Trigger events are directly linked to the key features of these funds. For an Incubator Fund, the most common triggering event for conversion is the expiration of its Term. At the end of the initial 24 months (“Validity Period”) of the Term, there is a decision to be made in terms of whether the Incubator Fund wishes to terminate its business or continue operation as an investment fund.  The other triggering events include (i) the total number of investors close to exceeding 20 and (ii) the net assets exceeding US$20 million over a period of two consecutive months.

For an Approved Fund, as there is no limit on the Term for the Approved Fund, the only triggering events for conversion are the total number of investors exceeding 20 or the net assets exceeding US$100 million over a period of two consecutive months.

Incubator Fund

Upon occurrence of a triggering event, if the Incubator Fund decides to continue its operation as a mutual fund, an application for conversion must be submitted by the Incubator Fund to convert into and be recognised as a Private Fund or a Professional Fund or be approved as an Approved Fund either at least 2 months before the expiry of its Validity Period, or within 7 days after the end of the second month where its number of investors or the net assets exceed the threshold.

In the application, the Incubator Fund should:

1. 1. 1. complete the application form and submit the updated fund documentation for the Fund to be recognised as a Private Fund or a Professional Fund or be approved as an Approved Fund;
      2. if the Incubator Fund intends to be converted into a Private Fund or a Professional Fund, prepare and submit to the FSC an audit of its (i) current financial position; and (ii) compliance with the requirements of the Regulations. The aforesaid audit should be performed by either a person approved by the FSC under SIBA or pursuant to section 56 of the Regulatory Code, 2009, as an auditor, or a person, if not an approved auditor, who is independent of the Incubator fund and whose normal duties include the performance of such an independent audit function; and
      3. in case of conversion to a Private Fund or Professional Fund, appoint an auditor, a fund manager, and a custodian pursuant to Mutual Funds Regulations (As Revised) of the BVI (the “MFR”) if it does not have these roles already filled (which in most cases it will not have had filled as they are not compulsory for an Incubator Fund). It may apply for exemption from the custodian or fund manager requirement along with the conversion application.

Where an Incubator Fund converts into an Approved Fund, the existing sophisticated private investors in the Incubator Fund shall be treated like any other investor in the Approved Fund.

Where an Incubator Fund converts into a professional fund, the existing investors are grandfathered and do not need to comply with the minimum initial investment amount requirement of US$100,000. This requirement would only apply to new incoming investors.

Approved Fund

Similar to the Incubator Fund, upon a triggering event, if the Approved Fund decides to continue its operation as a mutual fund, an application for conversion must be submitted by the Approved Fund to the FSC to convert into and be recognised as a Private Fund or Professional Fund within 7 days of the end of the second month where its total number of investors or the net assets exceed the threshold.

When filing the application, the Approved Fund should:

1. 1. 1. complete the applicable application form and submit the updated fund documentation for the Fund to the FSC to be recognised as a Private Fund or Professional Fund; and
      2. appoint the auditor, the fund manager, the fund administrator and the custodian, or apply for applicable exemptions as mentioned above.

Different to that for an Incubator Fund, an Approved Fund is not, at the time of applying for conversion, subject to a statutory requirement to submit an audit of its current financial position and compliance with the Regulations.

If the Approved Fund converts into a Professional Fund, each investor is required to demonstrate that it is a professional investor and has a minimum investment amount of US$100,000. There is no exemption for existing investors as in the case of an Incubator Fund.

The Incubator Fund or the Approved Fund should notify all of its investors of the conversion and keep them informed about the proposed change of regulatory status. The FSC may also raise queries about the details of the trigger event and the current circumstances of the Fund.

When a trigger event occurs, if the Incubator Fund or Approved Fund decides not to proceed with conversion as discussed above, under the Regulations, it should:

1. 1. 1. commence the process for a voluntary liquidation under the BVI Business Companies Act (As Revised); or
      2. take necessary steps to amend its constitutional documents to cease to be a Fund and remove all references from its constitutional documents to being an Incubator Fund or Approved Fund (as applicable).

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This publication is not intended to be a substitute for specific legal advice or a legal opinion. For specific advice on the matters covered in this Legal Insight, please contact your usual Loeb Smith attorney or any of the following: 

E: gary.smith@loebsmith.com
E: robert.farrell@loebsmith.com
E: elizabeth.kenny@loebsmith.com
E: vanisha.harjani@loebsmith.com
E: frost.wu@loebsmith.com

Subscription credit facilities are secured credit arrangements that enable fund managers to access short-term financing (i.e. short-term loans) against the capital commitments of fund investors.

