the bvi fsc during and after an inspection, including responses to findings and implementation of remediation plans, with the aim of demonstrating that controls are not only documented but operating effectively in practice.

bvi fsc’s press release can be found here

luxembourg stands as a premier global financial hub, a status reinforced by its extensive and sophisticated network of international investment agreements (iias). these legal instruments are fundamental to protecting and promoting foreign investment, creating a secure and predictable environment for international capital flows. understanding this framework is essential for investors, multinational corporations and legal advisors navigating the global economic landscape.

this guide explores the architecture of luxembourg's iias, drawing on insights from the un trade and development (unctad) investment policy hub. we will delve into the different types of agreements, their strategic importance, and how they align with global efforts to foster sustainable development.

understanding iias

what exactly are these agreements that form the backbone of international investment law? iias are treaties between countries designed to establish the terms and conditions for private investment by nationals and companies of one state in the territory of another. their primary purpose is to protect investments, ensure fair treatment and provide mechanisms for resolving disputes.

the unctad investment policy hub categorises iias into two main types:

• bilateral investment treaties (bits): these are agreements between two countries specifically focussed on promoting and protecting investments. the vast majority of iias fall into this category.
• treaties with investment provisions (tips): this is a broader category that includes various economic treaties, such as free trade agreements (ftas), that contain specific chapters or provisions dedicated to investment.

luxembourg has strategically utilised both bits and tips to build one of the most comprehensive and robust investment treaty networks in the world.

luxembourg's bits

luxembourg, often in partnership with belgium through the belgium-luxembourg economic union (bleu), has a long history of concluding bits. this network spans the globe, with agreements in place with countries across europe, asia, africa, and the americas.

key features of these bits typically include:

• fair and equitable treatment (fet): a core protection ensuring that foreign investors are not treated in a discriminatory or arbitrary manner.
• national treatment and most-favoured-nation (mfn) treatment: these clauses guarantee that foreign investors receive treatment no less favourable than that accorded to domestic investors or investors from any other third country.
• expropriation: provisions that set strict conditions for the expropriation of foreign investments, requiring it to be for a public purpose, non-discriminatory, and accompanied by prompt, adequate, and effective compensation.

dispute settlement: mechanisms for resolving disputes between investors and the host state, often through international arbitration forums like the international centre for settlement of investment disputes (icsid).

a review of luxembourg's bits reveals a dynamic approach. while older treaties from the 1980s and 1990s established the initial framework, newer agreements signed in the 21st century reflect evolving international standards. for example, the bleu-china bit signed in 2005 replaced an earlier 1984 agreement, demonstrating a commitment to modernising investment relationships. many of the intra-eu bits have since been terminated, following a coordinated approach within the european union.

tips and the eu context

as a founding member of the european union, luxembourg's investment policy is deeply intertwined with that of the eu. since the lisbon treaty transferred competence for foreign direct investment to the eu, many of luxembourg's newer investment agreements are tips negotiated at the eu level.

these agreements go beyond traditional investment protection, embedding investment chapters within comprehensive trade and partnership deals. this integrated approach allows for a more holistic framework that covers trade in goods and services, intellectual property, and sustainable development alongside investment.

prominent eu-level tips involving luxembourg include:

• eu-canada comprehensive economic and trade agreement (ceta): a landmark agreement that modernised investment protection standards, including provisions establishing an investment court system (ics), which will apply once the agreement is fully ratified by eu member states.
• eu-japan economic partnership agreement (epa): one of the largest free trade agreements ever concluded. the epa includes provisions on investment liberalisation and market access, while investment protection and dispute settlement were left for potential future negotiation.

eu-singapore and eu-vietnam ftas and ipas: these agreements separate trade and investment into distinct ftas and investment protection agreements (ipas), reflecting a new eu model.

these agreements highlight a shift towards treaties that not only protect investment but also actively promote sustainable practices, labour rights, and environmental protection.

unctad's vision for sustainable investment

the unctad work programme on international investment agreements plays a crucial role in shaping the future of global investment governance. its mission is to reform the iia regime to better align it with sustainable development and inclusive growth. are these goals reflected in modern treaties? increasingly, they are.

unctad's work is built on three pillars:

• research and policy analysis: monitoring trends and providing knowledge on how iias can support sustainable development goals.
• technical assistance: supporting policymakers and negotiators in formulating balanced investment policies and modernising their treaty networks.
• intergovernmental consensus-building: facilitating dialogue to share best practices and foster a coherent global approach to investment governance.

luxembourg's participation in modern tips, which incorporate clauses on sustainable development, aligns with this forward-looking agenda. these agreements increasingly include provisions that reaffirm the right of states to regulate in the public interest, encouraging responsible business conduct and ensuring that investment flows contribute positively to societal and environmental well-being.

your trusted partner in a complex world

navigating the intricate web of luxembourg's international investment agreements requires specialised expertise and deep insight. from legacy bits to the latest generation of eu-level tips, the legal landscape is constantly evolving.

our firm provides expert advice on luxembourg law, managing all transactional and contentious matters for a global client base. we are dedicated to delivering the highest level of service, helping you understand the protections, opportunities, and obligations that these critical agreements entail.

harneys is pleased to announce the relocation of its london office to larger premises in the broadgate tower, in the city of london.

harneys’ london office was established in 2002 and has grown into one of the city’s dominant offshore practices. the london team has leading expertise in british virgin islands, cayman islands, jersey, bermuda, and anguilla law. with decades of combined legal experience, the team offers a comprehensive range of legal services spanning banking and finance, corporate and commercial, digital assets and blockchain, funds and asset management, international arbitration, litigation and insolvency, private wealth, regulatory and tax, and restructuring.

london managing partner rachel graham commented: “this move reflects the continued growth and expansion of our london practice. the broadgate tower offers a fantastic location that is both convenient and easily accessible for our clients, and the new office space provides a light and bright working environment with areas for both collaboration and quiet working, enabling our teams to work together collegiately, effectively, and creatively. we are delighted to be starting this exciting new chapter.”

the firm’s new london address is:

level 18, the broadgate tower
20 primrose street
london ec2a 2ew

the grand court of the cayman islands recently delivered its judgment in in the matter of new ruipeng pet group inc, concerning the continuation of the appointment of restructuring officers (ros) over new ruipeng pet group inc (the company).

while the outcome was relatively straightforward on the facts, the judgment provides much-needed guidance concerning the grounds that the court will consider when determining whether to continue the appointment of ros given it is the first judgment to consider the issue.

background

on 5 december 2025, ros were appointed to develop and implement a restructuring plan for the company and its wider corporate group to avoid a potentially insolvent liquidation. upon appointing the ros, the court also directed that a case management conference be scheduled to assess progress with the restructuring plan.

by the hearing on 3 march 2026, the ros had made some progress developing a restructuring plan but had not yet obtained agreement from key stakeholders. given liquidity pressures faced by the company, the ros advised the court that they intended to pursue interim financing to stabilise the company while continuing to pursue a longer-term restructuring of its debt. in this context, justice asif kc considered whether it was appropriate for the ros’ appointment to continue.

the court’s approach

as noted by justice asif kc, the judgment addresses interesting jurisdictional questions about the nature of the enquiry the court must undertake when reviewing the continuation of ro appointments as there was previously no authority that directly addressed the court’s supervisory jurisdiction.

the court first considered the judgment of kawaley j in re holt fund spc which dealt with an application to discharge ros and records that where a consensual restructuring is no longer viable, the ros will have grounds for their removal. conversely, the potential for a viable restructuring must exist for the appointment of ros to continue as detailed below.

the court accepted that the dicta of cresswell j in re trident microsystems (far east) ltd, decided in the context of light-touch provisional liquidations, were relevant by analogy. cresswell j stated that when the court is asked to adjourn a winding up petition and permit the continuation of a provisional liquidation, the court is "in effect exercising its discretion to appoint provisional liquidators afresh" and must give due consideration to all relevant factors. justice asif kc determined that this approach should also be applied when considering the continuation of ro appointments. in other words, on each occasion the matter comes back before the court, the court must be satisfied that the statutory criteria in section 91b of the companies act for the appointment of ros continue to be met. if they are not, the court is under a duty to discharge the appointment.

reasons for approving the continuation of the ros’ appointment

after establishing the applicable test, the court approved the continuation of the ros’ appointment for the following reasons:

1. the company was, or was likely to become, unable to pay its debts.
2. the company and the ros intended to present a compromise to creditors.
3. the restructuring remained feasible and continued to be supported by significant stakeholders.
4. the alternative to restructuring, being a winding up of the company, was highly likely to result in a significantly worse outcome for stakeholders.
5. importantly, both the ros and the company itself supported the continuation of the ros’ appointment.

the court also bore in mind the warning in re aubit that the court must be astute to ensure that a hopelessly insolvent company is not allowed to continue trading to the detriment of creditors and stakeholders simply by seeking the appointment of ros. however, there was no suggestion by any party that this concern applied to the company.

key takeaways

justice asif kc's judgment is significant given the ro regime in the cayman islands remains relatively new. the decision serves as an important pronouncement of the obligations that ros will be required to demonstrate and clearly articulates that the court will consider the appointment afresh at each review hearing, applying the statutory criteria as if making the appointment order for the first time.

harneys acts for the ros.

