Introduction

Experienced Investor Funds (“EIFs” and each an “EIF”) are designed for sophisticated investors and they are very fast to set up.  It is easy to qualify to invest in an EIF as a minimum investment of EUROS 100,000 will automatically be enough. 

A lesser investment of EUROS 50,000 can also be enough provided that an investor has received investment advice from a regulated professional. The EIF itself does not need to be licensed by our financial services regulator, the Gibraltar Financial Services Commission (“GFSC”).

It needs Gibraltar resident directors and they are the ones who are licensed and regulated.  Therefore, there is no need to seek prior permission to launch an EIF and there is no delay caused by the regulatory authorities.

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EIFs pay no tax in Gibraltar and they are able to pay investors their profits free of Gibraltar tax. 

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The EIF can be set up relatively quickly. If all persons involved work hard, there is no reason why it cannot be done in a couple of months. Crucially, there is no need to wait for authorisation from the Authorities (as with some other jurisdictions) before the EIF can be launched.

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Basic Structure

The EIF would be setup as a Gibraltar limited liability company. Its constitutional documents are based on the English law model and would consist of a certificate of in corporation and tailor-made Articles and Memorandum of Association.

Shares

The EIF will normally contain two classes of shares: (a) ordinary/management shares which will belong to the promoter of the EIF and (b) redeemable preference shares which investors can subscribe to and, in this way, invest in the EIF. 
 

The ordinary/management shares will have all of the voting rights and, as such, the promoter can control the EIF. It also entitles the holder of these shares to charge management and performance fees. It does not, however, carry an entitlement to dividends or profits.
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The preference shares can be redeemable shares which will entitle the investor to redeem his shares at the Net Asset Value (“NAV”).

Private Placement Memorandum (“PPM”)

The PPM is the detailed offering document/prospectus of the EIF and we will draw this up. This will contain, amongst other things, the investment strategy, fees and expenses charged by the investment manager, valuation method, details of principal contracts entered into, subscription process and form and redemption process.

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Directors & Ensuring Management & Control is in Gibraltar

The EIF is required to have at least two resident Gibraltar directors. These need to be licensed by the GFSC as EIF Directors. We have practitioners with such a licence. It is now possible, however, to have a suitably-qualified non-Gibraltar resident approved as an EIF Director 
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The client can also be appointed as the Investment Director of the EIF. The Board can delegate all investment functions to such director. The Investment Director is, in effect, the investment manager and adviser to the EIF. In addition to having its normal duties as a director, it will have these additional responsibilities. The GFSC do not require such an investment manager to be licensed as it is providing services to its own company. 
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It is advisable to have a majority of Gibraltar-resident directors in order to provide enough substance here. In such a case, all board meetings should be held in Gibraltar and all strategic decisions taken here. Major contracts should also be signed in Gibraltar.
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In essence, management and control of a Private Fund should be in Gibraltar as this will ensure that Gibraltar regulatory and tax laws are applicable.
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Day to day operations can, though, be conducted outside Gibraltar. For example, it is legitimate for the investment management to be carried out by and Investment Manager from outside Gibraltar.

Investment Manager

An independent licensed investment manager can be appointed. Alternatively an Investment Director can be appointed which will also hold the ordinary shares in the EIF. 

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Fund Administrator

The EIF is required to have a Gibraltar Fund Administrator. They have all of the duties you would expect including opening the bank accounts, compiling due diligence on investors in accordance with our anti-money laundering laws, processing subscriptions and redemptions, keeping management accounts and calculating the NAV.

Auditor

It is a requirement to have a Gibraltar auditor. We have a range of well-known international firms in Gibraltar which can do this.

Banking & Custodian

Provided that the EIF has assets under management of less than EUR 100m, there is no restriction as to where the EIF establishes its bank account and custodian/depositary. 

Deemed authorisation

There is no need to wait for approval from the GFSC before launching the EIF (or any of the sub-funds comprised by different cells). Once the EIF is ready it can start receiving subscriptions and commence its trading activities immediately. The only requirement is that the Fund Administrator and the EIF’s lawyer, submit various documents to the GFSC within 14 days of launch. Provided that this is done, the EIF is deemed to be authorised under Gibraltar law and it does not need to wait for a licence or for any permission from the GFSC.

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