How to structure cornerstone investments using Cayman Islands and BVI vehicles: a practical guide

The Cayman Islands and British Virgin Islands (BVI) continue to be the preferred investment hubs for these transactions, bringing legal certainty, tax neutrality and market familiarity to deals across Hong Kong and Singapore.  

This article explains why Cayman Islands and BVI vehicles remain the popular choice for cornerstone investments; how they are typically structured and the key commercial and regulatory points to consider when selecting the right jurisdiction and entity type.

Why Cayman Islands and BVI vehicles work for cornerstone investments

Managers and allocators choose these investment hubs because they offer:

• global familiarity: Cayman Islands and BVI entities are widely recognised by investment banks, listing sponsors, institutional LPs and regulators. Their use is market standard for cornerstone allocations into Hong Kong and Singapore transactions. For managers, this translates to smoother onboarding and deal execution, faster KYC acceptance, and fewer structural surprises for syndicate banks or issuer counsel
• tax neutrality: Both jurisdictions are tax neutral and providecertainty for investors. Notably, there is no local corporate income tax, capital gains tax or withholding tax, and no stamp duty on share issuances or transfers (subject to limited exceptions)
• speed and efficiency: BVI incorporation can be completed in 1–2 days with minimal ongoing regulatory burden. Cayman Islands remains fast by institutional standards and offers more sophisticated fund, SPV and partnership options. This efficiency is critical when cornerstone commitments must be made within compressed deal timelines

How cornerstone platforms are typically structured

Cornerstone investing is increasingly developing as a distinct investment strategy. For some time, managers have been establishing dedicated vehicles focused primarily on cornerstone investments, rather than treating cornerstone allocations as part of a broader equity investment strategy.

A widely used model is the single deal SPV, incorporated either in Cayman Islands or BVI, to hold a stake in the listing or private target.

This structure helps:

• ring fence liabilities
• set clear waterfall and distribution mechanics
• facilitate deal-specific participation through dedicated vehicles while preserving flexibility
• improve transparency for co investors or managed accounts

When managers choose BVI

• the vehicle is strictly a passive holding company
• cost and speed are priorities
• no regulated fund features are required

When managers choose Cayman Islands

• the investor group includes large institutions
• regulatory oversight (eg Private Funds Act or Mutual Funds Act) is desired
• the SPV must form part of a master feeder or an AIV structure

Managers frequently pool multiple investor participants into a single Cayman Islands or BVI aggregator to:

• protect the confidentiality of downstream LP identities
• keep the issuer’s cap table clean
• streamline governance for voting and transfer restrictions

Depending on the structure, managers should ensure that the entity is appropriately registered with the regulator (as applicable) and complies with the requirements of the relevant investment hub.

Key legal and commercial considerations

Cornerstone allocations typically impose:

• 3 - 6 month lock ups
• restrictions on disposal
• limited liquidity, including restricted redemption rights
• confidentiality and information barrier requirements
• coordination with underwriters on permitted transfers

Cayman Islands and BVI corporate statutes allow these restrictions to be:

• embedded in constitutional documents
• governed by shareholders’ agreements
• implemented through share classes with differentiated voting or economic rights

Because listing sponsors and banks in Hong Kong and Singapore are familiar with Cayman Islands and BVI vehicles, these structures make it easier for managers to align with placing guidelines, disclosure requirements, controlling shareholder restrictions and "public float" preservation.

Both investment hubs also offer robust common law protection against foreign judgments and hostile claims, often a decisive point for sovereign wealth funds, corporate strategic investors, and family offices participating as cornerstone investors.

Regulatory filings

Depending on the structure, a cornerstone SPV may need to comply with the following requirements:

• Cayman Islands Beneficial Ownership Transparency Act regime
• BVI BOSS Act
• CRS and FATCA registration and reporting requirements

Managers should ensure timely filings, accurate classification, and designated contact persons to avoid administrative penalties.

Choosing between Cayman Islands and BVI

The table below highlights certain key characteristics of the Cayman Islands and BVI which may be relevant in determining where to set up a vehicle for a cornerstone investment.

Practical tips

1. Plan the SPV early. Cornerstone allocations are time sensitive, and constitutional documents may need to be adjusted to meet investor, bank or issuer requirements.
2. Engage investors early. As the cornerstone investment market matures, increasingly sophisticated investors are often involved from an early stage.
3. Confirm tax and regulatory classification. CRS, FATCA and BO filings must match the intended investment strategy and proposed structure.
4. Manage deal specific governance. Lock ups, drag/tag rights, voting mechanics and side agreements require precise and sometimes bespoke drafting.
5. Prepare for follow on or sell down events. Cayman Islands and BVI vehicles allow flexible handling of escrow arrangements, staged disposals and continuation fund transfers.

Conclusion

Cayman Islands and BVI structures remain central to international investment structures for cornerstone transactions.

Their combination of tax neutrality, legal certainty, structuring flexibility and international acceptance gives managers and allocators the certainty they need when navigating fast-moving, complex cross border opportunities.

Whether deploying a single deal SPV, establishing a managed account platform or integrating cornerstone allocations into fund structures, Cayman Islands and BVI vehicles continue to provide stability and optionality for institutional investors.