tokenisation of real-world assets (rwas) is reshaping global finance and commodities. rwas are universally valued for their liquidity and are among the most popular reference assets at the moment. for sponsors, legal professionals and investors, structuring these tokens in the right jurisdiction is critical. the british virgin islands (bvi) is an attractive jurisdiction for commodity-backed token projects, offering a sophisticated legal system, flexible corporate vehicles, and proven virtual asset framework.

key point: pure token issuer entities in the bvi benefit from a regulatory position that they fall outside the remit of the virtual asset service providers act 2022 (the bvi vasp act).

what are commodity-backed tokens?

a commodity-backed token is a blockchain-based digital asset pegged to a specific quantity of a physical commodity or precious metal (e.g., one gram, troy ounce, or barrel).

bvi regulatory framework briefly

the bvi offers a technology-neutral, business-friendly environment for digital asset development, governed by the bvi vasp act. legal analysis determines both initial token classification and ongoing compliance obligations. tokens may be characterised in three ways:

• bvi vasp act’s:most commodity-backed tokens fit the bvi vasp’s broad definition. issuers conducting token issuance, exchange, or custody as a business must register as vasps and meet comprehensive aml/cft/cpf, sanctions and customer due diligence (cdd) obligations.
• security or investment interest:where token rights resemble shares, debentures, or pooled investments, bvi securities laws (e.g., the securities and investment business act, revised edition 2020) may apply, requiring additional disclosures and restrictions on public offerings.
• hybrid or contractual claims:tokens functioning solely as contractual rights to commodity delivery are assessed case by case, with substance prevailing over form.

six key structuring considerations

1. corporate vehicle selection
   the bvi business company model offers flexibility for both single-asset tokenisation and multi-asset tokenisation projects and is the most common choice for token issuers.
2. custody: allocated vs. unallocated commodities

• • allocated commodities: each token is linked to a specific, segregated asset (e.g., gold bar, silver coin), minimising counterparty risk. holders own the identified asset, reducing exposure in custodian insolvency.
  • unallocated commodities: holders possess an undivided share of a commodity pool. this raises greater counterparty risk as assets are not segregated, and holders may rank as unsecured creditors in an insolvency.

3. title, insolvency, and custodial agreements

legal title to commodities must be clearly assigned with documented chains of ownership and address cross-jurisdictional insolvency risk addressed. custodial contracts should include robust audit and inspection rights, clear allocation mechanics, detailed liability and recourse clauses, and well-defined redemption protocols.

4. insurance, audit, and transparency

comprehensive insurance (theft, fraud, loss, and force majeure) is essential with the issuer or token holders listed as loss payees. frequent, transparent audits of reserves vs. token supply by reputable firms should be publicly accessible and any discrepancies or risks must be promptly disclosed.

5. compliance and governance

the bvi adheres to the financial action task force standards, requiring cdd for all token purchasers, ongoing transaction monitoring and sanctions screening and timely suspicious activity reporting. projects increasingly adopt permissioned or whitelisting models limiting transactions to verified, compliant parties to satisfy both institutional investors and regulators.

6. offering documentation and smart contract alignment

all material aspects – token structure, rights, redemption processes, custody and insurance details, risk factors, and governing law must be disclosed in the white paper or offering memorandum. smart contract logic must be carefully aligned with legal documents, as discrepancies invite regulatory scrutiny and legal risk. independent smart contract audits and ongoing update processes are essential.

why the bvi?

the bvi offers corporate flexibility and efficient setup through business companies, a technology-neutral approach with straightforward vasp registration, a favourable environment for projects prioritising operations alongside robust compliance and investor protection.

key takeaways

launching a commodity-backed token requires precise legal structuring, robust risk management and institutional-grade compliance. in summary, sponsors and investors should focus on:

• early legal assessment of token classification and applicable regulatory regimes.
• optimal corporate and custody structures aligned with commercial goals and investor safeguards.
• congruent documentation and smart contracts that are clear and consistently audited.
• transparent custody, frequent audits and full insurance for reserves.
• proactive aml/cft/cpf, sanctions and permissioned frameworks to satisfy institutional and regulatory demands; and
• engaging qualified advisors at the project’s inception is strongly recommended as strategic structuring pays lifelong dividends in this rapidly evolving field.

litigants and prospective litigants are now armed with two new tools for discovery in the cayman islands, thanks to the newly-introduced rule 7a of gcr order 24.

the new rule, which came into force on 30 march 2026 in the cayman islands, provides a structured mechanism to obtain discovery of documents before proceedings are commenced and from a non-party to existing proceedings.

the rule

rule 7(a) establishes two distinct categories of application. under rule 7(a)(1), a prospective litigant may apply to the grand court for discovery prior to proceedings being initiated. this application is made by way of originating summons, and the person against whom the order is sought is named as the defendant to the summons.

meanwhile, rule 7(a)(2) allows a party to existing proceedings to apply for an order for discovery by a person who is not a party to the proceedings. this application is made by summons and must be served on that person personally and on every party to the proceedings.

both types of application must be supported by affidavit evidence. in the case of pre-action discovery, the supporting affidavit must state the grounds on which it is alleged that the applicant and the named person are likely to be parties to subsequent proceedings before the court.

in both cases, the affidavit must specify or describe the documents sought and demonstrate, if practicable by reference to any pleading served or intended to be served, that the documents are relevant to an issue arising or likely to arise in the proceedings and that the respondent is likely to have or have had them in their possession, custody, or power.

the court retains wide discretion under rule 7(a)(5) to make the order for discovery conditional on the applicant providing security for the costs of the respondent, or on such other terms as the court thinks just. the discovery order must also require the respondent to make an affidavit stating whether any documents sought are, or have at any time been, in their possession, custody or power, and if not, when they parted with them and what has become of them.

rule 7(a)(6) contains an important limitation: no person shall be compelled by a discovery order under rule 7(a) to produce any documents he otherwise could not be compelled to produce:

• in the case of pre-action discovery, if the subsequent proceedings had already begun; or
• in the case of non-party discovery, if he had already been served with a writ of subpoena duces tecum to produce the documents at trial.

comparisons with hk and uk

the new rule 7(a) closely mirrors the language of hong kong’s order 24, rule 7a of the rules of the high court, which is modelled on the former english rules of the supreme court that also forms the basis of the cayman islands provision.

there are however noteworthy differences between rule 7(a) and the equivalent rules in england and wales, which are set out in uk cpr 31.16 and 31.17. in the case of pre-action discovery, cpr 31.16(1)(d) additionally requires that the disclosure sought must be “desirable in order to dispose fairly of the anticipated proceedings; assist the dispute to be resulted without proceedings; or save costs.” for non-party discovery, cpr 31.17(3) requires that the documents sought “are likely to support the case of the applicant or adversely affect the case of one of the other parties to the proceedings; and disclosure is necessary in order to dispose fairly of the claim or to save costs.”

why this matters

coined as the “cards on the table” approach to litigation by the court, the new discovery measures introduced through rule 7(a) could reduce time and costs of litigation by allowing the prospects of success of disputes to be assessed earlier.

this development represents a significant step in cayman islands civil procedure rules and brings the cayman islands procedural framework into closer alignment with the position in england and wales and hong kong, where pre-action and non-party disclosure rules are well established.

if you are contemplating commencing proceedings in the cayman islands, or if you already have proceedings underway and are considering seeking discovery from a third party, please contact the authors of this article, or your usual harneys contact.

the british virgin islands (bvi) has long occupied a pre-eminent position among the world's offshore jurisdictions for corporate formation.

hundreds of thousands of entities are registered under the bvi business companies act, revised edition 2020 (bca), and the territory's appeal as a domicile for holding companies, investment vehicles, and international trading structures shows no sign of diminishing. yet with such a vast population of registered entities comes an inevitable corollary: a great many companies fall into administrative neglect, are struck off the register of companies (the register), and are dissolved—sometimes without their beneficial owners, creditors, or counterparties appreciating the gravity of what has occurred.

a central feature of bvi company law, therefore, is the mechanism by which a struck-off and dissolved company may be restored to the register and brought back to legal life. among the various grounds upon which restoration may be sought, one of the most practically significant—and frequently litigated—is restoration at the instance of a creditor. creditor-led restorations sit at the intersection of corporate law, insolvency practice, and asset recovery, and they raise distinctive procedural, evidential, and strategic questions that reward careful analysis.

this article examines the legal framework governing creditor restorations in the bvi, the procedural requirements that must be satisfied, the practical obstacles that creditors routinely encounter, and the emerging judicial solutions that have reshaped this area of practice.

the legislative landscape: from strike off to dissolution

a bvi company may be struck off the register for a number of reasons, but the most common is the prosaic failure to pay annual government fees by the due date. other triggering events include the absence of a registered agent, the failure to file statutory returns, or the conducting of business without a required licence.

the amendments to the bca that came into force on 1 january 2023 effected a fundamental change to the consequences of a strike off. under the previous regime, a struck-off company continued to exist in a form of corporate purgatory—suspended but not yet dead—for up to seven years before it was automatically dissolved. that grace period has now been abolished. under the current regime, a company that is struck off the register is simultaneously dissolved on the same date. it ceases to exist as a legal entity from that moment. the conflation of these two previously distinct events means that companies no longer enjoy a prolonged window during which restoration is a straightforward administrative matter; instead, the consequences of administrative neglect are immediate and severe.

