This is the most common structure and benefits from the flexibility of BVI corporate law.

A BVI Business Company is a separate legal entity from the investing shareholders. The shareholders of a BVI Business Company have no direct legal or beneficial interest in any of the assets of the company which are instead legally and beneficially owned by the company itself.

The BVI Business Companies Act provides a great deal of flexibility in terms of structuring funds. By way of example, there is no concept of “authorised capital” or “share capital” and therefore there is no longer a requirement for there to be any par value or capital attributed to shares. A company only has to state in its memorandum of association the maximum number of shares that it is authorised to issue. The directors may also designate different series of shares within each class without the need to amend the constitutional documents of the fund, giving a great deal more flexibility to funds wishing to use series accounting techniques to achieve equalisation of performance fee allocations among shareholders.

Although less commonly chosen, the limited partnership is sometimes preferred by clients who are familiar with funds structured as partnerships in their home jurisdiction, such as the US, and for those that are looking for a flow-through tax treatment.

A limited partnership can elect whether to have a separate legal personality distinct from its partners so that it can enter into contractual arrangements directly, rather than through its general partner. But in either structure, the General Partner is ultimately liable for the debts and obligations relating to the limited partnership, and so is very commonly set-up as a limited liability company in either the BVI or another jurisdiction which will preserve and protect the interests of the owners. As a matter of BVI law, a limited partner is not liable for the debts and obligations of the limited partnership (save for the amount contributed/committed).

A limited partnership is formed by a general partner and at least one limited partner executing a limited partnership agreement (or adopting a model form agreement) and the registered agent submitting a registration statement and registered agent consent to act to the Registrar of Limited Partnerships. The partnership agreement forms the internal governing document of the partnership, dealing with issues such as partnership contributions and withdrawals and the day-to-day running of the partnership and does not have to be filed with the registrar.

In some very specific circumstances and for clients in certain jurisdictions, using a unit trust can be favourable.

A unit trust arrangement is not a separate legal entity. The Trustee has legal capacity and holds the assets of the fund on the terms of the deed of trust for the investors in the unit trust scheme. Under BVI law, the holders of units in a unit trust scheme are the beneficial owners of the trust assets.

If the trustee of a BVI unit trust is a company incorporated in or operating out of the BVI, then the trustee is likely to require a trust licence under the BVI Banks and Trust Companies Act, 1990, as well as having to apply for recognition of the unit trust as a fund under SIBA.

An exempted company may register as a segregated portfolio company, which is a single company limited by shares but offering statutory segregation of assets and liabilities between separate “portfolios” (SPC). It is similar to a segregated cell or protected cell company in many other jurisdictions.

An SPC may establish any number of segregated portfolios. Assets and liabilities attributed to a particular segregated portfolio are legally separated from the assets and liabilities attributed to any other segregated portfolio. A creditor who is party to a contract involving a particular segregated portfolio will have restricted recourse and will be entitled to recover only against assets attributed and credited to the specific segregated portfolio to which the contract is also attributed.

SPCs can be useful as multi-strategy vehicles and platform vehicles. Savings by using multi-strategy SPCs are often not as great as anticipated however, and SPCs with multiple segregated portfolios do require a greater degree of care to ensure assets are properly segregated, contracts are entered into on behalf of the correct segregated portfolio and inadvertent cross-collateralisation does not occur.