Anguilla provides advantages for hedge funds

Anguilla provides advantages for Hedge Funds and IBCs

In 2004, Anguilla added legislation that provided for mutual funds, captive insurance and protected cell companies. The IBC (International Business Company) Act provides all the necessary features of this entity with enhanced shareholder protections.

INCORPORATION

Anguilla has an online company formation system, ACORN, which allows for the incorporation of IBCs, and other corporate entities, as well as the filing of annual returns and all other statutory documents over the internet. Only licensed practitioners i.e. holders of a company management (registered agent), trust or offshore banking license or their approved overseas agents, are allowed access to the system. At the end of the incorporation process, the incorporator receives a digital certificate of incorporation which can be used to open bank accounts. There is no need to take any documents to the Companies Registry for stamping. These are automatically generated by the ACORN system and service providers simply have to collect the hard copy of the articles of incorporation bylaws which will all bear the Registrar's stamp, from the Registry.

Shares and share capital

Shares may be issued as registered shares or bearer shares or both and may be issued to corporations or natural persons. IBCs can be formed with any authorized share capital and in any currency approved by the Registrar. The government fees do not increase based on share capital and shares may be issued with no par value. Shares may also be issued in fractions.

Share registers

IBCs must maintain registers of shareholders and directors. However, there is no requirement to file them with the Registrar.

Registered office/registered agent

Each IBC must have a registered office and registered agent. Only licensed practitioners can provide this service.

Directors and company secretary

An IBC must have at least one director but there is no residency requirement. Directors have all powers provided for in the bylaws except those reserved to the shareholders by the Act. Directors may be corporations or natural persons. There is also no requirement for a company secretary.

Shareholders� meetings

Meetings may occur outside of Anguilla, wherever and in whatever manner determined by the shareholders. Meetings may occur by telephone or other electronic means.

In practice, all companies formed in Anguilla are ordinarily incorporated by a trust company. Because all companies are required to have a licensed registered agent, and only trust companies are so licensed, in practice they control the incorporation procedure.

Technically any person may incorporate an IBC or a CAC by subscribing and filing the Articles of Incorporation, but as all IBCs and CACs are required by law to maintain a registered agent at all times, in practice the registered agent will invariably deal with the incorporation procedure. Similarly any person may form an LLC by subscribing the Articles of Formation, but because all LLCs are required at all times to have a registered agent, this process is usually undertaken by that agent.

All IBCs must be incorporated as companies limited by shares. A CAC may be incorporated as either (1) a company limited by shares, (2) a company limited by guarantee, or (3) a company limited by shares and by guarantee.

 

The corporate constitution of an Anguillan company depends upon which statute it is incorporated under.

         For an International Business Company, they are the Articles of Incorporation and the by-laws. The Articles of Incorporation are publicly filed upon incorporation, but they are a relatively perfunctory document containing very little information beyond the name of the company, the registered office and registered agent, and particulars of the authorised share capital. The regulation of the company's affairs is primarily delegated to the by-laws which are a private document not accessible by the public which are maintained at the company's registered office.

         For a private company registered under the Companies Act, they also consist of the Articles of Incorporation and by-laws.

         For a limited liability company, they are the Articles of Formation and the LLC agreement. Similar to IBCs, the Articles of Formation are publicly filed upon registration, but they are a relatively perfunctory document containing very little information beyond the name of the company, the registered office and registered agent. The principal regulation of the company's affairs is primarily delegated to the LLC agreement which is a private document not accessible by the public which are maintained at the company's registered office.

 

The Articles of Incorporation (or Formation) of a company are filed with the Companies Registry but are not available for public inspection. However, the by-laws or LLC agreement are private, and not available to the public. In each case, the constitutional documents may be amended without a court application, but where the document is publicly filed, the amendment will normally need to also be publicly filed before it becomes effective.

For IBCs and CACs the Articles of incorporation and by-laws will bind the company and each member of the company as if they had been executed by them personally. There is no equivalent provision for LLCs.

In addition to raising capital from their members by way of equity, Anguillan companies may raise capital by way of debt, either in the form of loans or by issuing debt securities. Companies are not required to file financing statements in Anguilla when borrowing money.

