IFM12284 | Offshore Funds: Definition of an offshore fund: particular arrangements: fixed share capital companies

Few fixed share capital companies fall within the definition of an offshore fund. For example, an investment in a trading or investment company or group with fixed share capital which does not have limited life (even if local law provides for continuation votes) does not come within the definition. But entities that have fixed share capital and are structured in such a way that they share the characteristics of open-ended share capital arrangements (that is, the share capital expands and contracts in response to demand) will be within the definition.

So, fixed share capital companies that are predicated on the basis that investors are able to redeem their interest to get a net asset value (or indexed) return or a return which is very close to net asset value may fall within the definition (if conditions A and B at s356 TIOPA 2010 are satisfied and none of the exceptions at s357 TIOPA2010 apply). That will also be the case where there are no redemption rights but the arrangements have a limited life and a reasonable investor could expect to get a net asset value return on winding up.

The following pages consider specific examples of fixed share capital arrangements and their interaction with the offshore funds tax definition in more detail.