one of the most serious consequences of dissolution is that any property of the company that was not disposed of at the time of strike off and dissolution vests in the crown as bona vacantia pursuant to section 220(1) of the bca. nevertheless, and critically for the creditor, the dissolution of a company does not extinguish its liabilities. section 215(3)(b) of the bca expressly preserves the right of any creditor to make a claim against the dissolved company and to pursue that claim through to judgment or execution. equally, the company and each of its shareholders, directors, officers, and agents remain responsible for any liability that existed before the strike off.

two routes to restoration

the bca provides two mechanisms by which a struck-off and dissolved company may be restored to the register. section 217 provides for administrative restoration by the registrar of corporate affairs (the registrar), while section 218 provides for restoration by order of the court. both routes are available to creditors, although their respective requirements and the circumstances in which each is appropriate differ materially.

administrative restoration under section 217

the administrative route does not require a court application and is therefore, in principle, the quicker and less costly option. a creditor seeking administrative restoration must satisfy the conditions set out in section 217(2) of the bca. the creditor applicant will, however, need to liaise closely with the intended registered agent, who must consent to act and provide either a statutory declaration that the company's records have been updated or an undertaking that they will be updated or procured and maintained within 14 days of the company's restoration.

standing and limitation period

section 217(3) provides that an application for administrative restoration may be made by the company itself, or by a creditor, member, or liquidator of the company. the application must be brought within five years of the date on which the notice of striking off was published in the bvi gazette. this represents a reduction from the seven-year period that applied under the previous regime—a change that demands greater vigilance from creditors and their advisers.

conditions for administrative restoration

the registrar must be satisfied that the following conditions have been met:

• the company was carrying on business or in operation at the date of its striking off and dissolution;
• a licensed person has agreed to act as registered agent of the company;
• the proposed registered agent has made a declaration in the approved form that the company's records have been updated, or has given an undertaking in the approved form that the records will be updated or procured and maintained within 14 days from the date of restoration;
• if any property of the company has vested in the crown bona vacantia, the financial secretary has either consented to the company's restoration or has failed to respond within seven days of receiving a request for consent;
• the company has filed, or will within 14 days from the date of restoration file, copies of its register of members and register of directors, unless these were already filed at the date of strike off;
• the company has paid the applicable restoration fee and any outstanding penalties; and
• the registrar is otherwise satisfied that it would be fair and reasonable for the company to be restored.

it should be noted that the bvi business companies (amendment) act, 2024, introduced additional requirements for the filing of beneficial ownership information as part of the restoration process. these requirements reflect the bvi's ongoing commitment to transparency and compliance with international standards, and they add a further layer of procedural complexity to creditor-led restorations.

right of appeal

if a creditor applicant satisfies the conditions for restoration and the registrar nonetheless refuses to restore the company, the applicant may appeal to the court within ninety days under section 217(4) of the bca. if the court is satisfied that it would be just for the company to be restored, it may direct the registrar to do so upon such terms and conditions as it considers appropriate.

court restoration under section 218

where administrative restoration under section 217 is not available or is not appropriate—for instance, because the company was not carrying on business at the date of its dissolution, or because the purpose of restoration is to initiate or continue legal proceedings—a creditor may apply to the court under section 218 of the bca.

standing

section 218(2) confers standing on a broad range of applicants, including the attorney general or other competent authority in the virgin islands, a creditor, former director, former member, or former liquidator of the company, a person who but for the company's dissolution would have been in a contractual relationship with the company, a person with a potential legal claim against the company (or its former directors or former members, or in respect of any assets of the company or issued shares), a manager or trustee of a pension fund established for the benefit of employees of the company, or any other person who can establish an interest in having the company restored to the register. this broad category of potential applicants makes standing a relatively low bar in most cases.

an important question of standing arises where a creditor asserts its claim by virtue of a foreign judgment debt. the present state of the law, as articulated by the bvi commercial court in jjw hotels & resorts holding inc v benjamin alexander rhodes and another (handed down on 31 march 2026), is that a foreign judgment must be recognised in the bvi before it can be relied upon to support a creditor's standing to apply for restoration. where, by contrast, the creditor's claim is founded on a contractual debt, that debt may be relied upon directly without the need for prior recognition proceedings.

limitation period

as with administrative restoration, an application to the court must be brought within five years of the date of the company's dissolution. transitional provisions apply to companies dissolved before 1 january 2023: in those cases, the application may be made at any time before 1 january 2028 or within ten years of the date of dissolution, whichever is earlier.

evidence and procedure

the application is made by way of a fixed date claim form, in accordance with rule 8.1(1) and (5) of the eastern caribbean supreme court civil procedure rules (revised edition) 2023. historically, the application should be supported by an affidavit exhibiting

• evidence of the company's status;
• the date of its strike off and dissolution;
• proof of the applicant's standing;
• proof of a purpose for the restoration;
• the intended registered agent's consent to act;
• the financial secretary's consent (or a declaration that the financial secretary did not respond within the prescribed time), where the purpose of the restoration is to make an application for the return of the company's property that has vested in the crown as bona vacantia;
• a declaration or undertaking from the intended registered agent regarding the updating of the company's records;
• evidence that the company has filed, or will within 14 days from the date of restoration file, copies of its register of members and register of directors (unless these were already filed at the date of strike off); and
• evidence that the company will pay the applicable restoration fee and any outstanding penalties upon the restoration of the company.

in the context of an application by a creditor, the applicant will also be expected to exhibit any relevant contractual or transactional documents evidencing the debt upon which the applicant's standing is premised.

however, in the recent case of as pnb banka (in liquidation) v registrar of corporate affairs bvihcm 234/2025 (15 april 2026), justice mangatal held that section 218a(1) of the bca does not require the appointment of a registered agent as a precondition to restoration where a creditor seeks to restore a dissolved company solely for the purpose of placing it immediately into insolvent liquidation by the same order. therefore, in this situation, the creditors do not need to exhibit any evidence regarding the consent of the registered agent or any declaration or undertaking from the registered agent in respect of the updating of the company's records.

conditions and the exercise of judicial discretion

under section 218(1), the court may order restoration where, among other things, the purpose is to initiate, continue, or discontinue legal proceedings in the name of or against the company, or where the court considers it just and fair to do so. in exercising this discretion, the court will have regard to all the circumstances, including the reason for the company's striking off, the length of time since dissolution, the purpose for which restoration is sought, and whether any prejudice would be caused to third parties.

there have been numerous iterations in the bvi courts on how this discretion ought to be exercised. in dedyson enterprises ltd v registrar of corporate affairs (claim no. bvihcm 2011/0008), bannister j observed that the power to restore is to be exercised when it serves "some beneficial purpose consistent with the requirements of justice". in global diversity opportunity ii ltd v the registrar of corporate affairs (claim no. bvihc (com) 2020/0176), the court reiterated the breadth of its discretion, reflecting a commercially sensible approach that allows for judicial agility.

notice requirements

section 218(6) of the bca requires the applicant to serve notice of the application on the registrar, the financial secretary, and, where the company was a regulated person, the financial services commission. the purpose of the notice requirement is to ensure that all relevant parties are aware of the application and have the opportunity to be heard.

the registered agent problem: the real hurdle and recent development

whilst arguments over standing and judicial discretion may have become less contentious following the broadening of the statutory criteria, recent amendments to the bca had quietly shifted the principal battleground to a different terrain altogether.

even where section 218 was satisfied, restoration was conditional upon satisfying several procedural—but critical—requirements under section 218a. before the judgment of as pnb banka (in liquidation) v registrar of corporate affairs, a licensed registered agent must agree to act. that agent must provide a declaration or undertaking confirming the company's records are, or will be, brought up to date. updated registers of members and directors must be filed, or an undertaking to file them within fourteen days must be given.

this seemingly innocuous administrative requirement had become a real barrier to restoration, particularly where the applicant is an outsider with no access to the company's records. registered agents are often unwilling to act where the applicant is a stranger to the company, typically because of a highly conservative, risk-averse interpretation of their obligations under the bvi's anti-money laundering and compliance regime. historically, the result was a practical impasse: no agent, no restoration.

however, in as pnb banka (in liquidation) v registrar of corporate affairs, the court held that section 218a(1) of the bca is framed in permissive rather than mandatory terms: the court “may” restore the company if satisfied of the listed matters. the provision does not state that restoration shall not occur unless those matters are satisfied. mangatal j held that the use of the word “may” indicates that the provision is intended to guide the exercise of the court’s discretion rather than to convert each element into an inflexible jurisdictional precondition incapable of contextual interpretation. sections 218, 218a and 91(5) of the bca are to be read as part of a single statutory scheme, and individual provisions must be understood not in isolation but in the context of the act as a whole.

the judgment in as pnb banka is of particular significance because it addresses the practical difficulties faced by creditors who cannot provide the kyc and other compliance information ordinarily required by registered agents under the anti-money laundering regime. justice mangatal observed that the ability of a creditor to exercise its statutory right under section 218 cannot depend upon the discretionary commercial risk appetite of private licensed entities. the legislature conferred standing on creditors as a class and did not condition that right on persuading a regulated third party to assume regulatory exposure. a construction which made creditor restoration dependent upon factors inconsistent with the requirements of the aml code, and which introduced unnecessary cost and arbitrariness into the insolvency regime, could not be taken as the intention of the legislature.

