Gibraltar is a popular jurisdiction for the establishment of investment funds and their managers, offering robust fund legislation, favourable tax advantages, efficient regulation, the flexibility of a small jurisdiction, quality infrastructure and the security of high regulatory standards which meet UK and EU requirements. Gibraltar’s funds and investments infrastructure has developed over the past decade.
During this time Gibraltar has become home to a broad spectrum of domestic and international companies, including banks, fund administrators, accountants, investment managers, fund managers, stock brokers, company managers, auditors and lawyers who comprise Gibraltar’s funds service industry. Gibraltar has an impressive pool of experienced service providers and offers political and economic stability on the European continent.
The Gibraltar Financial Services Commission (GFSC)
The financial services regulator in Gibraltar, the GFSC, prides itself on being a pragmatic and approachable regulator and on understanding the business of the companies it regulates. That in turn ensures that Gibraltar has a quick and efficient regulatory process. Prior to submission of an application, it is usual for the applicant and/or professional advisers to meet with the GFSC in order to discuss points of principle and/or clarification. All application requirements, fee details and forms are available to be downloaded from the GFSC’s website at www.fsc.gi
Fund Managers & Asset Managers
Gibraltar joined the EU with the UK in 1973 and consequently has transposed EU Directives into Gibraltar law. This has included:
- the alternative investment fund managers directive (AIFMD);
- the undertakings for collecitve investment in transferrable securities directives (UCITS Directive); and
- the markets in financial instruments directives (MiFID).
By virtue of Gibraltar forming part of the EU, Gibraltar fund and asset managers are able to passport across the European Union.
Fund and asset managers are taxed at the corporate rate of tax of 10% of profits. In addition, senior executives or managers who possess skills that are necessary to promote and sustain activity of particular economic value to Gibraltar or the firm, can obtain a special tax status known as High Executive Possessing Special Skills (HEPSS). This allows the individual’s personal tax liability to be capped at approximately £30,000 if the individual earns over £120,000 per annum.
The Gibraltar funds offering
Gibraltar’s fund products include both domestic regimes and regimes driven by AIFMD and UCITS and they can be managed by a third-party manager or self-managed by its board of directors:
- Private Schemes;
- Experienced investor funds (EIFs);
- Retail schemes;
- Gibraltar qualified alternative investment funds (Gibraltar QAIF); and
- UCITS schemes.
Gibraltar funds can be established using a variety of vehicles, this includes partnerships, companies and protected cell companies.
A private scheme is a collective investment scheme that is not listed on a stock exchange and is not authorised to have more than 50 investors. A private scheme does not require authorisation by the GFSC and is considered unregulated.
Experienced Investor Funds
An EIF is a regulated collective investment scheme exclusively for investment by experienced investors. EIFs are designed to invest in a wide range of traditional and alternative asset classes, most recently this has included cryptocurrency and blockchain related projects. There are no restrictions in law as to the eligible asset classes for an EIF, and there are no diversification requirements within the relevant legislation.
One of the attractions of Gibraltar as a fund domicile is that no regulatory approval is required before an EIF can begin to raise capital and commence with its investment activities. Gibraltar is a unique jurisdiction on the European continent where an EIF may be launched based on a legal opinion that confirms the EIF has met all legal and structural requirements for its operations, and provided that the fund’s documentation is submitted to the regulator within ten business days of launch. The majority of EIFs make use of this preferred route, however, alternative or exotic fund structures and strategies are generally discussed with the regulator ahead of launch.
Gibraltar’s retail scheme regime (also known as the non-UCITS retail scheme) pre-dates UCITS and is currently utilised in the context of the establishment of retail schemes in Gibraltar that do not fall within the remit of UCITS.
Retail schemes are regulated by the GFSC and the authorisation process is very similar to that of a UCITS.
Gibraltar QAIFs are established pursuant to the transposition of AIFMD and the provisions of Gibraltar’s EIF regime offering an extremely efficient and flexible manner of launching an AIF that is in-scope for the purposes of AIFMD.
In the case of a Gibraltar QAIF with an external AIFM, it can commence to undertake its activities as soon as the GFSC has been notified of the appointment of the AIFM.
Gibraltar QAIFs benefit from the marketing passport and therefore access to the European market.
Gibraltar UCITS are established pursuant to the transposition of the UCITS Directive and can be established as both common funds and investment companies
A Gibraltar UCITS fund can be structured as an umbrella scheme under which the contribution of the participants and the profits out of which payments are to be made are pooled separately in relation to separate parts of the scheme.
Like the Gibraltar QAIF, UCITS benefit from the marketing passport and therefore access to the European market.