Funds

Definition of a fund refers to a sum of money saved or made available for a particular purpose.

“Fund” is a general term that often appears in a company name. How such a term is used can be a sensitive issue and in well regulated jurisdictions its use is strictly controlled.

Advantages can flow from using a company with a title including “fund”. Inclusion gives a visible image of the purpose of the company – for  example indicating an investment fund or a development fund. Such a company might be given fiscal benefits, or greater operating flexibility. Some countries give special protection to “inward investors”.

What’s in a name?

In the UK a proposal to register a company name to include “Fund” can require referral to the Financial Conduct Authority (formerly the Financial Services Authority) as regulator. In turn the regulator can impose requirements for its use – for example a high value of issued capital can be set.

Problems occur because a fund is usually created through fundraising. So the regulators are sensitive to possible misuse of the name in bogus charities or similar.

However it is financial references that can give rise to most concerns. A collective investment scheme is often referred to as a fund. Linking “fund” with “mutual” and “hedge” are well known applications.

Yet it is these word connections where a “fund” is most useful.

Fund = Company

Essentially a fund is a company. It is a company with a distinct purpose and often clarity can be brought by simply adding key words in the company name. For example an “investment fund” or a “development fund” has a clear and declared purpose.

However even with a purpose in the name there can be different types of investment companies. For example mutual funds are also termed open-end funds. Investment funds are termed closed end funds and are also known as investment trusts. Complicated perhaps but for some purposes important.

Our interest is that clients can take advantage of including a fund in their interests.

International Business Structures

Why do I need a fund?

Consideration of a UK company starts the process.

UK company

Advantages can flow from using a company titled as an investment fund because, for example, some countries give protection to “inward investors”.

Taking the example of a client’s home country, an inward investor is a foreign registered company that makes an investment into business in the home country. Such investment can cover many things. The home country encourages such inward investment and can often offer special terms to both encourage and reassure protection for the investor. Emerging economies do this. If they are members of the World Trade Organisation or aspire to membership of other economic or trading groups they may be required to offer such support to inward investors.

Similarly some countries offer special arrangements for investment made to local business from foreign companies. These are to ensure the free movement of interest payments on loans and returns on investment to foreign companies. Often these measures are included in tax treaties. The home country recipient may have local tax advantages available to it.

An English face to investment

We mention elsewhere the benefits of an English face to business.

UK face to a company

However these matters become more important when considering investment funds. The face becomes attributable to the source of funds. This is also featured by the press coverage and other publicity. It usually generates more political interest.



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