Mutual Funds
A mutual fund can be used to pool investors from various countries in an advantageous manner, as Barbados has a number of bilateral investment treaties (BITs) which grant Barbados entities most favoured nation status and protect their investments from unfair expropriation by providing for an international arbitration procedure for the settlement of disputes. Barbados currently has BITs with Botswana, Canada, China, CARICOM, Cuba, Finland, Germany, Italy, Mauritius, Mexico, Norway, Sweden, Switzerland, the United Kingdom, the Unites States of America and Venezuela.
Barbados mutual funds are governed by the Mutual Funds Act, Cap. 320B of the laws of Barbados (the “Act”). A mutual fund is classified under the Act as a registered unit trust, a company, partnership or society which has been granted a licence by the Securities Commission to carry on mutual fund business in or from Barbados.
Furthermore, international business companies (“IBCS”) are not precluded from being licensed as mutual funds and will be able to benefit from the tax incentives offered under the International Business Companies Act as well as the BITs.
The Act established three types of licences a general mutual fund licence, a limited investor licence and an exempt mutual fund licence.
A limited investor licence is granted where the equity interest is held by not more than 15 investors, the majority of whom are capable of appointing or removing the operator of the fund; and in the case where any of the investors is a corporation, that the corporation does not have more than 4 beneficial owners.
An exempt mutual fund licence is granted where the fund is licensed in a foreign jurisdiction. The initial registration fee for a mutual fund licence is US$5,000.00 and the licence must be renewed annually at a cost of US$2,500.00.
A Barbados licensed mutual fund must also have a mutual fund administrator who is also licensed under the Act. The administrator can also be licensed as an IBC and benefit from the tax incentives available to IBCs under the International Business Companies Act. The Act prescribes that a company which is seeking to be licensed as an administrator must have a minimum capitalization of US$500,000.00. Two types of administration licences are issued: (a) a general administration licence and (b) a restricted administration licence.
The holder of a general administration licence is authorized to act or carry on business as a mutual fund administrator in respect of an unlimited number of mutual funds whilst the holder of a restricted administration licence is authorized to act or carry on business as a mutual fund administrator solely in respect of the mutual funds specified in the licence. The initial registration fee for a general administration licence is US$5,000.00 and the licence must be renewed annually at a cost of US$2,500.00. The initial registration fee for a restricted administration licence is US$2,500.00 and the licence must be renewed annually at a cost of US$1,250.