Unlike traditional fund financing, these facilities are typically structured as revolving credit lines, allowing funds to bridge capital calls, manage liquidity, or seize investment opportunities, therefore allowing quick access to cash for investment without having to call on capital commitments from investors immediately.

1. Security and collateral arrangements. The foundation of subscription credit facilities is the security interest over the fund’s unfunded capital commitments. Under Cayman Islands and BVI law, the enforceability of security interests such as a pledge and/or charge over unfunded capital commitments (as collateral for a loan) relies on the proper drafting of security agreements and registration procedures. It is crucial to clearly define the scope of security, including any guarantees or other security interests created to ensure priority and enforceability.
2. Intercreditor arrangements. Given that subscription credit facilities often coexist with other fund financing or investor arrangements, establishing clear intercreditor agreements is vital. Intercreditor agreements safeguard funds and investors by defining the payment hierarchy and security rights among multiple lenders. These agreements are essential for ensuring orderly enforcement and mitigating conflicts, particularly in multi-lender scenarios. Offshore jurisdictions facilitate sophisticated intercreditor arrangements, supported by well-established legal frameworks.
3. Fund governance and limited partnership agreements. Cayman Exempted Limited Partnerships (ELPs) or BVI Limited Partnerships (LPs) are the typical structure, offering flexibility and strong creditor protections. A fund’s constitutional documents determine the scope of authority its general partner or manager has. In the case of an ELP or LP, this is detailed in the limited partnership agreement (LPA).
   Accordingly, to ensure compliance and mitigate legal risks, a fund’s LPA must explicitly authorise the general partner or manager to pledge investor capital commitments as security. It is advisable to include provisions that address the express borrowing authority, mechanics of security, enforcement procedures and investor consent processes (such as through side letters) and any transfer restrictions.
4. Regulatory and Anti-Money Laundering (AML) considerations. The BVI and Cayman Islands have AML regimes requiring the appointment of AML officers. As subscription facilities often involve large capital commitments from institutional investors, enhanced customer due diligence may be required, in addition to measures such as verifying the source of funds, sanctions screening, record keeping and reporting obligations. Proper due diligence, know your customer procedures and compliance measures are essential to prevent regulatory issues and ensure legality of security interests and transaction structure.

Flexibility and speed. Offshore jurisdictions have efficient legal processes and flexible corporate structures, enabling funds to implement subscription credit facilities swiftly. This agility is critical in investment environments.

Tax neutrality and confidentiality. Both the Cayman Islands and BVI offer tax-neutral regimes and strong confidentiality protection, which are attractive for international fund managers seeking discreet and efficient financing arrangements.

Legal certainty and established frameworks. With mature legal systems, both jurisdictions provide a high degree of legal certainty for security enforcement, contractual validity and dispute resolution, backed by a wealth of case law and legal expertise. The final court of appeal for both is the Privy Council in the UK.

Tips for structuring

1. Draft clear security documents. Ensure security interests over capital commitments are precisely defined and properly registered.
2. Obtain investor consent. Incorporate provisions in the LPA or side letters to facilitate or confirm investor approval for security grants.
3. Plan for enforcement. Establish enforcement procedures like notice periods and rights of first refusal.
4. Co-ordinate with creditors. Negotiate intercreditor arrangements early to prevent conflicts.

Subscription credit facilities represent a powerful tool for offshore funds seeking liquidity and operational flexibility, offering a flexible and efficient mechanism aligning well with the governance and operational frameworks of private equity funds in the Cayman Islands or BVI.

The article was first published by Asia Business Law Journal – https://law.asia/cayman-bvi-subscription-credit-facilities/

This publication is not intended to be a substitute for specific legal advice or a legal opinion. If you require further advice relating to the matters discussed in this Legal Insight, please contact:

Partner:  Vanisha Harjani
E: vanisha.harjani@loebsmith.com

An application to restore a dissolved company to the Register may be made where:

1. The company was struck off the Register and dissolved following the completion or termination of its liquidation (whether voluntary or involuntary);
2. On the date of dissolution, the company was not carrying on business, or in operation;
3. The purpose of restoration is to:
   1. 1. initiate, continue or discontinue legal proceedings in the name of or against the company; or
      2. make an application for the company’s property that has vested in the Crown bona vacantia to be returned to the company; or
4. In any other case, or where an application cannot be made to the Registrar of Corporate Affairs (Registrar), the court considers that it is just and fair to restore the company to the Register.

An application has to be made within five years of the date of the company’s dissolution.

The application is made by way of a fixed date claim form together with an affidavit (by the claimant), exhibit and a draft order. The affidavit should set out, inter alia, the purpose of the restoration, and the claimant’s standing to restore the company.

