Structuring Options For Offshore Fund Management Companies

I’m often approached by clients looking to set up a Fund Management or Investment Services Company Offshore.

 

For the purposes of this week’s article I’m going to focus on the options for incorporating such a business in Seychelles.

 

You may be surprised to know there are several ways to set up a Funds Management Type Company in Seychelles (including several options that should not require any form of special license).

 

Here are the options:

 

(a)    If your main aim is to obtain a license offshore to trade others funds then a Seychelles Securities Dealer’s license might be the way forward (usually referred to in other Offshore Jurisdictions as a Broker’s License). See below for details; or

 

(b)   Alternatively you could set up a Private (non-licensed) Closed End Fund. See below for details; or

 

(c)    Another possibility is you could obtain a Mutual Fund license for the proposed business. Seychelles is arguably the quickest, easiest and cheapest place to do this. See below for details;

 

(d)   Another possibility is to utilise a Seychelles IBC which could be contracted to trade an investor’s money in the broker’s account under Power of Attorney. See below “How To Trade 3rd Party Funds Using a POA” which explains how that can work; or

 

(e)   If you just want to assist others to invest or manage monies you could apply for a Financial Adviser’s License in Seychelles. See below for details.

 

Seychelles Securities Dealers Licenses

 

A Seychelles Securities Dealer’s License is a license which allows a Business (ie a Seychelles Company) to trade in securities, either as a principal (ie on its own account) or as an agent (on behalf of the Company’s clients). In comparable jurisdictions such a license is usually referred to as a Broker’s License. For more detailed information please contact me.

 

Private (Non-licensed) Closed End Fund

 

A closed end fund is in effect a private or collective investment company limited by shares wherein (a) generally the shareholders have the right to hire/fire the directors and (b) where the investment matures and is redeemable at the conclusion of a set period and (c) where the number of shareholders/investors is set (ie you can’t take on board new investors during the defined investment period). If structured and managed correctly such a Company should not have to apply for a Fund License. For more detailed information please contact me.

 

Seychelles Licensed Mutual Fund

 

There are three kinds of Licensed Fund that one can set up in Seychelles, a Public Fund, a Professional Fund and a Private Fund. The essential differences and distinctions are as follows: 

 

  1. A Public Fund is one which is designed to be mass marketed. As it is aimed at the general public a very detailed Offering document must be given to and approved by the Authority before a license is granted. (The authority needs to be sure that all plans and risks of the fund are disclosed upfront to the investors).
  2. A Professional Fund is one aimed at qualified/sophisticated Investors. Minimum investment is $100,000 and only qualified investors can invest (ie in the case of an individual, the investor must have a net worth of at least one million USD). Unlike a Public Fund one does not need to file a finely detailed Offering document prior to receiving License approval.
  3. A Private Fund is one aimed at the Professional Adviser looking to gather together a consortium of investors from his/her client database. It is limited to 50 investors only. No minimum or maximum investment is required. Again, unlike a Public Fund one does not need to file a finely detailed Offering document prior to receiving License approval.

 

For detailed information as regards Seychelles Licensed Funds click on this link:

http://offshoreincorporate.com/faq/how-does-one-go-about-obtaining-a-fund-license-in-seychelles/

 

Trading Funds Under PoA

 

Powers of Attorney are commonly used by Traders (eg Forex Traders) to trade funds for a 3rd party. How it works is:

 

(a)   In the case of forex etc trading an account is opened in the name of the 3rd party investor (“the Account Owner”).

 

(b)   The Trader sets up a tax free Offshore Company (“IBC”)

 

(c)    The Account Owner (ie 3rd party investor referred to in a PoA as “the Principal”) signs a Power of Attorney with the Trader’s IBC which appoints at law the Trader’s IBC as the Account Owner’s Authorized Trader and attorney-in-fact (the “Agent”).

 

(d) The Trader and the Investor enter into an agreement whereby the Trader is entitled to be paid a percentage of profits generated.

 

Seychelles Investment Adviser Licenses

 

Such a license enables you to act Internationally as an investment advisor for Funds, Family Businesses, and High Net Worth Individuals (“HNWIs”).

 

It is highly useful for Investment Groups who manage and provide advice to investment funds and HNWIs as regards wealth management, asset preservation and structuring advice. The Seychelles Investment Advisor License would be tremendously helpful especially if the client has given you a Power Of Attorney to manage and organize his/her portfolio. Such a license can enable you to act either via agreement or under Power of Attorney.

 

With this license, you can:

          Advise other persons concerning investment in securities

          Issue, analyze or prepare reports concerning specific portfolios

          Manage a portfolio of securities for another person

 

As the saying goes there’s more than one way to skin a cat. But the devil is in the detail! Do make sure then that you seek legal/financial/tax advice before committing to incorporate such a business as described above Offshore.

 

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