importantly, the court noted that where restoration is sought solely for the purpose of immediate entry into insolvent liquidation, the functions ordinarily performed by a registered agent in respect of an active company are practically and legally redundant. the regulatory and investigative oversight otherwise provided by the registered agent is instead provided by court-appointed liquidators operating under the supervision of the court and within the statutory framework of the insolvency act 2003. the court did, however, grant leave to appeal to the registrar, acknowledging that the point is not free from difficulty, and invited legislative intervention to clarify the issue and put the matter beyond argument.

effect of restoration

the principal effect of a restoration order is retrospective: the company is deemed never to have been struck off the register and dissolved. the company regains its legal personality and its capacity to sue and be sued. any property that vested in the crown upon dissolution re-vests in the company, and the company is entitled to be paid out of the bvi's consolidated fund in respect of any money received by the crown upon dissolution or the value of any property that the crown has disposed of. proceedings that were commenced or contemplated prior to dissolution may be continued or initiated.

in the case of court restoration, the court retains a discretion under section 218a(1)(b) to give such directions or make such orders as it considers necessary or desirable for the purpose of placing the company and other persons as nearly as possible in the same position as if the company had not been dissolved. a sealed copy of the court order must be filed with the registrar within sixty days of its making; once filed, the registrar will restore the company and issue a certificate of restoration. if the company's name has been reused since the strike off, it will be restored with its company number as its name.

restoration does not, however, resolve the underlying reasons for the company's striking off. accordingly, the court will typically attach conditions to the restoration order, such as the payment of outstanding fees and penalties owed to the registrar.

practical considerations for creditors

creditors and their advisers should weigh several practical matters carefully before committing to a restoration application.

necessity: in some cases, it may be possible to pursue claims against the company's former directors, shareholders, or other related parties without restoring the company itself. this question should be addressed at the earliest stage, before significant costs are incurred.

cost: since the company is dissolved and has no lawfully functioning management when the application is made, it is usually the applicant creditor who bears the company's outstanding registered agent fees, government fees, and any penalties that have accumulated since the strike off. these costs can be considerable, particularly where a company has been off the register for a number of years. existing struck-off companies that were deemed dissolved under the transitional provisions and are restored via the court may also be liable to an additional penalty of us$5,000.

asset recovery: the recovery of the company's assets following restoration may require additional efforts, particularly where they have been dissipated or are located in other jurisdictions. it is often prudent to undertake an asset analysis before deciding whether restoration is a worthwhile endeavour. where assets have vested in the crown bona vacantia, the financial secretary's consent to restoration—or, failing that, a declaration that the financial secretary did not respond within seven days—must be obtained.

the registered agent: as discussed above, procuring the consent of a registered agent to act is one of the most significant practical hurdles for creditor applicants. creditors who find themselves in this position should seek specialist advice at the earliest opportunity to determine whether alternative approaches—including restoration followed by immediate liquidation (the case in as pnb banka (in liquidation) v registrar of corporate affairs)—are available and appropriate.

beneficial ownership and transparency requirements: recent amendments to the bca have introduced further obligations relating to the filing of beneficial ownership information upon restoration. these requirements reflect the bvi's alignment with evolving international standards on transparency and anti-money laundering, and they add an additional dimension to the due diligence and documentary burden facing creditor applicants.

the way forward: scope for legislative reform?

the bvi's updated legislative framework provides broader standing and clearer statutory purpose for restoration, but practical obstacles—especially regarding the registered agent requirement—remain. it may be that disapplying section 218a in cases where the applicant is a genuine outsider—neither a former member, director, nor involved in the company's incorporation—would ease the burden without undermining the integrity of the aml regime. however, any such reform would need to be carefully calibrated, and for the time being, the courts have rightly prioritised substance over form, reflecting the bvi commercial court's hallmark approach to difficult problems: with one eye on justice and the other on commercial reality.

conclusion

creditor restorations are a vital mechanism within bvi company law, ensuring that the dissolution of a company does not operate as a shield against legitimate claims. the administrative route under section 217 offers a relatively straightforward and cost-effective means of restoration, provided that the creditor applicant is able to furnish the registered agent with the required statutory information and documentation. where that is not possible—whether because of the creditor's status as a third-party outsider, the unwillingness of a registered agent to act, or the complexity of the circumstances—a court application under section 218 provides a further avenue. the court's broad discretion, informed by the principles of justice and commercial pragmatism, has proven a valuable safeguard for creditors. the emergence of restoration followed by immediate liquidation as a judicially endorsed workaround reflects the bvi courts' willingness to adapt their approach to the realities of modern offshore practice, such as the recent judgment in as pnb banka (in liquidation) v registrar of corporate affairs.

in either case, the process involves a number of procedural and practical complexities that should not be underestimated. creditors are well advised to seek specialist legal advice at the earliest possible stage to ensure that their applications are properly prepared, that the costs and consequences of restoration are fully understood, and that the chosen route—administrative or judicial—is the one best suited to achieving the creditor's objectives.

the regulatory landscape of european data protection is evolving rapidly.

we are pleased to share that elina mantrali, counsel in financial services at harneys, will feature as a key speaker at the 2nd techisland legal community meetup.

powered by adex, this important session is titled “what’s next for gdpr? insights on new eu data protection legislation and industry impact”. are you prepared to adapt your compliance strategies for the future?

elina will be sharing the stage with an outstanding group of industry leaders:

• farukh rakhimov – head of financial & compliance group and gdpr officer, adtech holding
• irene loizidou nicolaidou – special scientist, university of cyprus and former vice chair, edpb
• aleksandra vvedenskaia – privacy & product compliance team lead, indrive
• moderator: michael tsikouris – advocate, partner and head of pwc network legal practice in cyprus

event details:

the event will take place in limassol, cyprus on 5 may 2026 at 19:00 - 21:00

attendance is completely free, but you must register to secure your place. register here to confirm your attendance.

harneys has strengthened its corporate practice with the appointment of alexander curry as a partner and head of its corporate practice in jersey.

alex brings over two decades of experience advising international and local clients on a wide range of corporate matters, with particular expertise in cross-border public and private m&a transactions, schemes of arrangement, equity capital markets work, including ipos on the london and new york exchanges, and downstream private equity transactions. he regularly acts for leading private equity firms, ftse 100 companies, and other high-profile corporates, as well as private wealth and family office clients on structuring and investment matters. alex has deep sector expertise across technology and web3, natural resources, real estate, sport, and healthcare, and helps clients navigate the evolving legal and regulatory landscape in jersey. before joining harneys, alex spent over ten years at another leading offshore law firm in jersey, where he co-led its technology and web3 team, having previously practised as a corporate lawyer in london.

nicola roberts, jersey managing partner at harneys, commented: "we are delighted to welcome alex to harneys. his outstanding track record spanning more than twenty years, combined with his deep expertise in cross-border m&a, equity capital markets, and private equity transactions, makes him an exceptional addition to the jersey team. as head of corporate in jersey, alex will be instrumental in driving the continued growth of our corporate offering and ensuring we deliver best-in-class advice to our clients across the full spectrum of corporate and transactional matters."

alex's appointment follows the appointment of katrina edge as a partner and head of the firm's banking & finance practice in jersey, as well as the appointment of william lee as a partner in the corporate practice of its hong kong office, both in march this year, along with three other partner appointments in the first quarter of 2026.

the corporate team at harneys advises on complex cross-border transactions involving british virgin islands, bermuda, cayman islands, cyprus, jersey, and luxembourg corporate vehicles. the team’s significant track record includes advising on high-profile private equity transactions, landmark ipos, as well as public and private m&a and joint ventures.

for a creditor to place a dissolved bvi company into insolvent liquidation, the creditor must first restore the company. good news to all creditors – as pnb banka (in liquidation) v registrar of corporate affairs now confirms that the appointment of a registered agent is not required as a precondition to restoration where the creditor seeks restoration solely for the purpose of placing a dissolved company immediately into insolvent liquidation.

appointment of a registered agent

pursuant to section 91 of the bvi business companies act, revised edition 2020 (bca), a company shall at all times have a registered agent, except if it is in liquidation.

section 218a(1) of the bca provides that:

as such, the practice has been to engage a registered agent for the company, for the purpose of seeking the restoration which is immediately followed by the insolvent liquidation.

unfortunately, as happened to the claimant in as pnb banka (in liquidation) v registrar of corporate affairs, the engagement of a registered agent is often difficult for creditors because creditors will invariably not have all the kyc documents and information that registered agents are statutorily required to obtain. no registered agents were willing to act for the claimant , leading the claimant to apply to the court for restoration without the appointment of a registered agent.

the judgment

upon considering the parties’ arguments, justice mangatal accepted the claimant’s submission that a creditor’s ability to exercise its rights to seek restoration cannot depend upon the “discretionary commercial risk appetite of private licensed entities”. she also noted that the appointment of a registered agent would cause delay and incur unnecessary costs, especially since section 91 of the bca clearly states that no registered agent is required for a company in liquidation, being what the dissolved company will immediately enter into upon restoration.