Anguilla offers a low cost and efficient regulatory fund environment for private investment funds. 3 types of funds allowed, the two of interest to small offshore fund operators being Private and Professional Funds. A fund may be in the form of Anguillan company, Intl business company, LLC, limited partnership, partnership, unit trust or protected cell company, protected cell accounts, segregated portfolio company, or segregated portfolio accounts. This allows for the issuance of series or classes of shares with different rights, thus allowing for the creation of umbrella funds and master/feeder structures.

Private Funds

This refers to a mutual fund whose constitutional documents specify that it will have no more than 99 members. Private funds are recognised under the Act. The documents must also specify that the making of an invitation to subscribe for or purchase shares issued by the mutual fund are not offered to the public. Exemption from recognition is given to a family trust fund as defined in the Act.

There is no restriction on the amount of investment by individuals who may constitute a private fund.

Professional Funds

This refers to a mutual fund whose shares are made available only to professional investors and the initial investment in which, in respect of each of the persons constituting a majority of such investors, is not less than US$100,000 or its equivalent in any other currency. Professional funds are recognised under the Act. Professional investors are required to state in writing that they consent to being treated as a professional investor.

There is no restriction on the number of investors who may constitute a professional fund.

A mutual fund may also be recognised as a professional fund if it was carrying on business or engaged in an activity as a mutual fund on the date of the coming into force of the Act; the initial investments in respect of the majority of each of the investors in the mutual fund have been not less than US$100,000 or its equivalent in any other currency. Furthermore, the shares of the mutual fund are, after the date of the coming into force of the Act, made available only to professional investors.

Offshore choices for Latin American investors

Small world

8 Jul 2011

 

The scramble for yield and return has sent investors scouring the globe in the post-credit crisis environment. Although still unprepared to invest too far from the beaten track, improved liquidity in markets like Latam has meant there is real opportunity for investors to reduce their risk profile through allocations to emerging markets. 

...

Latam investor base

The message appears to be that there is little let up in the demand for Ucits structures among investors who crave onshore structures, particularly in the absolute return format, but clearly that isn’t for everyone. In Brazil the opposite can be said. The market is currently awash with financial products and investors aren’t desperate for the security offered by Ucits, particularly in an absolute return fund.

“Things are going well in the real economy. When you analyse the risk assets, like the Bovespa, then there are certainly some problems but it’s because investors are wary of putting their money to work at the moment,” says Otavio de Magalhães Coutinho Vieira, director of investments Safdie Private Bank based in Sao Paolo. “This is because there are so many IPOs and financial products coming to the market. It’s a type of digestion the market is going through, and I believe that it will pass through a period of ups and downs and there won’t be too much definition for the markets.”

The ‘multimercados’ make up the majority of the market, regulated onshore products, whereas traditional hedge funds are set up as offshore vehicles attracting a different  client base. There’s no real rush by local institutional investors to invest in Ucits-wrapped funds, even hedge funds. “There is no rush. The majority of the investors here, the big endowments and the pension funds, prefer to go down the managed account route,” says Vieira. “And the ones that are launching these structures are the big banks so it depends more on the size and the objectives of the manager.

“Independent managers need to have some control over their client base so naturally prefer pension and endowments, which are longer term investors than the retail investors. In general these retail investors want to have a very liquid strategy and these independent guys are more dedicated to mid-caps and even small-caps, and they want a long term-oriented client base.”

A survey completed by KPMG released in early June indicated that the appetite for Ucits was still strong but that the wholesale shift to Ucits [Undertakings for Collective Investment in Transferable Securities] products hadn’t quite happened as many expected. In a lot of cases hedge fund managers opted to keep an offshore vehicle while at the same time create an onshore product that appeals to a certain investor base, largely reflecting the mixed attitude of investors.

Pension funds and endowments in places like Brazil have yet to come round to Ucits, and may not, although some of the institutional in Peru and Chile are more avid investors in Ucits products. “Here in Latam we didn’t have those problems that a lot of places had in 2008. So if a Latin American investor wants to have an absolute return type of product they’ll go toward a Cayman vehicle [offshore]. It is a different game [in Latin America],” says Vieira.

“For other investors Luxembourg protection matters but for Latam investors you see more plain vanilla type of products with a certain alpha attached. Hedge fund managers are receiving demand for their capacity and their skill at alpha generation and the growth is coming from big institutional investors, so Luxembourg [Ucits] is not an issue for them.”

