Seychelles Mutual Funds and Hedge Funds,
Offshore Investment Fund
Seychelles mutual funds (“Seychelles investment funds”) are a popular choice for private equity funds (“private funds”) or funds limited to sophisticated investors (“professional funds”). In Seychelles, mutual funds are governed by the Seychelles Mutual Fund and Hedge Fund Act 2007 and are licensed by the Seychelles Financial Services Authority.
The Seychelles Mutual Fund and Hedge Fund Act 2007 defines a “mutual fund” as a company, unit trust or partnership that collects and pools funds for collective investment purposes including hedge fund purposes or with the aim of spreading investment risks, and issues equity interests enabling investors in the mutual fund to receive or have the right to receive a portion of profits or gains derived from the investments and includes (i) an umbrella fund whose equity interests are split or segregated into different funds or sub funds and (ii) a hedge fund.”
An “equity interest” means a share, trust unit or partnership that (a) carries an entitlement to participate in the profits or gains of the company, unit trust or partnership; and (b) is redeemable or re-purchasable at the option of the investor before commencement of the winding-up, termination or dissolution of the company, unit trust or partnership, but does not include a debt.
Therefore the Act only regulates open-ended funds and does not regulate nor license closed-ended funds.
Mutual Fund Administration
The Seychelles Mutual Fund and Hedge Fund Act 2008 prescribes for the mutual fund administration to be conducted from –
- within Seychelles by a licensed fund administrator; or
- from outside of Seychelles by an approved foreign administrator (a licensed fund administrator from another recognized jurisdiction).
Under the Act, “recognized jurisdictions” currently include Austria, Australia, Belgium, Bahamas, Bahrain, Bermuda, British Virgin Islands, Canada, Cayman Islands, Cyprus, Denmark, France, Germany, Gibraltar, Guernsey, Holland, Hong Kong, Isle of Man, Ireland, Japan, Jersey, Luxembourg, Malaysia (including Labuan), Mauritius, New Zealand, Singapore, South Africa, Switzerland, United Arab Emirates, United Kingdom and United States of America.
This provides a great deal of flexibility in terms of the fund administration options of Seychelles mutual funds.
Salient Features of Seychelles Mutual Funds
- Types of Mutual Funds – The FSA provides for licensing of 3 different types of Seychelles mutual funds (private funds, professional funds and public funds) as well as provisions for exempt foreign funds marketed in Seychelles or administered by a Seychelles fund administrator to be registered.
- Foreign Auditors Permitted – auditing of accounts of Seychelles mutual funds and fund administrators may be audited by approved overseas auditors including those qualified and belonging to recognised bodies in Australia, Canada, Hong Kong, Singapore, South Africa, UK and USA. This provides flexibility and comfort to both fund managers and investors who may have a relationship with an existing overseas audit firm. Otherwise, KPMG, BDO, Ernst & Young, Grant Thornton, PKF and others are available in Seychelles.
- Foreign Fund Administrators Permitted – explained below.
- Time Zone – Seychelles being located at GMT +4 falls within overlapping business hours from the Europe/Africa to Asia making it an ideal jurisdiction from which to provide fund administration or supporting domiciliary services of the fund vehicle for funds focused on the AMEA (Africa, Middle East and Asia).
- Competitive Costs – Seychelles mutual funds can be established, administered and maintained for much less than Cayman Islands mutual funds.
- Tried and Tested Fund Vehicles – the preferred vehicle for a Seychelles mutual fund is the popular Seychelles IBC which sees over 20,000 new company formations annually and is a tried and tested vehicle. Also available are the Seychelles PCC, Seychelles Special License Company, Seychelles Trust and Limited Partnership.
- Value – Seychelles offers an attractive overall proposition for mutual funds.
Type of Seychelles Mutual Funds and Hedge Funds
The Seychelles Mutual Fund and Hedge Fund Act prescribes four different types of funds:
Private Funds
A Private Fund” is a mutual fund
- the constitutional documents of which specify that it will have no more than 50 investors; or
- the constitutional documents of which specify that an invitation to the public to subscribe for or purchase equity interests in the mutual fund is prohibited.
Professional Funds
A Professional Fund means a mutual fund; the equity interests which can only be acquired by professional investors and in respect of which the initial minimum investment per investor is not less than $100,000 or its equivalent in any other convertible currency.
A Professional Investor means a person –
- whose ordinary business or employment involves, whether for his own account or the accounts of others, the acquisition or disposal of property of the same kind or substantially the same kind as the property of the relevant fund;
- who has a net worth, whether individually or jointly with his spouse, exceeding $1,000,000 or its equivalent in any other convertible currency, and has signed a declaration to such effect and consenting to be treated as a professional investor;
- a bank licensed under the Financial Institutions Act, 2004 or under the corresponding law of a recognized jurisdiction;
- a mutual fund licensed under this Act or under the corresponding law of a recognized jurisdiction;
- an insurance company licensed in Seychelles or under the corresponding law of a recognized jurisdiction; or
- a securities dealer or stock broker licensed in Seychelles or under the corresponding law of a recognized jurisdiction.
Public Funds
A Public Fund is any mutual fund which is not a private fund or a professional fund.
Exempt Foreign Funds
Exempt Foreign Funds are those holding a current license or other authorisation to operate as a mutual fund issued under the laws of a “recognised jurisdiction”. The Act allows foreign funds to receive an exemption from the Financial Services Authority to operate from within Seychelles without being licensed under the Act if the fund is:
- administered by a person holding a Seychelles fund administrator’s license;
- incorporated or otherwise established and domiciled outside Seychelles; and
- listed on a recognized stock exchange or has initial minimum investments of $100,000 or its equivalent per investor.
Fund Vehicles
Another distinct advantage of mutual and hedge funds licensed in Seychelles are the variety of options for fund vehicles:
- Seychelles International Business Companies (IBC) – tax exempt
- Seychelles Special License Companies (CSL) – has access to the growing Seychelles DTA tax treaty network and pays 1.5% on income
- Seychelles International Limited Partnerships (LP) – tax exempt
- Seychelles International Trusts (unit trusts) – tax exempt
- Companies, unit trusts or limited partnerships constituted in a recognized jurisdiction – tax exempt
Click here to read the full text of the Seychelles Mutual Fund and Hedge Fund Act 2008.
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