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The British Virgin Islands has had a good year, with sources reporting a lot of activity across the board. "Things are fairly rosy at the moment after a couple of dark years," says one finance partner....

The British Virgin Islands has had a good year, with sources reporting a lot of activity across the board. "Things are fairly rosy at the moment after a couple of dark years," says one finance partner. "2011 has shown something's happened and we've turned a corner."

The distressed funds work that dominated 2009 has subsided for the most part, while general banking and structured finance have become particularly busy, especially in early 2011. There has been a focus on large offshore SPVs (Special Purpose Vehicles) and aircraft and ship financings. Another new trend, driven by changes in US tax law, has been an increased use of BVI limited partnerships as SPVs, rather than for the establishment of funds.

M&A transactions are on the rise, and private equity companies are beginning to invest cautiously. Public-to-private transactions and joint ventures have also been active, typically involving buyouts by private equity groups. "A fair number of Chinese companies are buying into Latin America, particularly Brazil," one attorney noted.

Another positive indicator has been the return of Special Purpose Acquisition Companies (Spacs), to the jurisdiction. Spacs, which first raise money to go public then look for a buyer "went away for a long time," according to one lawyer.

In May 2010, the initial phase of the Securities and Investment Business Act (SIBA) was implemented. This brought securities and financial market regulations to the BVI for the first time under the principles of the International Organisation of Securities Commissions. Though this phase, with its emphasis on licensing requirements, created some work for the attorneys interviewed, the impact was minimal. "It's the managers, broker-dealers, administrators, and custodians that are primarily affected," says one lawyer.

However, the Financial Services Commission's (FSC) issuance of The Public Funds Code 2010, under Part III of SIBA, seems to have dispelled an air of uncertainty. The code, which came into force in April 2011, affects BVI-registered public funds, primarily addressing transparency issues through prospectus content requirements and corporate governance. It also codifies pre-existing FSC policies.

"We have certainty that the BVI will carry on with the way funds are now. Essentially, any changes will be put off for five years," remarks one funds attorney. Another observes: "Perceived changes in the jurisdiction have been very positive for building funds practices. There is a good range of new funds work coming from all corners-new managers spinning off, banks, old managers raising new funds."

Russia and Eastern Europe have recently shown a stronger presence in the funds market, which has historically been dominated by the US, Europe and Switzerland. Other emerging economies such as Uruguay, Brazil and Cyprus are also making themselves known.

"It's hard to imagine the go-go days, the halcyon days of pre-Lehman returning," says one lawyer. "My take, we'll come to a soft landing somewhere in between."