Gibraltar Fund Formation and Management Advisory Services

Gibraltar is a popular jurisdiction for investment funds and their managers, offering robust fund legislation, favourable taxation,within an EU framework efficient regulation, the flexibility of a small jurisdiction and quality infrastructure.

The primary attraction of Gibraltar funds to investors and investment managers is reciprocal market access for UK and Gibraltar financial services firms. These permanent market access arrangements, generally referred to as the Gibraltar Authorisation Regime (GAR), are unique arrangements not available to any other British Overseas Territory, Crown Dependency or third country.

The legislation governing funds or collective investment schemes in Gibraltar is found in

The Companies Act
The Financial Services (Collective Investments Schemes) Act 2011.
The Financial Services Act 2019.
The Financial Services (Experienced Investor Funds) Regulations 2018.

The Financial Services (Collective Investments Schemes) Act defines a “collective investment scheme” as “any arrangement with respect to property, the purpose or effect of which is to enable persons taking part in the arrangement, whether by becoming owners of the property or any part of it or otherwise, to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income.”

Under the laws of Gibraltar, the following funds, which are all collective investment schemes (CISs), can be established:

Private Fund.
Experienced Investor Fund.
UCITS fund.
Non-UCITS retail fund.

After Brexit, a Gibraltar fund no longer falls within the scope of the EU Alternative Investment Fund Managers Directive (AIFMD) unless it purposely structures itself to access the EU market by appointing an EU fund manager or use the national private placement regimes available for funds that are out of scope of AIFMD.

This puts Gibraltar’s fund products on a level playing field with other financial centres, such as the Channel Islands and the Cayman Islands, but with the benefit of a well-regulated EIF regime, a very competitive private fund product, a strong professional services sector and an appealing tax regime.

The reciprocal market access between Gibraltar and the UK further puts Gibraltar funds at a huge advantage where access to the UK is a requirement.

Private Funds

A Private Fund is a CIS that can be offered privately to any identifiable group, capped at a maximum of 50 investors. The directors are obliged to follow the investment objectives set out in the offering documents but are not regulated or authorised by the Gibraltar Financial Services Commission (FSC).

Private funds can be established cost-effectively and quickly as private companies, limited partnerships or unit trusts, providing flexibility in structuring.

Key advantages of Gibraltar private funds include:

Limited investor pool – the restriction to 50 investors ensures exclusivity and allows for tailored investment strategies.
Lighter regulatory oversight – the reduced regulatory burden streamlines fund operations and reduces administrative costs.
Structural flexibility – the choice of legal structures accommodates various investor preferences and investment objectives.
Ideal for private wealth – suited for family offices and private wealth management due to the focus on privacy and tailored solutions.

Experienced Investor Funds

Experienced Investor Funds (EIFs) are the most popular fund type in Gibraltar for sophisticated and institutional investors.

An EIF is an authorised collective investment scheme that is exclusively for investment by experienced or high net worth investors. They can be set up quickly and with minimum regulatory intervention and are designed to invest in a wide range of traditional or alternative asset classes.

Investors in these funds should either:

Be investment professionals.
Have assets in excess of €1 million.
Have investments of €1 million invested in one or more EIFs.
Fall under the classification of a professional investor.

EIFs offer a high degree of flexibility and are an attractive option for investors seeking greater autonomy in managing and structuring their investments.

There is no restriction on asset classes or borrowing, and EIFs can opt out of certain requirements of the Alternative Investment Fund Managers Directive (AIFMD), allowing for greater flexibility and reduced regulatory burden.

There are no restrictions on the maximum size of an EIF, making them suitable for both small and large investment projects.

Generally, EIFs are formed as limited companies or as Protected Cell Companies (PCCs), although they may also be unit trusts, limited partnerships or any other vehicle acceptable to the FSC.

EIFs benefit from a streamlined set-up process and no regulatory approval is required before a fund can begin to raise capital and commence with its investment activities.

To achieve authorisation, the FSC must be notified of the launching of the fund within 14 days. Notification must be accompanied by the fund’s prospectus, memorandum and articles of association, a legal opinion from Gibraltar counsel confirming that the fund has been set up in accordance with the law, a form completed by the administrator and the prescribed fee.

Two of the directors of an EIF must be authorised by the FSC and reside in Gibraltar. The fund must also appoint a qualified administrator and submit audited accounts signed by a Gibraltar registered auditor.

UCITS Funds

UCITS stands for Undertakings for the Collective Investment in Transferable Securities. It is a regulatory framework that governs the management and distribution of investment funds that may be offered to the general public in the European Union.

There are controls over the types of investments that may be made and UCITS funds are regulated by the FSC.

In Gibraltar a UCITS fund can be established either as a common fund constituted by a trust deed or a binding agreement between the manager and the trustee, or as an open-ended investment company (OEIC) which would be a Gibraltar body corporate established by memorandum and articles.

A UCITS fund can also be created as an umbrella scheme with multiple sub-funds in a single structure.

Since Gibraltar is no longer within the EU, Gibraltar UCITS funds no longer have the right to passport their services within the EU on the basis of their Gibraltar licence.

Non-UCITS retail funds

Non-UCITS retail funds are licensed by the FSC and can be distributed to retail investors. Licensing of such funds can take up to six months. These funds can be structured as:

Umbrella funds.
Hedge funds.
Feeder funds.
Fund of funds.
Mutual funds.

Cryptofunds

Since Gibraltar’s DLT Regulatory Framework came into effect in 2018, Gibraltar’s Experienced Investor Fund (EIF) regime has become a popular vehicle to establish crypto funds, allowing institutional investors and others to invest in digital assets.

Crypto EIFs must clearly state the valuation methodology for its crypto assets and this must be clearly described in the fund’s offering memorandum.

As an EIF, the crypt fund may be managed by a third party investment manager or self-managed by its board of directors. Crypto EIFs can also be set up as protected cell companies (PCCs), allowing fund promoters to create sub-funds.

Sovereign Gibraltar Funds Services

If you are considering setting up a fund in Gibraltar, Sovereign provides a ‘turn-key’ solution that includes:

Incorporation and licensing of fund company.
Incorporation and licensing of fund management company.
Drafting of fund prospectus.
Drafting of agreements between the fund/investment manager and others such as custodian, investment advisor, bankers, registrars and company secretaries.
Introductions to auditors, bankers, brokers and other intermediaries.
Full fund administration and investment management services.

Depending upon the country of residency of the promoters, Sovereign can advise on how to structure the affairs of the fund, management company and investment advisor so as to achieve maximum tax efficiency.