Full text in http://www.latamfm.com

Panama Punching above its weight

Punching above its weight

3 Oct 2011

Keywords: investment appeal, Market, News, Panama

Panama continues to appeal to international investors despite its relative insignificance in size. The Central American tax haven of just three million people has not attracted brokers and service providers to develop into a financial hub, but its attractive tax environment has helped it attract more than $10bn in foreign direct investment (FDI) since 2006, a quarter of which arrived in 2010.

“Investors use our jurisdiction for reduced taxes for the income from investment vehicles,” explains Ernesto Chong Coronado, CEO of PMC International Management Corp.  “Panama is not like a modern financial centre where you see everybody coming here to be a brokerage house or broker-dealer.”

With limited direct investment opportunities, funds play an important role in getting investors access to the Panama growth story – indeed, Panama continues to be one of Latam’s fastest growing economies. The World Bank projects that Panama’s GDP, which grew 4.5% in 2010, will grow at 7.8% in 2011 and 6.8% in 2012.

“The growth outlook for Panama´s economy is very promising,” says Ricardo Zarak, senior vice president at Prival Securities. “Construction, tourism, logistics and financial services are the sectors that offer the best investment opportunities and potential.”

BBVA Research says the Panamanian economy rallied by 7.5% year-on-year in 2010, regaining momentum after growth slowed during 2009. “Panama thereby consolidated its position as one of the fastest growing economies in Latam. Quarterly GDP growth accelerated over the year, supported by the strong growth of domestic demand, driven by increased spending on the public sector investments programme and Panama Canal expansion works,” the firm said.

Indeed, Panama’s significant government spending on a pipeline of high profile projects is one of the main factors drawing in international investors (and also fuelling a hefty account deficit). “A lot of developments are beginning in Panama,” says Jorge Vallarino vice president of treasury and institutional relationships at MMG Bank. “When you look at the canal expanding, for example, there are a lot of opportunities to develop services tied to that in particular.”

Considerable amounts of capital are going into certain sectors including tourism-related real estate, with a lot of construction around the hospitality sector planned for the future. “I think the real gems here are going to be the projects that have been developed in beach areas,” says Vallarino.

However, political risk still exists, with the government changing every five years and new rules evolving, often as a result of constantly changing agendas, which can make development somewhat unpredictable. A more pressing concern, however, is the potential inflationary pressures associated with global commodities.

“The main economic weakness of Panama is the high dependency on imports, especially on fuels, and an unspecialised labour force, which has caused wage inflation in the country,” says Zarak. “Panama´s dependency on fuel imports could damage growth – a spike on the price of oil due to circumstances from the Middle East will have a negative effect on consumer´s disposable income.”

“Inflation is set to be close to 5.3% on average, driven by strong business activity and high international commodity prices,” said BBVA Research. “The main risk threatening the economy’s performance would be intensification of the political crisis in the Middle East and the subsequent effects of this on oil prices and world trade flows.

“We forecast inflation of close to 5.3% on average during 2011, moderating in 2012 towards a rate of 4.4%, consistent with the adjustment expected in international commodity prices and the strengthening dollar, due to a more restrictive monetary policy in the US,” the firm added. “However, amid strong momentum in terms of economic activity and in the absence of monetary policy instruments to temper spending, inflation will remain a challenge for economic policymakers, reducing the economy’s competitiveness and highlighting outstanding problems facing productivity.”

Financial markets

Panama’s equities and debt markets are relatively underdeveloped. “Sophistication in the market is derived through the international investors, but not the local investors,” explains Coronado.

The market is fixed-income orientated (although there is a significant number of equities funds relative to the market’s small size), with many investors prioritising regular returns over long-term capital gains. The equities universe is small, with the stock exchange dominated by a handful of companies that power much of the economy and employ most of the workforce.

The biggest challenge for the local equity markets is that most of these companies’ shares are controlled by insiders, according to Vallarino.  “Even in the face of a high valuation, no one wants to give up control - that is one of the biggest challenges that we are trying to get people here in the Panamanian space to understand,” he says.