justice mangatal considered what the claimant was seeking as a “single composite judicial act”: restoration of the dissolved company and the appointment of liquidators. the company therefore never exists in a state requiring a registered agent pursuant to the bca, and hence no registered agent need be appointed for applications of this nature.

conversely, the two-stage approach creates a "circular barrier to enforcement": restoration is required to appoint liquidators, yet the appointment of a registered agent, which may itself depend upon cooperation from those whose conduct may warrant investigation, would become an indispensable threshold condition. restoration would become impossible "precisely in those cases where corporate management has disappeared or is unwilling to cooperate – circumstances which most strongly justify investigation through insolvency proceedings".

importantly, the judge was satisfied that the claimant’s construction does not dilute the aml objectives underpinning section 218a of the bca. in the insolvency context, regulatory and investigative oversight is provided by court-appointed liquidators operating under the supervision of the court and within the statutory framework of the insolvency act, rather than by a registered agent.

in permitting the claimant’s composite solution, the judge interpreted the permissive language in section 218a of the bca as providing a guide for the exercise of judicial discretion rather than an inflexible jurisdictional precondition incapable of contextual interpretation.

while justice mangatal considered leave to appeal unnecessary, she nonetheless granted leave to the registrar of corporate affairs on the basis "it concerns important issues that are likely to arise again, and the point is not free from difficulty”. for now, this judgment removes a very common obstacle to the exercise of creditor rights and is a positive development in this area of law.

on 25 march 2026, the uk (ofsi, otsi and the fcdo) published updated guidance under the iran (sanctions) regulations 2023, reinforcing its commitment to addressing human rights violations, deterring hostile activities, and promoting international security.

key points:

• scope of application: sanctions apply to individuals, businesses, and organisations operating in the uk or under uk law, as well as uk nationals globally.
• prohibitions: restrictions include financial sanctions (asset freezes), trade sanctions (prohibited goods and technology), director disqualification, transport sanctions, and immigration bans.
• designated persons: individuals or entities involved in specified activities may be designated for sanctions, including financial, immigration, and trade restrictions. the uk sanctions list provides details of all designated persons.
• financial sanctions: designated persons' assets are frozen, and funds or resources cannot be made available to them. the office of financial sanctions implementation (ofsi) oversees compliance and enforcement.
• trade sanctions: prohibitions cover goods and technology linked to internal repression, telecommunications monitoring, and strategic concerns (e.g., missile programs). licences may be required for certain activities.
• director disqualification: designated individuals are barred from holding directorships or managing companies connected to the uk.
• transport and immigration sanctions: restrictions include port entry bans for certain ships and travel bans for designated individuals.
• enforcement: breaches of sanctions are criminal offences, with penalties including imprisonment and fines. relevant authorities, such as ofsi and hmrc, handle enforcement.
• exceptions and licensing: certain activities may qualify for exceptions or require licences, such as humanitarian assistance, medical purposes, or national security concerns. applications are assessed on a case-by-case basis.
• reporting obligations: firms must report suspected breaches or dealings with designated persons to the relevant authorities.

businesses and individuals are encouraged to familiarise themselves with the guidance to ensure compliance and avoid inadvertent breaches.

the guidance is key to advising firms and persons in the uk overseas territories and crown dependencies which implement uk sanctions. this is of direct relevance to many of harneys’ jurisdictions: bermuda, the british virgin islands, the cayman islands and jersey.

for further details, consult the full guidance here

ai is no longer a future prospect. it is transforming the way financial services operate right now. for businesses in offshore financial centres such as the british virgin islands (bvi), the cayman islands, and jersey, the opportunities are immense but so are the risks. from algorithmic decision-making and automated compliance tools to ai-driven investment strategies, the technology is advancing faster than the regulatory framework designed to govern it. with no comprehensive ai-specific legislation yet in place across key offshore jurisdictions, firms face a critical question – how do you innovate responsibly while staying on the right side of the law?

the regulatory landscape is shifting fast

while dedicated ai statutes are still emerging in the offshore world, businesses are far from operating in a vacuum. existing data protection laws, financial services regulations, and anti-money laundering frameworks already apply to many ai use cases. meanwhile, international developments, most notably the european union ai act are setting new global benchmarks that have extraterritorial reach, meaning offshore businesses with european touchpoints cannot afford to look the other way. regulators in the bvi, the cayman islands, and beyond are also paying close attention to this developing area. it is only a matter of time before tailored ai governance requirements arrive in the form of legislation and regulatory guidance. the firms that act now will be the ones best positioned when that happens.

where harneys comes in

at harneys, we understand that navigating ai governance is not simply a technology issue, it is a legal, regulatory, and strategic one. our cross-jurisdictional regulatory and compliance team works with financial institutions, fund managers, fintechs, and corporate clients to provide practical, forward-looking guidance on ai-related matters, including:

• ai advisory services: advising on how existing laws (including data protection, financial regulation, and corporate governance) apply to your ai tools and processes
• policy creation and review: drafting bespoke ai governance policies, acceptable use frameworks and internal guidelines tailored to your organisation’s risk profile and jurisdictional obligations
• regulatory compliance: helping you assess and align with emerging standards such as the eu ai act and preparing for any upcoming local regulatory developments in the bvi, cayman islands, bermuda, and jersey
• risk management and due diligence: conducting ai risk assessments, vendor due diligence for third-party ai providers and advising on liability and accountability frameworks
• policy updates and ongoing support: keeping your governance documentation current as the regulatory landscape evolves with periodic reviews and horizon-scanning alerts
• board and senior management training: equipping decision-makers with the knowledge they need to oversee ai adoption responsibility and meet their internal governance obligations

don’t wait for regulation to catch up

the most forward-thinking businesses are not waiting for prescriptive rules. they are building robust ai governance frameworks now. proactive compliance not only mitigates legal and reputational risk but also signals to investors, regulators, and counterparties that your firm takes responsible innovation seriously. whether you are deploying ai for the first time or looking to strengthen your existing governance arrangements, harneys is here to help.

get in touch with our team to find our how we can support your ai strategy. for further insights into ai and regulation in offshore financial centres, read our full article here.

on 25 march 2026, the department for international tax cooperation (ditc) published an industry advisory announcing an extension to the registration deadline under the crypto-asset reporting framework (carf).

cayman reporting crypto-asset service providers (rcasps) are now required to register the necessary information on the ditc portal by 31 january 2027, instead of the original deadline of 30 april 2026. this extension ensures rcasps have adequate time to comply once the portal functionality becomes available.

key registration requirements:

• the rcasp’s name and identification details from relevant regulatory bodies.
• full contact details of the principal point of contact (ppoc) and an authorised individual for change notifications.
• the date the entity became an rcasp.

principal point of contact (ppoc):

the ppoc must be ‘in the islands’, i.e. locally reachable to facilitate timely communication with the ditc.

an entity is "in the islands" in the following circumstances:

• for individuals: a physical address in the cayman islands.
• for entities: incorporation or registration in the cayman islands with a physical address (not solely a mailing address).

submissions lacking sufficient contact details may be rejected or subject to follow-up.

for further information, ditc advisory can be accessed here.

on 10 march 2026, the british virgin islands financial services commission (bvi fsc) shared updates regarding sanctions from two key areas: the united nations security council (unsc) regarding amendments to its consolidated sanctions list and financial sanctions obligations for institutions under its jurisdiction. these updates highlight critical changes and compliance actions required to meet international and local regulatory standards.

un sanctions updates:

these updates include changes to sanctions lists under various resolutions targeting individuals and entities involved in activities such as terrorism, arms embargo violations, and other international security threats.

recent updates:

• amendments to the (taliban) and the afghanistan sanctions regime under unsc resolution 2816 (april 2026).
• additions to the sudan sanctions list (february 2026).
• additions to the isil (da’esh) and al‑qaida sanctions list under unsc resolution 2734 (march 2026).

actions required:

• supervisory authorities must notify relevant entities to ensure compliance.
• entities are advised to review and update their records and processes to align with the revised sanctions, including freezing assets, prohibiting transactions, and adhering to reporting obligations.

access to information:

• the updated unsc consolidated list is available in multiple formats and languages on the official unsc website.
• detailed press releases and notes verbale are accessible for further reference.

for inquiries or assistance, stakeholders are encouraged to contact the virgin islands sanctions unit. compliance with these updates is critical to maintaining adherence to international obligations. for more information, the bvi fsc publication can be found here.

financial sanctions updates from the bvi fsc

in addition to the un sanctions updates, the bvi fsc issued important updates regarding financial sanctions. these measures specifically target financial institutions and their obligations under the revised sanctions framework.

key requirements for financial institutions:

• evaluate exposure to newly listed entities.
• freeze any relevant assets associated with sanctioned individuals or entities.
• report actions taken to the bvi fsc promptly.

consequences of non-compliance:
failure to comply with these financial sanctions could result in significant penalties, underscoring the importance of prompt and thorough adherence.

staying informed:

financial institutions are advised to frequently review updates posted on the bvi fsc’s website. for more information on specific notices, visit the bvi fsc’s website here.

artificial intelligence (ai) is rapidly transforming industries globally and financial services is not exempt. in this article, we look at developments in the uk overseas territories (ukots) and crown dependencies (cds) focussing on the british virgin islands (bvi) and the cayman islands, which both serve as major international financial centres. as financial services businesses look to the future, the need to embrace ai becomes important, and all international centres, including the bvi and the cayman islands will need to consider the question of how ai will be regulated and the impact of that regulation on day-to-day business operations.

