If you are considering setting up a mutual fund or collective investment scheme ("CIS"), the amount of legal administration and paperwork that must be prepared and completed can be daunting.
Hiring a "Prime Broker" or major law firm to do the necessary can be a very expensive option. We offer an alternative.
Turn-key Solution
We have offices in Cayman Islands, Bahamas, British Virgin Islands, Gibraltar, Isle of Man, Malta, Cyprus, Mauritius - in fact all the major offshore centres where funds are most commonly established. We can assist with the set up of fund structures in all of these jurisdictions and more besides.
We offer a turn-key solution including:
- incorporation and licensing of fund company;
- incorporation and licensing of fund management company;
- drafting of fund prospectus;
- drafting of agreements between the fund/manager; and a) custodian, b) investment advisor, c) fund manager, d) bankers, e) registrars and f) company secretaries;
- introductions to auditors, bankers, brokers etc;
- full fund administration services.
In Bahamas we are permitted by the Central Bank to licence funds so can have a fund up and running in a matter of days.
Our services in this area would normally cost between US$25,000 and US$50,000. This is a fraction of the fees charged by prime brokers and leading law firms for the same service.
Tax Planning
In a traditional fund structure both the fund company itself and the fund manager are incorporated offshore. The manager generally charges the fund a fixed annual fee of around 2% and often a performance fee of up to 20%.
The investment strategy is normally in the hands of the promoters of the fund who are often onshore. The investment advisor will normally receive a portion of the fees reserved to the manager and any profit will be fully taxable onshore.
In an ideal scenario, therefore, the majority of the management fees are retained by the managers in a tax free offshore environment. Not unsurprisingly, many onshore tax authorities prefer to have the whole of the management fee taxed onshore and can use various arguments regarding lack of substance offshore, lack of any real management functions being carried out offshore, transfer pricing, various anti tax avoidance laws or principles etc to successfully argue that the majority or all of the management fee should be taxable onshore.
We can advise on how to structure the affairs of the fund, management company and investment advisor so as to achieve the maximum tax efficiency and defer or avoid tax on as much of the management fee as possible.
Tax Planning for the promoters of the Fund
Many countries have enacted rules which allow undistributed profits held offshore to be attributed to onshore shareholders.
In a typical hedge fund scenario this means that if the management company is able to keep management fees offshore in a tax free environment those fees may well be apportioned to the owner’s of the management company pro-rata to their shareholdings and taxed immediately upon them whether distributed to them or not. In other words even if the management fees can be kept offshore they will not escape being taxed on onshore promoters without further planning.
Dependent upon the country of residency of the promoters we can advise upon suitable strategies to make that legislation inapplicable allowing funds to be retained offshore and tax free. We can also advise upon suitable holding vehicles which would allow a sale of the fund to be made free of capital gains tax.
Fund Administration
If required, we can provide competitive in-house fund administration services through our office in Bahamas (that is Licensed by the Securities Commission of the Bahamas to administer funds), as well as providing a licensed asset management company Sovereign Asset Management Limited. We also work closely with a number of the best known global private banks, and can provide introductions to their many impressive trading platforms and broking facilities.
lan Le Breton, Gibraltar Magazine, January 2012
The advantage of a Trust owning your property
John Hanafin, CEO MIDDLE EAST, November 2011
QNUPS: the secret to escaping inheritance tax?
Howard Bilton, The Telegraph, October 2011