Examples of those who have standing to make an application include:

1. A creditor, former director, former member or former liquidator;
2. A person who, but for the company’s dissolution, would have been in a contractual relationship with the company;
3. A person with a potential legal claim against the company, or its former directors or former members, or in respect of any assets of the company or issued shares; and
4. Any other person who can establish an interest in having the company restored to the Register.

Where the purpose of the restoration is to make an application for the company’s property that has been vested in the Crown bona vacantia to be returned to the company, such application shall not be made unless it is accompanied by, in writing:

1. Consent of the Crown, signified by the Financial Secretary, that the Crown has no objection to the company’s restoration;
2. Response of the Financial Secretary objecting to the company’s restoration; or
3. A declaration of the applicant that the Financial Secretary has not responded to a request for consent to the company’s restoration within seven days after receipt of the request.

Notice of the application must be served on the Registrar, the Financial Secretary and, where the company was a regulated person, the Financial Services Commission.

Upon an application, the court may exercise its discretion and restore the company. The court may:

1. Make an order to restore the company to the Register subject to:
   1. being satisfied that a licensed person has agreed to act as a registered agent (RA) of the company;
   2. the proposed RA making a declaration that the company’s records have been updated or an undertaking that the company’s records will be updated or procured and maintained within 14 days from the date of restoration of the company;
   3. the company filing, or undertaking to file, within 14 days from the date of restoration, copies of its register of members and register of directors; and
   4. the company paying the restoration fee and any outstanding penalties; and
2. Give such directions or make such orders as it considers necessary.

Evidence from the RA should be included in the exhibit to the affidavit.

The restoration will usually not take effect immediately when the court orders the restoration of the company to the Register (subject to the wording of the order in question). There are usually several steps that need to be taken before this can happen, including:

1. Filing a sealed copy of the order with the Registrar; and
2. Paying all outstanding fees and penalties due and payable to the Registrar.

To avoid any delays or complications in the restoration of a company, it is therefore prudent for the claimant to comply with the terms of the order once it has been made by the court.

The article was first published in Asia Business Law Journal. https://law.asia/bvi-company-restoration-court-process-requirements/ dated 11 Feb 2026. 

This publication is not intended to be a substitute for specific legal advice or a legal opinion. If you require further advice relating to the matters discussed in this Insight, please contact us.  We would be delighted to assist.

E: Edmond.fung@loebsmith.com

Firstly, the Letter of Wishes is a document separate from the Trust Instrument. Unlike the Trust Instrument, the Letter of Wishes does not have binding legal force. It is more akin to a guiding document, providing advisory guidance to the Trustee in administering the Trust. This means the Trustee has the discretion to decide whether or not to adopt the contents of the Letter of Wishes. Settlors might ask the question: if the Letter of Wishes lacks enforceability, isn’t creating one meaningless?

In practical application, if a Trustee’s failure to follow the Letter of Wishes results in harm to a beneficiary’s interests, the beneficiary may sue the Trustee in court. If the Trustees cannot provide sufficient evidence to prove that their decision-making process and purpose complied with the law and the provisions of the Trust Instrument, the court may assume the Trustees’ decision is invalid. For further details, see the section below on the validity of Trustee decisions contrary to the Letter of Wishes.

Typically, settlors do not include excessive detail within the Trust Instrument itself. Instead, specific wishes for trust administration will be placed in the Letter of Wishes. The main contents of a Letter of Wishes usually cover the following points:

1. 1. Trust/Beneficiary Arrangements. These often include prioritizing children’s education and medical needs. Additionally, conditions for beneficiaries to receive benefits can be set, such as age thresholds or educational requirements. Specific scenarios for excluding beneficiaries can also be stipulated. For example, distribution may be suspended or a beneficiary may be excluded if they are involved in drug-related crimes.
   2. Principles for Trust Asset Distribution. The Letter of Wishes can specify methods for distributing Trust assets, such as regular distributions, emergency distributions, and distributions upon the occurrence of significant events.
   3. Explanation of Trust Purpose. Elaborating on the Trust’s purpose within the Letter of Wishes is also a key measure to prevent Trust disputes. For instance, stating that the Trust aims to safeguard the livelihood of family members and their descendants. The Trustee must then weigh these purposes when making decisions.
   4. Stipulation of Special Clauses. For example, sometimes, while the law grants Trustees discretionary power to invest the Trust assets, the Letter of Wishes could state a recommendation to limit the proportion of assets invested in high-risk financial products to a specific range.
   5. Confidentiality Requirements. The settlor may state in the Letter of Wishes that its contents will not be disclosed to minor beneficiaries.