this article examines the current legal and regulatory landscape governing ai in both jurisdictions, considering existing and comparative regulatory frameworks, data protection regimes, and the likely trajectory of future developments.

spoiler alert: as at the date of this article, no offshore jurisdiction, as far as we are aware, has moved to comprehensively regulate ai technologies or uses. in this article, we speculate what might be on the horizon and, more importantly, the checks and balances institutions and their participants should be putting in place in order to get a healthy head start on regulatory initiatives and to manage their ai risks more broadly. firms should be in no doubt, regulators will use ai tools to ensure stricter compliance by firms, being able to more thoroughly scrutinise returns submitted by their regulated entities.

firstly, what do we mean, precisely, by “ai”?

the organisation for economic and cooperative development’s definition of an ai system in its ai principles overview publication^[1] is a good place to start. ai is described as a machine-based system that, for explicit or implicit objectives, processes input to generate output such as predictions, content, recommendations, or decisions that can influence physical or virtual environments. these systems vary in their levels of autonomy and adaptability after deployment.

how is ai being used in financial services and capital markets?

based on the seminal ai report of the international organisation of securities commissions from march 2025, ai is being used increasingly in capital markets and financial services industries to enhance efficiency, decision-making, and compliance. key use-cases comprise the following:

1. decision-making support:
   • robo-advising: ai systems provide automated investment advice and portfolio management, including portfolio optimisation and risk-return assessments.
   • algorithmic trading: ai is used to process market data, monitor movements, and optimise trade execution strategies.
2. market analysis and insights: ai models analyse diverse data sources, including financial, macroeconomic, and social media data, to forecast asset prices, predict market trends, and identify patterns.
3. surveillance and compliance:
   • ai enhances anti-money laundering (aml) and counter-terrorist financing (cft) measures by detecting suspicious transactions and automating compliance processes.
   • it is also used for fraud detection and monitoring client communications for regulatory compliance
4. internal operations:
   • ai automates tasks like coding, document summarisation, and transcription, improving internal productivity.
   • large language models assist in generating transaction summaries, meeting notes, and translations.
5. customer interaction: ai-powered chatbots and virtual assistants handle client queries, provide support, and enhance customer engagement.
6. risk management: ai systems improve risk assessment and management by analysing market conditions and identifying potential vulnerabilities.

horizon scanning ai legislative frameworks

the most prominent ai-specific legislation as of early 2026, has been exclusive to the european union’s artificial intelligence act, regulation (eu) 2024/1689 (the eu ai act). at present, the eu framework continues to represent the global benchmark of ai regulation. firms should take note of the contents and requirements even where they are based outside of the eu as the framework will likely influence the direction of travel that offshore jurisdictions may take when implementing ai measures into local regulatory frameworks. we have commented extensively on the eu ai act, links to our publications may be found here.

the offshore jurisdictions in the ukots and cds are starting to conduct their own consultations and discussions on the extent of ai regulation. we look comparatively below at the initial developments in some of these jurisdictions:

cayman islands

according to recent press releases from the cayman islands government, the jurisdiction is actively preparing for ai legislation, targeting a draft framework by mid-2027.^[2]

the government has established a national digital transformation task force to guide the development of ai governance, focussing on balancing innovation with safeguards for public safety and rights. a preliminary ai policy for the civil service has already been drafted, emphasising oversight, risk management, and restrictions on unauthorised or harmful ai use. this policy mandates formal reviews for ai adoption in government operations to address cybersecurity, legal, and technical risks.

separately, the cayman islands court of appeal has issued a warning on the use of generative ai in legal filings, following a case where ai-generated references included non-existent legal precedents. the court emphasised the duty of litigants to ensure accuracy and transparency, cautioning that future misuse could lead to severe consequences. this reflects a broader regional trend toward regulating ai in legal and governmental processes to maintain integrity and accountability. see our post: cayman court issues warning on ai use in legal filings.

bermuda

in july 2025, the bermuda monetary authority (bma) published its discussion paper “the responsible use of artificial intelligence in bermuda’s financial services sector”.^[3] the bma stressed that bermuda is advancing its regulatory framework for ai in financial services emphasising a principles-based approach. the bma's discussion paper focusses on governance, board accountability, and proportional oversight. the framework also addresses key areas such as data management, model validation, human oversight, and cybersecurity, while also considering the unique risks of generative and agentic ai systems. the bma aims to balance innovation with safeguards, ensuring ai adoption aligns with bermuda's reputation as a premier financial hub.

the bma's approach integrates global regulatory insights, including those from the eu ai act and the voluntary national institute of standards and technology frameworks on cybersecurity in the united states, while tailoring them to bermuda's financial ecosystem, which serves sophisticated institutional clients. the framework emphasises proportionality, allowing smaller institutions to innovate without excessive compliance burdens. the bma also highlights the importance of transparency, fairness, and operational resilience, proposing measures like ai inventories, incident response plans, and third-party risk management.

jersey

jersey has yet to implement specific ai legislation but is taking steps toward establishing a framework influenced by developments in larger jurisdictions such as the eu. further, the jersey institute of directors recently introduced comprehensive ai adoption guidelines to assist local businesses dealing with these issues. see our blog here.

a principle-based approach has already been adopted in areas such as education, with policies emphasising fairness, transparency, accountability, and inclusivity. jersey finance additionally highlights ai's potential to enhance efficiency and client relationships in the financial sector, though concerns about jurisdictional differences in ai regulations persist. future developments may include either a codified law or an expansion of principle-based frameworks to regulate ai use responsibly.

anguilla

anguilla has not yet introduced an ai framework but has capitalised on its ".ai" internet domain, earning significant revenue from its association with artificial intelligence. in 2024, domain sales contributed $39 million, nearly a quarter of the island's total revenue, with projections for further growth. this income is being used to diversify anguilla's economy, traditionally reliant on tourism, with plans to invest in infrastructure, healthcare, and a new airport to support sustainable development.^[4]

(and last but not least) the united kingdom

offshore jurisdictions like the bvi and cayman islands, as uk overseas territories, often align their regulatory approaches with developments in the uk. for instance, in 2024, the uk’s financial conduct authority (fca) launched its ai lab to foster collaboration among stakeholders, support ai innovation, and deepen understanding of ai’s risks and opportunities in financial markets. additionally, the bank of england and fca conducted studies on machine learning in financial services, revealing widespread use of vendor models and pilot projects in capital markets, though mature applications remain limited. these efforts reflect a global trend of grappling with the complexities of regulating rapidly evolving ai technologies.^[5]

what should offshore firms, specifically those in the bvi and cayman islands, be doing now to mitigate ai risks?

bvi and the cayman islands have historically adopted a principles-based regulatory approach, particularly in financial services, which may shape future ai governance. in the absence of specific ai legislation, existing legal frameworks—such as company law, contract law, tort law, data protection laws, and sector-specific financial regulations—govern ai use. businesses deploying ai must navigate these established principles to address novel technological applications.

key principles for ai governance include, but are not limited to: transparency; ensuring systems are understandable and disclosures are accurate, reliability; ensuring consistent and robust performance and fairness; and avoiding bias or discrimination. security, privacy, accountability, and effective risk management are also critical, alongside reasonable human oversight to augment, not replace, effective decision-making and good governance. regulators have also emphasised investor protection, issuing alerts and educational materials to raise awareness of ai-related fraud risks and urging firms to comply with existing laws on disclosure, registration, and marketing.^[6] these measures aim to balance innovation with safeguards, ensuring responsible ai adoption in financial services.

monitoring investor alerts and regulatory announcements

regulators worldwide have taken proactive steps to educate investors, particularly retail investors, about the growing risks of securities fraud linked to artificial intelligence.^[7] this has been achieved through the publication of investor alerts and educational materials. firms should be monitoring these publications. some of these resources provide general insights into fintech risks, including references to ai and robo-advisory services, while others are specifically tailored to highlight ai-related investment fraud risks. additionally, more targeted alerts focus on unregistered ai firms or products, emphasising the importance of regulatory compliance.

beyond investor-focussed materials, regulators have also issued guidance for firms. for example, esma’s may 2024^[8] guidance for firms using ai in investment services underscores the need for transparency, accountability, and adherence to existing laws. the overarching message is clear: investors should conduct thorough due diligence before investing in ai-focussed companies or using ai-driven investment tools.

similarly, firms leveraging ai in financial services are expected to comply with all applicable regulations, including those governing disclosure, registration, and marketing practices. these efforts aim to foster trust and ensure responsible ai adoption while safeguarding market integrity and investor interests.

data protection considerations

data protection law is of central importance to ai governance, given that ai systems typically rely on the processing of large volumes of data, including personal data.

in the cayman islands, the data protection act (2021 revision) (the cayman dpa) establishes a comprehensive framework for the protection, collection, and processing of personal data of data subjects by data processors and date controllers. the cayman dpa imposes obligations on data controllers and processors, including requirements relating to lawful processing, data security, and the rights of data subjects. where ai systems process personal data, organisations must ensure compliance with these requirements. of particular relevance is the principle of transparency, which may require organisations to inform individuals when automated decision-making is being used in ways that significantly affect them.

