Eternity Law International — News — Investment fund in Bahamas

Investment fund in Bahamas

Published:
August 7, 2024

The Bahamas has become a popular location for many licensed investment funds due to its favorable terms and efficient regulation. The Investment Funds Act (IFA Act) has played an important role in strengthening the Bahamas’ position in the global investment vehicle management market. The Securities Exchange Board (SCB) regulates, licenses and registers investment fund Bahamas. Investment funds play an important role in the financial ecosystem by providing collective investment opportunities to institutional and private investors. The Bahamas, with its favorable tax conditions and transparent legal framework, has become one of the leading centers for the creation and management of investment funds.

Our company specializes in providing consulting services on the creation of such organizations and obtaining an investment fund license in any jurisdiction around the world. Experienced professionals help clients navigate the complex legal environment and take advantage of all the benefits the Bahamas has to offer.

Bahamas investment regulations

The Investment Funds Act, passed in 2019 and which came into force on 1 September 2019, represents a modern update to the investment fund regulatory system in the Bahamas. Our company actively cooperates with institutional clients seeking to create investment funds in accordance with the requirements of this law. The new IFA Act is aimed at attracting more institutional clients and is harmonized with the EU AIFMD Directive, allowing Bahamian funds to be marketed in the EU through national private placement regimes.

Types of investment funds

An entrepreneur who intends to implement Bahamas fund setup should know that in this jurisdiction there are four main types of investment funds, each of which has its own characteristics and advantages.

  1. Standard Investment Fund. This type of fund provides the opportunity for a wide range of investors to purchase shares of the fund. Such funds can operate as collective investment schemes (CIS), making them attractive to private investors and small institutional clients. The Standard Fund is one of the most flexible instruments that allows investors to receive income from a wide range of assets.
  2. Professional Investment Fund. This fund is intended for institutional investors and professional market participants. Professional funds can be licensed by both the administrator and the chief supervisor, speeding up the start-up process. Such funds are required to undergo an annual audit and have a licensed administrator, which guarantees a high level of transparency and reliability.
  3. Recognized Foreign Fund. This structure is intended for funds incorporated in other jurisdictions that wish to register in the Bahamas to sell their interests. Registering a foreign fund in the Bahamas allows it to take advantage of local laws and tax conditions while remaining subject to the jurisdiction of its home country.
  4. SMART Fund. SMART funds are innovative and flexible vehicles that include seven types of investment structures. Each structure is designed to meet specific business cases, taking into account the risk and characteristics of each type of fund. SMART funds give investors the option to forgo audits in favor of semi-annual reports and accept streamlined term sheets, making them attractive to different types of investors.

Starting a fund in Bahamas: general procedure

Bahamas fund registration requires careful preparation and compliance with a number of requirements. Our company offers a full range of services for registration and support of investment funds, ensuring compliance with all regulations and local legal requirements.

  1. Preparation of documentation. To register a fund, it is necessary to prepare and submit to the SCB a memorandum containing information about the key participants of the fund, its investment objectives and policies, as well as the rules of operation.
  2. Appointment of a licensed administrator. Professional funds are required to have a licensed administrator who will monitor the fund’s activities and ensure compliance with all requirements.
  3. Passing the audit. The fund must undergo an annual audit, the results of which are submitted to the SCB. This ensures a high level of transparency and investor protection.
  4. Obtaining a license. After submitting all the necessary documents and passing the verification, the fund receives a license for investment activities in the Bahamas.

Bahamas fund management: requirements for fund investors

Investors of a professional fund can be:

  • local or foreign banks;
  • local or foreign trusts;
  • registered FX dealers or firms authorized as advisors for investments in securities with a capital of at least 120 thousand US dollars;
  • insurance companies (local or non-resident);
  • investment funds (local or foreign);
  • individuals with a capital of at least US$1 million;
  • trusts with assets exceeding five million US dollars.

Registration of a SMART fund in the Bahamas: features

SMART Bahamas investment funds are designed to meet the needs of international clients by offering innovative and flexible solutions. The introduction of the SMART Fund concept has enabled SCB to create a product that meets the changing demands of the global market.

All SMART funds have a number of common features:

  • the possibility of abandoning the audit in favor of semi-annual reports, which helps manage the current expenses of the fund;
  • optimized term sheets with appropriate disclosures;
  • limiting the number of investors (5, 10 or 50), which allows for more efficient fund management.

Registering a SMART fund requires similar steps as for other types of funds, but taking into account the specifics of each type of SMART fund. Our company provides services for registration and support of SMART funds, helping clients take advantage of all the benefits of this innovative product. We also have options for ready-made businesses, in particular, we can offer a ready-made alternative investment fund in the Czech Republic for sale and much more.

Available structures for Bahamas fund administration

Investment funds in the Bahamas can be structured in a variety of forms, each with its own characteristics and advantages.

  1. International Business Company (IBC). An IBC can be converted into an investment fund without the requirement of having a local director. This structure provides flexibility and ease of management, which makes it attractive to foreign investors.
  2. Segregated Account Company (SAC). A SAC allows the management of segregated accounts and can be entirely foreign. This structure provides asset protection and flexibility in investment management.
  3. Exempt Limited Liability Partnership (ELP). An ELP is registered by one or more partners to offer shares to investors. This structure provides partners with limited liability and flexibility in management.
  4. Unit Trust. The trust is administered by a trustee and units are offered to investors. A mutual fund does not have the status of a legal entity, which simplifies its management and tax aspects.

Benefits of Bahamas investment funds

The Bahamas offers a number of advantages for setting up and managing investment funds.

  1. Benefits in terms of Bahamas investment fund taxation. The islands offer favorable tax treatment for investment funds, including exemption from capital gains tax, dividend tax and income tax.
  2. Transparent legislation. Local legislation complies with international standards and requirements, which ensures a high degree of confidence from investors and regulators.
  3. Flexibility of structure. The ability to choose from different types of structures allows investors to choose the most suitable option for their needs.
  4. Developed infrastructure. The Bahamas offers a developed financial infrastructure, including access to international banks, law firms and consulting firms.
  5. High level of confidentiality. The laws of the Bahamas provide a high level of confidentiality for investors, which is an important factor for many clients.

Establishing an investment fund in the Bahamas requires compliance with local regulations and regulations. SCB is a member of IOSCO, which demonstrates its high regulatory standards.

There are four types of investment funds in the Bahamas: professional funds, SMART funds, established foreign funds and standard investment funds. Our company is ready to help you understand these issues and provide advice on the regulation of investment activities in the Bahamas. We provide full support during the process of registering investment funds in SVG, Cyprus, Portugal, Estonia and other countries. Contact us now.

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