With inflationary pressures in certain sectors of the global economy and the continuing impact of COVID-19, there are several important and urgent issues to discuss. As offshore legal advisors, we wanted to highlight some features from our investment fund/M&A and finance practice from 2021, which we believe will continue the trend in 2022, subject to global economic pressures, recovery from the impact of the pandemic. and the economic fallout from the developing conflict in Ukraine.
Series Financing: Several legal developments and customer trends in 2021 will continue throughout 2022 in the major offshore jurisdictions: the Cayman Islands and the British Virgin Islands (BVI). We have already discussed in a previous article how 2021 was a record year for chain financing transactions in Asia, with venture investments totaling US$165.1 billion, up from US$110.2 billion in 2020, up from US$110.2 billion in the previous year. Represents an increase in activity of about 50%, surpassing the record. According to Crunchbase data, an amount of US$150.2 billion was earmarked in 2018. A significant proportion of the corporate vehicles used were Cayman and BVI companies and we predict that this trend will continue due to the important role that BVI and Cayman companies play in chain financing transactions, as both jurisdictions create a flexible, cost-competitive And let’s introduce the well-tested instrument of transaction structure. Tax neutrality, the absence of exchange controls and the ability to close transactions electronically, among other things, have continued the popularity of the BVI and the Cayman Islands as the jurisdiction of choice in these types of transactions. See previous article: Key Issues and Trends in Chain Financing Transactions
BVI Approved Manager: For emerging fund managers in Asia and particularly the US, the use of the BVI Approved Manager Regime has become a very popular solution for keeping some elements of investment management and advisory work offshore. We anticipate that the increased use of BVI approved managers will continue this year, particularly with respect to new funds and also for existing standalone funds, which are generally driven by regulatory requirements and/or regulatory requirements of a particular master. – Want to restructure the feeder system. Asset class (eg cryptocurrencies/digital assets). See previous article: BVI Approved Managerial Arrangement
Growth of Digital Asset M&A and Finance Transactions: There was a substantial increase in M&A and financing transactions in the blockchain technology/digital asset space in 2021 and we expect that to continue throughout 2022 with the use of BVI entities and Cayman Foundation companies and trusts in these transactions (including an increase in ) Use of Decentralized Autonomous Organizations (DAOs for Investment). BVI is expected to unveil its codified regulatory regime for virtual asset service providers later this year and it will be interesting to see how it differs (not only in terms of the requirements of the new law) but also how. The BVI FSC enforces regulations in the Cayman Islands from the current Virtual Asset Service Providers (VASP) regime in reviewing and approving applications for registration and licensing and the length of time for the entire process.
Development of technology-focused funds: In addition to an increase in the total number of fund creation and launches in the Caymans and BVI in 2021, the past year saw a plethora of new venture capital (VC) and private equity (PE) funds focused on investments in Asia and the United States. In new technology (including fintech and blockchain) many are focused on online and mobile gaming development, infrastructure building in the digital universe, and the development of Web3 applications. These funds primarily focus on equity growth over time and the time period to maintain their portfolio position is much longer than that of traditional VC and PE funds. In our experience, some managers of these types of funds seem to be agnostic about whether to use BVI or Cayman structures for the fund and it will be interesting to see which jurisdiction develops and is home to emerging managers. As the reputation strengthens. this place.
SPAC: The popularity of SPAC continued well into 2021. For example, 18 Asian issuers raised more than US$3.6 billion in the first six months of 2021, and Hong Kong and Singapore also began their respective SPAC regimes, according to data collected by the Asia Business Law Journal. Although the SPAC framework in Hong Kong is widely seen as relatively conservative, we anticipate that Hong Kong’s reputation and quality as a leading listing site will be large and high enough to raise capital in the technology and healthcare sectors in 2022. Will attract quality SPAC. The Cayman Islands are likely to be dominated by companies in Asia as the vehicle of choice for SPAC listings because of the flexibility they offer and their familiarity to stock exchanges, regulators and other relevant market participants. See previous article: Welcome to the offshore SPAC wave in Asia
Continued focus on compliance with offshore regulatory requirements: For both BVI and Cayman, we address the growing demand for structuring and regulatory advice regarding investment funds, economic substance compliance and reporting, VASP requirements, and AML/CFT compliance (including with regard to restrictions imposed as one). hope to see. Result of the ongoing conflict in Ukraine) from M&A, Corporate, Finance and Investment Management clients.