the bvi enacted the data protection act 2021 (the bvi dpa), which similarly establishes a modern data protection regime. the bvi dpa imposes requirements concerning the fair and lawful processing of personal data, and organisations deploying ai must ensure that their data practices comply with these statutory obligations. the bvi dpa act also addresses the rights of data subjects, which may be engaged where ai systems are used to make decisions affecting individuals.

financial services regulation

the bvi and the cayman islands are highly regarded as significant offshore international financial centres, and the financial services sector is a key area where ai is being deployed. applications include algorithmic trading, fraud detection, customer onboarding, ai chat-boxes and regulatory compliance (often referred to as "regtech").

the bvi financial services commission (fsc) and the cayman islands monetary authority (cima) are the principal competent authorities overseeing financial services in their respective jurisdictions. while neither regulator has issued ai-specific guidance as of this date, both maintain high expectations regarding operational resilience, sound risk management practices, and robust governance that are relevant to the deployment of ai systems.

financial services firms operating in these jurisdictions should expect regulators to take an interest in how ai systems are developed, tested, and monitored. key areas of regulatory focus are likely to include model risk management, the explainability of ai-driven decisions, and the potential for algorithmic bias. firms operating with the regulatory framework in these jurisdictions would be well-advised to develop robust governance frameworks for ai systems, including appropriate oversight mechanisms and audit trails. where for example, regulated firms are using ai as a part of their business to generate advice, care should be taken to consider if this type of activity falls within the regulatory parameters of, for example, the securities and investment business act (revised edition 2020) in the bvi and the securities investment business act (2025 revision) in the cayman islands, together with any subsidiary legislation, regulatory rules and guidance.

anti-money laundering and ai

both jurisdictions have robust and sophisticated aml/cft regimes, and ai is increasingly being used to enhance aml compliance. in the cayman islands, the proceeds of crime act (2025 revision) and the anti-money laundering regulations (2025 revision) establish the framework for aml compliance, while in the bvi, the anti-money laundering regulations (revised edition 2020) and the anti-money laundering and terrorist financing code of practice (revised edition 2020) serve a similar function.

ai-powered transaction monitoring and customer due diligence tools are becoming more prevalent. while the use of such technology is not prohibited, firms must ensure that their ai systems are calibrated appropriately and that human oversight is maintained. regulators will expect firms to be able to demonstrate that their aml controls, whether ai-assisted or otherwise, are effective and proportionate.

contractual and tortious liability

even though firms would need to look at embracing technology as a part of its business products and services, the deployment of ai systems, policies and procedures undoubtedly also raises important questions of liability. where an ai system causes loss or damage, determining responsibility may be complex, particularly where the system's decision-making processes are opaque. firms will need to ensure there is very good corporate governance policies, internal operations systems and controls and business continuity policies in the event that there is some degree of infraction.

the laws in the bvi and the cayman islands, which are based on english common law, established principles of contract and tort and these laws will generally apply. parties using ai as a part of their business engineering model to provide services to clients should ensure that their agreements clearly allocate risk and responsibility. this includes addressing issues such as warranties as to performance, limitations of liability, and indemnities. to this extent, firms operating in the financial services arena may want to also consider adopting specific indemnity insurance policies to adequately cover any shortfall or liability that may arise.

in the tortious context, questions may arise as to whether the entity in question providing the service through the use of ai bears responsibility for harm caused by that system. the resolution of such questions will depend on the specific facts and the application of established principles of negligence, product liability, and vicarious liability.

intellectual property considerations

ai raises novel questions concerning intellectual property, including the ownership of ai-generated works (which can include advice) and the use of protected materials in training ai systems. businesses operating in these jurisdictions should take care to ensure that their use of ai does not infringe third-party intellectual property rights, and should consider how ownership of ai-generated outputs is addressed in their contractual arrangements. to the extent firms own ai related assets there may also be relevant tax considerations to think about, particularly under the economic substance (companies and limited partnerships) act (revised edition 2020) in the bvi and the international tax cooperation (economic substance) act (2025 revision) in the cayman islands together with any subsidiary legislation and regulatory guidance.

stay ahead of the curve

it is reasonable to assume that both the bvi and the cayman islands will continue to monitor international developments in ai regulation. the eu’s ai act is likely to be influential in this regard. given the close ties between these offshore jurisdictions and the uk legal system, guidance and legislation emanating from the uk may also be of relevance.

for the time being, businesses operating in the bvi and the cayman islands should focus on ensuring that their use of ai complies with existing legal requirements, including data protection, financial services regulation, and aml obligations. developing robust internal governance frameworks for ai, including appropriate policies, procedures, and oversight mechanisms, will also be important in demonstrating responsible ai use to regulators and stakeholders.

businesses should take a proactive approach to ai governance, ensuring compliance with data protection laws, financial services regulations, and aml/cft requirements. as the international regulatory landscape continues to evolve, both jurisdictions can be expected to develop their approaches to ai governance, and stakeholders should remain attentive to future developments in this dynamic area of law.

^[1] oecd ai principles overview

^[2] cayman compass: government targets 2027 for cayman islands ai legislation

^[3] bermuda monetary authority: the responsible use of artificial intelligence in bermuda’s financial services sector

^[4] bbc news: how sheer luck made this tiny caribbean island millions from its web address

^[5] gov.uk: government to create new lab to keep uk in the fast lane on ai breakthroughs

^[6] examples of this can be seen in hong kong: policy statement on responsible application of artificial intelligence in the financial market

^[7] financial conduct authority: investor education in the age of artificial intelligence

^[8] esma provides guidance to firms using artificial intelligence in investment services

harneys has been named offshore law firm of the year by asian legal business at the 2026 alb china law awards, its fourth consecutive win. the firm also picked up the m&a deal of the year (premium) for its involvement in geely auto’s acquisition of zeekr. the awards were presented on 16 april 2026 at the park hyatt beijing, where the firm was represented by shanghai managing partner vicky lord and partners vivian ma, ben mccosker, jessie xu, and lily zhang.

vicky commented: “these awards reflect the trust our clients place in us and the dedication of our teams. they drive us to keep raising the bar and deliver responsive, efficient, and innovative legal services across everything we do. thank you to alb for this recognition and to our clients for their continued trust.”

the alb china law awards recognise outstanding achievement by private practitioners and in-house teams across china.

with three full-service offices in shanghai, hong kong, and singapore and more than 60 lawyers on the ground, harneys is one of asia's leading offshore law firms.

on 2 march 2026, the commission de surveillance du secteur financier (cssf), luxembourg's financial regulator, published a guidance document outlining the documents and information to be submitted for the assessment of the shareholding structure of authorised investment fund managers (ifms). the guidance applies to both initial authorisation applications and modifications to the shareholding structure of authorised ifms and covers both qualified and non-qualified shareholders.

key points

• the guidance specifies the minimum documentation needed for cssf evaluations.
• applications missing these requirements will be deemed incomplete, delaying the review process.
• the cssf may request additional information if necessary.

practical implications

ifms planning on seeking authorisation or implementing changes to their shareholding structure should ensure that the documentation required by the guidance is prepared and submitted at an early stage. it is important to note that the cssf will not begin its review until a complete submission has been received, so failure to include the specified information may result in the application being treated as incomplete and may significantly delay the overall authorisation or modification process.

this guidance aims to streamline the submission process and ensure compliance. the document is available in english and can be found here

the british virgin islands financial services commission (bvi fsc) published details of general licences no. 12 (2026) and no. 11 (2025), issued under the authority of the governor. these licences outline specific permissions and conditions for activities related to sanctions compliance, including the supply of russian oil under price cap regulations and the payment of legal fees for designated persons. below is a summary of their key provisions:

summary of general licences no. 12 (2026) and no. 11 (2025)

general licence no. 12 (2026) - oil price cap

issued on 30 january 2026, this licence permits the supply, delivery, and associated services for russian oil and oil products, provided the price cap terms are met. key provisions include:

• scope: allows transactions involving russian oil by ship between third countries, provided the unit price is at or below the specified price cap.
• conditions: tiered service providers (tier 1, 2, 3a, 3b) must adhere to strict attestation and reporting requirements, ensuring compliance with price caps.
• reporting: tier 1 providers must report contracts to the attorney general within 40 days, while tier 2 and tier 3 providers have 60 days to confirm compliance or withdraw services.
• record-keeping: all involved parties must maintain detailed records for six years.
• exclusions: the licence does not permit the import of russian oil into the virgin islands or transactions with designated persons or specified ships.

general licence no. 11 (2025) - payment of legal fees

issued on 3 november 2025, this licence allows payments for reasonable professional legal fees and expenses for designated persons under sanctions. key provisions include:

• scope: covers legal services provided by virgin islands legal practitioners, including advice and court representation, except for defamation claims.
• payment limits: professional legal fees are capped at us$2.4 million per practitioner, with expenses limited to 10 per cent of fees or us$240,000, whichever is lower.
• conditions: payments must relate to obligations entered into before the designation of the individual or entity.
• reporting: legal practitioners must report payments to the attorney general within seven days, including detailed documentation of the services and payments.
• record-keeping: practitioners must retain records for six years.
• exclusions: payments cannot benefit persons designated under united nations obligations.

these licences aim to balance compliance with international sanctions while facilitating specific permissible activities.