MMG Bank

MMG Bank currently runs two funds, a fixed income fund and a land fund, overall running around $55m in mutual funds.  The bank is a market maker in government debt, issuing the majority of the deals coming to the market.  This primary focus ties very well into the investment banking unit, which is bringing companies to the market by, for example, structuring debt deals.  Investment banking was at the core of the business at its inception, with everything else born from that centre, according to vice president of treasury and institutional relationships Jorge Vallarino.Sustaining liquidity is a also challenge for fund managers. According to Vallarino, it is important to be trading with the right bank to get access to the right deals. “We are structuring most of the new deals that are coming to the market, and we are going to give our customers a better entry point than any other firm,” he says.  “It is a big challenge, getting the deals and then trying to trade in the secondary market – it is far easier to sell than buy here, which presents another challenge for fund managers.”

Panama's strength

LatAm FMspoke with Prival Securities senior vice president Ricardo Zarak to discuss opportunities and growth in the Panamanian fund space

LatAm FM (LFM): When was Prival’s fund business formed?

Ricardo A. Zarak A. (RZ):Prival Securities is a 100% subsidiary of Prival Bank, and is an asset management firm that received its licence in 2010.  The executives of Prival Bank and Prival Securities have more than 10 years of fund management experience; and under their previous fund administration managed more than $300m in assets, mainly in the Latin American fixed income space. Prival Securities acquired the operations of Mundial Asset Management late last year, who had a family of funds. The Mundial Global Diversified Fund (MGDF) is a blended fund, currently being modified by Prival so it can be a purely fixed income fund, concentrated in investing in Latam. From 30 June, the MGDF, renamed the Prival Bond Fund after amendments, had $33m AUM and distributes dividends monthly to investors.  Year to date dividends are around 5% annualised. The breakdown of our clients is 90% Panamanian, and 10% international.

LFM: To what extent are you looking to attract more international investors?

RZ:We are always looking for ways to diversify our client base.  However, we are extremely careful

in how we allocate assets, since managing the capacity of the fund is always a challenge.  We have a deep evaluation process of the opportunities that come from the open market, and from private deals.  We want to maintain a dividend yield that is 150 basis points above the average deposit offering at local banks, so there are only a few assets that we can allocate each month.  We are growing between $3-5m a month, and we are seeing that level of growth until the year end. 

LFM: How developed are Panama’s fixed income and equities markets?

RZ:The market consists mainly of government bills and notes, as well as corporate bonds, commercial paper and preferred shares.  Most of the fixed income securities are bought by local institutional and private clients who hold the investments until maturity; therefore, sometimes finding a secondary market can take a few trading sessions.  Recently, the government has launched, through local broker dealers, a market maker programme to give liquidity to government bills and notes.Panama´s equity market looks positive overall.  As of 15 July, the equity market was up 14.18%.  The most important component of the stock market is in financial firms, which have sound liquidity, and must enjoy the benefits from a growing economy. 

LFM: How positive is investor sentiment towards Panama at the moment?

RZ:Investor sentiment towards Panama is very strong.  Another encouraging sign is that Panama received around $2.3bn in foreign direct investments (FDI) in 2010, which represent around 8-9% of GDP.  Furthermore, Panama has received more than $10bn in FDI since 2006. Because Panama has a limited market in terms of the quantity and size of the issuers, finding enough deals to meet inflows is always the main challenge; for this limitation, fund managers must look to other markets, or at private deal opportunities.

Meanwhile, the legal environment for funds poses few challenges; it is relatively sophisticated and efficient, making the fund space relative easy to navigate for external players. The management of assets is very well regulated, but the administrative services are not regulated for those funds. What is required, though, says Coronado, is a more competitive edge from the market’s administrators.

“We need to be more aggressive, more sophisticated, to compete with, for example, Colombia and Brazil,” he says. “This aggression should not manifest in the form of risk, but, rather, in a way that we can be more sophisticated and stay in control of our jurisdiction, and to stay in touch with international investors.”

Full text in http://www.latamfm.com

Panama Attorneys Advise Offshore Hedge Fund

Panama Attorneys Advise European investors forming Private Investment Fund
 

Attorneys Lombardi Aguilar Group advised a group of European investors to file before the Panama securities regulators a notice of compliance with private investment fund provisions.