A settlor can usually sign multiple Letters of Wishes, reflecting the flexibility of Trusts. The settlor can update and adjust such non-binding guidance to the Trustee over time, based on changes in their circumstances (e.g., family situation, financial status, tax environment). It is generally understood that the most recently signed Letter of Wishes takes precedence, as it better reflects the settlor’s current situation and intentions. To avoid conflicts between multiple Letters of Wishes, a new Letter of Wishes should clearly and explicitly state that it revokes and replaces all prior Letters of Wishes or specified prior Letters of Wishes.

However, if the settlor fails to explicitly revoke prior versions in the new Letter of Wishes and conflicts arise between the old and new documents, the Trustee can face difficulties in decision-making. In such cases, the Trustee needs to consider all the Trust documents and make decisions based on the settlor’s overall intent. If the conflict is irreconcilable, the Trustee should seek legal advice to determine the course of action that best serves the interests of the Trust and aligns with the settlor’s true intentions, while avoiding liability for breaching fiduciary duties.

As mentioned, the Letter of Wishes itself lacks binding force. This means that, under specific circumstances, the Trustee has the right to make decisions that deviate from or even contradict the instructions in the Letter of Wishes. However, this does not mean the Trustee can arbitrarily disregard the settlor’s wishes. The Trustee’s power to deviate is strictly limited by the core requirement that the Trustee must fulfill his/her/its fiduciary duties, particularly the duties of loyalty, prudence, and adherence to the Trust’s purpose and terms.

Referencing a classic case, the Wong Case (Grand View Private Trust Company v Wong & Others [2022] UKPC 17), the UK Privy Council (whose judgment is persuasive authority in the Cayman Islands and the BVI) issued a number of guiding principles.

Based on the facts stated in the UK Privy Council’s judgment, the Wong brothers co-founded the large Taiwanese conglomerate Formosa Plastics Group (FPG) in the 1950s. In 2001, the brothers established two Bermuda trusts. The first was a discretionary family trust named the Global Resource Trust No. 1 (GRT), holding approximately US$560 million worth of FPG shares, with the beneficiaries being the settlors’ children and descendants. This discretionary family trust also granted the Trustee the discretionary power to add or remove “any person or class or description of persons” to the beneficial class of the Trust. The second Trust was a purpose trust named the Wang Family Trust (WFT), serving both charitable and non-charitable purposes. In 2005, The Trustee of the GRT exercised its powers of addition and exclusion to exclude all family members of the founders from the beneficial class of the Trust, and to add the Trustee of the WFT as the sole beneficiary. The dispute accordingly focused on the GRT trust deed, which granted the Trustee the power to add or exclude beneficiaries. Further, as early as 2001, the founding brothers had signed a memorandum of wishes before establishing the Trusts. This memorandum stated their intention in establishing the family trust was for the benefit of their children. The UK Privy Council admitted this memorandum as evidence, concluding that the purpose of the GRT discretionary trust was for the benefit of the founder’s family members. According to the Letter of Wishes, if the family Trust was established to benefit the family, how could excluding the family members to benefit another Trust serve a proper purpose? Consequently, the UK Privy Council found that the Trustee’s exercise of its power to exclude the existing beneficiaries and add the purpose Trust as a beneficiary was invalid.

Although the above case is an extreme and unusual example, it illustrates that a Trustee cannot ignore the settlor’s wishes and purposes when exercising their administrative powers. However, when dealing with such cases, courts will not automatically find a Trustee in breach simply for not following the Letter of Wishes. The reasonableness of the Trustees’ decision-making process and basis, and whether they have complied with their fiduciary duties, are also crucial factors. The court will consider the Letter of Wishes as significant evidence for understanding the settlor’s intent.

The Letter of Wishes, as a key non-binding document within a Trust, plays an indispensable role in family wealth succession planning. Its core value lies in providing guiding principles for the Trustee regarding the management of Trust assets, distribution of gains or profits, and addition or removal of beneficiaries, thereby significantly compensating for the potential lack of detailed execution provisions in the Trust Instrument, which prioritizes flexibility.

Although the Letter of Wishes itself lacks binding legal force, its practical influence and risk management value in practice of Trust administration cannot be overlooked. When making discretionary trust administration decisions, Trustees should fully understand the settlor’s Trust intentions to avoid dispute.

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This publication is not intended to be a substitute for specific legal advice or a legal opinion. For specific advice on the matters covered in this Legal Insight, please contact your usual Loeb Smith attorney or any of the following: 

E: gary.smith@loebsmith.com
E: robert.farrell@loebsmith.com
E: elizabeth.kenny@loebsmith.com
E: vanisha.harjani@loebsmith.com