bvi’s general licences can be found here

the cyber resilience act (cra) is a pivotal eu regulation designed to bolster the cybersecurity of digital products, including hardware and software, in response to the escalating risks of cyberattacks. with cybercrime causing an estimated €5.5 trillion in global damages by 2021, the cra aims to address vulnerabilities and ensure a safer digital environment for consumers and businesses alike.

key objectives of the cra include

• improved product security: ensuring manufacturers design, develop and maintain products with robust cybersecurity measures throughout their lifecycle.
• user empowerment: providing consumers and businesses with clear information to make informed decisions about secure digital products.
• transparency and compliance: establishing a coherent cybersecurity framework to simplify compliance for manufacturers and enhance transparency regarding product security features.

the cra introduces mandatory cybersecurity requirements for all products with digital elements, ensuring they are designed with security in mind from the outset. manufacturers are obligated to provide timely security updates and manage vulnerabilities throughout the product lifecycle. high-risk products may require third-party assessments before being marketed in the eu and compliant products will bear the “ce” marking, signifying adherence to the cra's standards. national market authorities will oversee enforcement to ensure compliance.

the cra not only protects consumers but also fosters trust in the digital market by creating a level playing field for manufacturers. it builds on the eu cybersecurity strategy and complements existing legislation, such as the nis2 directive, to create a comprehensive cybersecurity framework.

timeline

the cra officially came into force on 10 december 2024, with key obligations taking effect from 11 december 2027 and reporting requirements starting 11 september 2026. a timeline of the reporting obligations and deliverables seen below.

the cra also clarifies that manufacturers must report actively exploited vulnerabilities in third-party components integrated into their products. this ensures a comprehensive approach to cybersecurity, addressing risks across the entire supply chain. by mandating transparency and proactive vulnerability management, the cra represents a significant step forward in safeguarding the digital ecosystem, ensuring that the benefits of digital innovation are not undermined by preventable security risks.

for more information, the cyber resilience act’s dedicated webpage can be accessed here.

the faq - cyber resilience act implementation page can be found here.

related content: our blog post on the nis2 directive be accessed here.

harneys story began in 1960 in the british virgin islands, where we became the jurisdiction’s first-ever legal practice. that moment marked the start of a journey. sixty-five years later, we’ve grown from a single bvi office to an international law firm employing over 400 people and with 185 lawyers across 11 global locations, with plans for further expansion. at the centre of this, the bvi has remained at the heart of that evolution, shaping who we are and how we operate.

the bvi remains central to our global strategy. its strong regulatory environment, english common law foundation and political and economic stability have allowed it to become a trusted hub for cross-border transactions spanning asia, europe, and the americas. these strengths have supported the continuous expansion of both our transactional and our dispute resolution practices.

for me, the defining moments in harneys’ development have been the ones where we helped shape the jurisdiction itself by advising on landmark legislative developments including the international business companies act, the limited partnership act, and the economic substance legislation. equally important has been our commitment to talent development in the bvi, whether through our legal training programme launched in 2000, the scholarship programme introduced in 2023, or longstanding community initiatives, such as adopting francis lettsome primary school. more recent efforts, including our adopt-a-court programme and our financial services workshop for secondary school teachers, reflect our belief that the bvi’s future is built on investment in its people.

as we look ahead, the same spirit of innovation that has shaped the bvi’s legal and commercial landscape is now driving its rapid emergence in new sectors, particularly digital assets.

digital assets and innovation

to provide the best insight on this topic, i turned to phil graham, our global head of investment funds and digital assets, as this is very much his area of expertise. phil notes that the bvi has established itself as a leading jurisdiction, “the bvi is a leading jurisdiction for digital assets, decentralized finance (defi), and virtual asset service provider (vasp) regulation.” the jurisdiction’s vasp act requires registration with and supervision by the bvi financial services commission, which also provides a regulatory sandbox for defi projects.

since 2015, our global digital assets & blockchain team has been at the forefront of providing legal advice and structuring investment funds in the digital asset space. their work spans crisis management for offshore structures, governance for daos, crypto asset tracing, regulatory compliance, and token issuance.

we are very proud to have successfully obtained more vasp licenses for our clients than anyone else in the bvi, and also supported landmark developments, including helping launch a major l1 blockchain and one of the market-leading stablecoins from the bvi in the past year.

future frontiers and investment

looking ahead, we expect the next phase of bvi growth to be shaped by a combination of traditional structures and emerging opportunities. demand for private credit, digital asset strategies, and emerging manager platforms continues to grow, supported by the bvi’s tax neutral environment and adaptable legal framework. at the same time, fintech, tokenisation, and vasp-related activity are opening new avenues for innovation.

the bvi is well-positioned to capture this growth, but the global environment is becoming more demanding. the jurisdiction must continue balancing transparency, economic substance, and aml/ctf expectations with the commercial agility that has long set it apart. competition from other offshore and midshore centres continues to intensify, and maintaining speed, cost-effectiveness, and service quality will
be essential.

global trends, including esg, governance expectations, and digital transformation, are shaping client behaviour. more businesses are embedding sustainability into their structures, and the bvi’s flexible framework allows them to do so efficiently. at the intersection of asset management and fintech, tokenised and hybrid fund platforms are also gaining traction. meanwhile, the strengthening of courts and regulatory oversight is positioning the jurisdiction to meet rising global standards.

across markets, client expectations vary: asia values responsiveness and efficiency; the americas prioritise innovation, agility, and cost effectiveness; and europe focuses heavily on governance and regulatory insight. despite regional differences, our fundamental commitment remains the same - to provide exceptional, commercially grounded advice that meets clients’ global needs.

harneys' distinctiveness

being rooted in the bvi gives us a deep understanding of the jurisdiction’s regulatory, legal, and business landscape. this foundation enables us to deliver advice that is both technically robust and globally relevant. our physical presence, combined with offices across the americas, asia, and europe, allows us to operate seamlessly across time zones and jurisdictions.

this year (2025) has been a milestone for us. we opened new offices in jersey and dubai, bringing our global footprint to 11 locations. we also celebrated our 65th anniversary through the “65 for 65” initiative, completing 65 community-focused activities that strengthened our connection with the bvi and showcased our values of excellence, innovation, and people-first leadership.

these initiatives have not only allowed us to give back to the community but have also sparked new partnerships and highlighted areas where we can deepen our support in the years ahead.

vision for the future

looking ahead, the bvi office will remain central to serving our global client base. with emerging legislation around digital assets and international regulatory standards, the jurisdiction is continually evolving, and we intend to remain closely involved in that evolution.

i am confident that the bvi will remain a leading offshore financial centre. its legal and regulatory frameworks continue to evolve in ways that support global market needs, and we remain committed to advising on legislative advancements and promoting the jurisdiction worldwide.

in the years ahead, the bvi is poised to support new asset classes, esg-driven investments, and cross-border digital developments, and harneys will continue to champion the jurisdiction, contribute to its growth, and help shape its future.

_

this edition also features contributions from our team, including aki corsoni-husain (p19), david mathews (p60), christopher pease (p72), and james kitching (p22).

this article was originally published in bvi finance's business insight magazine.

on 19 march 2026, luxembourg formally adopted dac8 transposing the council directive (eu) 2023/2226 (dac8) enacting far-reaching tax transparency rules that apply retroactively from 1 january 2026, with first reporting due by 30 june 2027. this law mandates compulsory reporting for a broad spectrum of crypto-asset service providers (casps) and imposes significant enhancements on existing financial reporting standards.

dac8 has two clear objectives:

• to bring crypto‑asset activity within mandatory tax reporting and
• to streamline and strengthen the existing cooperation architecture between tax authorities.

in practice, this means that traditional financial institutions and a wide spectrum of digital‑asset operators with a luxembourg nexus face materially higher expectations on data capture, due diligence, reconciliation and governance.

the changes reach well beyond the markets in crypto-assets regulation (mica) authorised providers; any firm handling, exchanging or safeguarding crypto‑assets may fall within the definition of a reporting crypto‑asset service provider and be required to register, conduct due diligence and report annually.

crypto-asset reporting framework

the most notable innovation under dac8 is the introduction of the crypto-asset reporting framework (carf). under carf, entities that facilitate crypto‑asset transactions must identify reportable users through self‑certification and verification processes, notify those users about data collection, and file annual returns to the luxembourg tax authorities.

reporting covers specified user and transaction data, and nil returns are expected where no reportable users exist. where a crypto‑asset provider is also a reporting financial institution under the crs, the framework permits limited simplifications to avoid duplication; however, these do not remove the need for robust, documented controls around onboarding, classification and reporting.

• scope: the carf brings a wide array of casps operating with a luxembourg nexus into scope, regardless of their authorisation status under mica. this includes operators not previously subject to oversight.
• definition: dac8’s definition of crypto-assets is comprehensive, extending to all digital assets that can serve as payment or investment vehicles.
• obligations for casps:
  • registration: casps must register with luxembourg tax authorities. mica-authorised entities are registered automatically.
  • due diligence and self-certification: casps are required to classify users via self-certification and carry out verification to determine reportable persons.
  • user notification: individuals whose data is reportable must be promptly notified regarding collection and correction rights.
  • annual reporting: reportable user details and relevant transaction data must be submitted annually, including nil filings where applicable.