Panama City, Panama ---- Attorneys Lombardi Aguilar Group (http://www.laglex.com/) advised a group of European investors to file before the National Securities Commission (http://www.conaval.gob.pa/ - CONAVAL) of Panama a notice of compliance with private investment fund provisions. CONAVAL is the local securities regulator.

A private investmend fund is a type of financial investment company which generally exempt from most securities regulations and laws and are included under the label of "hedge funds". As a form of transparency for investors, Panama's Law Decree 1 of 1998 allows private investment funds to file their prospectus, background information about their managers and other corporate documents before the local CONAVAL regulator, as long as the company charter provides that: (1) the number of owners of quotas or investors is limited to a maximum of fifty (50) and any offers may be made only through private communications; (2) securities can only be offered to qualified purchases and with minimum investment amounts of USD100,000. The filing does not amount to a registration with the Commission and these funds are not subject to the supervision or scrutiny by the Commission.

The fund is an open-ended private investment fund based in and managed from the Republic of Panama. The main purpose of the Fund is to invest in privately-issued shares of international asset management companies and other similar companies (distributors and/or managers of funds, securities brokers, etc.) outside of Panama. According to corporate documents, the company has a capital is of 30 million euros. Its board of directors has Swiss members and two partners of Lombardi Aguilar Group serve as external directors.  A limited liability partnership called LAG Asset Management, S. de R.L., served as special purpose entity for the subscriber purpose in the incorporation process.
 

Following the local Panama securities laws, the Fund is professionally-managed by another company incorporated in the Republic of Panama which has in place proper risk management, monitoring and internal control procedures. Such risk management process enables the management company to monitor and measure, at any time, the exposure of the investment positions and their contribution to the overall risk profile of the fund portfolio. The Panamanian regulators will require the Management Company to certify in each annual report of the Fund that the procedures and controls for monitoring the management and risk of the Fund are still in place as defined in the Prospectus filed with the Commission.

Current regulations allow the fund to:

a. maintain liquidity in different currencies;
b. issue fully-covered currency options;

c. place deposits with a bank licensed in a foreign jurisdiction;

d. invest in money market instruments or debt securities such as government or international bonds, U.S. Treasury bills, bank certificates of deposit, banker acceptances, floating rate notes, commercial papers, asset-backed securities and repurchase agreements;
e. enter into deliverable or non-deliverable currency forward contracts;
f. invest in privately-issued shares of international asset management companies and other similar companies (distributors and/or managers of funds, securities brokers, etc.).

Dr. Jorge Lombardi, a partner at Lombardi Aguilar Group commented that "we were recommended by colleagues in Switzerland to create and manage this fund, because of previous succesful experience". The legal expertise of the firm and its ability to provide counsel in several languages of the investors was crucial to its selection for this assignment. "My full knowledge of the Italian language was very useful as well as a tool to have a better and fluent communication with the clients", said Lombardi. "The beneficiaries of the fund are in Europe and our correspondents are in Lugano, Switzerland, and after a series of conversations they were convinced that Panama was the place to create it, and that our firm provided the security, confidentiality and confidence they needed". Lombardi is a graduate of Universidad Santa Maria la Antigua (LLB) and University of Paris (3eme cycle, DED).

About Lombardi Aguilar Group
Lombardi Aguilar Group is comprised of Lombardi Aguilar & Garcia and other professionals. The Group was created as an alternative for clients worldwide who seek fast, innovative and effective solutions to their legal problems. The firm currently provides services to individual and corporate clients in Panama as well in the Americas, Europe and Asia. Its partners maintain a commitment with professional ethics and social responsibility by participating in the board of directors of groups such as the Panama Bar Association, the Alliance Francaise, the German and the American Chambers of Commerce (AMCHAM) of Panama, and the Association of Chinese-Panamanian Professionals (APROCHIPA).

The firm centers its law practice in private client services and asset protection (Private Interest Foundations, Trusts), business structures (Offshore Corporations), tax planning, real estate and e-commerce. It also advices in areas of Law such as Corporate, Commercial, Intellectual Property, Maritime, Tax, and Immigration Law as well as related litigation that may arise.

For more information, contact +507 340-6444, e-mail info (at) laglex.com, or see: Lombardi Aguilar Group http://www.laglex.com/

Keywords: Panama, offshore, hedge funds, private investment companies
http://www.prlog.org/10815190

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