The Virgin Islands officially launched a new financial services product designed to draw business from investment funds, according to BVI Finance Limited.

Government activated the Limited Partnership Act, 2017, earlier this year, establishing a new partnership regime to replace the one created by the Partnership Act, 1996.

A limited partnership happens when two or more people unite to form a business, but only one or more needs to serve as the general partner and assume liability for the business’s debts. The others can act as limited partners and only be liable for the money they invested in the partnership.

The new regime better positions the VI to compete for limited partnership business — which often comes in the form of private equity funds — with other jurisdictions like the Cayman Islands, according to Robert Briant, a partner at Conyers Dill & Pearman’s VI office who provided input on the new legislation.

 

Grabbing business

As of Sept. 30, only 758 limited partnerships were registered in the VI under the former regime, according to the BVI Financial Services Commission’s most recent statistical bulletin.

Cayman, however, has about 23,000 limited parterships, a number the VI hopes to cut into, Mr. Briant explained.

The Conyers partner said he and other stakeholders proposed $750 yearly registration fees for limited partnerships, in addition to various smaller costs for different services. The final fee schedule will be included in the legislation’s accompanying regulations, which are not yet public.

Mr. Briant was reluctant to make specific predictions about the number of partnerships he hopes will register, though he said he would be happy if about 1,000 new entities register over the next three years.

Very few of the existing partnerships are likely to reregister under the new model, but likely will continue under the old regime, he added.

 

Advantages

The act is designed to modernise the territory’s limited partnership laws and offer some unique benefits that will give the VI’s marketplace an advantage over other jurisdictions, according to Mr. Briant.

One of the main ones: the ability to register charges against a limited partnership itself, separate from the general partner, and obtain priority under VI law, he explained.

The Conyers partner said he believes such a feature is unique to the VI’s new model.

Numerous other features were added by borrowing some of the attractive concepts from the standard BVI Business Company regime, he added.

“We’re not inventing the wheel for the first time,” Mr. Briant said. “We’re taking the wheel from one vehicle and putting it onto an entirely new vehicle.”

 

VI benefit

While optimistic, the Conyers partner was cautious not to overpromise what the new legislation could do for the territory’s revenue.

“This is not the golden egg. The [1984] International Business Companies Act was an extraordinary event. This is not that,” Mr. Briant said, adding, “This is part of an arsenal of products required to diversify the BVI financial services portfolio. … It’s another arrow in the quiver.”

Lorna Smith, the interim executive director of BVIF, spoke similarly.

“The BVI is committed to ensuring that our business legislation is modern and fits market needs, reflecting the actual commercial landscape in which companies operate,” she said in a BVIF press release.

The new law also has the potential to create a demand for more lawyers and accountants in the territory, Mr. Briant added.