Segregated Portfolio Companies (SPCs) are well recognised and widely used corporate vehicles, and the BVI is seeing increasing demand for them in the funds context. A segregated portfolio company benefits from statutory segregation of its assets and liabilities in one segregated portfolio from those of any other segregated portfolio, and from the general assets and liabilities of the company, but is a single, legal entity. The SPC has only one set of constitutional documents, one board of directors and, importantly, one set of annual licence fees. The ability to segregate the assets and liabilities of one segregated portfolio from another makes SPCs popular for umbrella or multi-class investment funds which can operate different investment strategies and, in particular, different levels of leverage, without risking cross contamination across the segregated portfolios.
The use of SPCs in the funds and insurance industries has grown in recent years and the concept is now well understood and recognised in the international financial services industry. Harneys BVI is receiving more frequent enquiries about establishing SPCs, not only for their traditional uses in the BVI as regulated funds and insurance companies, but also for a broader range of uses, for example as closed-end, unregulated funds or employee benefit schemes.
The BVI Business Companies Act, 2004 provides scope for greater flexibility as to the type of vehicles that are able to adopt the SPC structure, and the FSC is looking into widening the circumstances in which SPCs can be used. We expect that the use of SPCs in the funds industry will continue to grow, and that when the BVI expands the permitted uses of the SPC, it will become even more popular.
This article explores regulation of SPCs and key features of SPCs, including duty of directors, creditors, liquidation, shares, dividends and distributions, contracting with an SPC and financial statements.
A version of this article was also published in HedgeWeek.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.