What is a domicile?
Domiciles are the jurisdiction in which your fund is legally located. Choosing the right domicile for your venture fund is a vital decision. They can impact factors such as taxation and cross-border capital distribution. At times, domiciles can be a major determinant in where a VC fund can invest and also be a factor in attracting Limited Partners to the fund. Fund managers must note that the domicile landscape is constantly changing due to new regulations and processes.
Trends in 2021
2021 has been an interesting year for domiciles around the world. We are seeing a common trend of increased regulations in most jurisdictions. With a rise in the number of people investing in financial assets and financial crime becoming a major trend, many regulators across the world are increasing their efforts to provide safer market environments to all.
The common theme in many jurisdictions is a substantial crackdown on KYC and AML compliance and regulations. KYC (Know Your Customer) and AML (Anti Money Laundering) are compliance requirements to ensure funds know who their investors are and check necessary compliance measures to combat any potential financial crimes.
Click here to read VC Lab’s comprehensive VC Domicile Update Q4 - 2021.
What are the best domiciles?
The best domicile for your fund is highly dependent on where you are located and where you plan to invest. The optimal domicile for your fund also depends on the size of your fund and as mentioned, the regulatory environment.
For example, Luxembourg is a highly regarded domicile, however, may not be viable for smaller funds due to relatively high costs. Some jurisdictions have specially tailored fund vehicles and regimes for newer smaller funds and are a much better fit.
Here are some of the most popular domiciles around the world:
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Delaware
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Cayman Islands
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Hong Kong
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Singapore
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Netherlands
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Luxembourg
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Estonia
You can read more about this highly complex and opaque landscape in VC Lab’s detailed Domicile Report.
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