Funds in Cyprus - Alternative Investment Funds
The Alternative Investment Funds Law
On the 10th of July 2014, the Cyprus Parliament enacted a new law providing for a new institutional framework governing the establishment and operation of Alternative Investment Funds in the Republic Cyprus. The law came into force on the 27th of July 2014, repealing thereby the previous legal framework, which was implemented in 1999 for the regulation of the International Collective Investment Schemes (ICIS).
Objective of the AIF Law
The Law, by creating a new institutional framework regarding the establishment and operation of Alternative Investment Funds in Cyprus, aims to enhance transparency and protection of investments and to harmonize the national legislation with the EU directives.
Main provisions of the AIF Law
Regulation & Supervision
The supervision and the regulation of investment funds in Cyprus are transferred from the Central Bank of Cyprus (CBC) to the Cyprus Securities and Exchange Commission.
Legal Forms of AIFs
AIFs can be structured in one of the following forms:
- Common Fund
- Fixed Capital Investment Company
- Variable Capital Investment Company
- Investment Limited Partnership
Classes of AIFs
The AIF Law provides for two classes of AIF:
- AIF for an unlimited number of investors, which can be marketed to retail or to well-informed and/or professional investors, as defined by the the EU Directive 2004/39/EC (on Markets in Financial Instruments).
- AIF for a restricted number of investors (up to 75), which can be marketed only to well-informed and/or professional investors, as defined by the the EU Directive 2004/39/EC (on Markets in Financial Instruments).
Minimum Capital Requirements
Minimum share capital: € 125.000
In the case of self-managed funds: €300.000
Management of AIFs
An AIF can be self-managed or appoint a management company.
Does the value of the AIF exceeds EUR 100 million (including leverage) or EUR 500 million (without leverage with a lock-up period of 5 years)?
If yes: The AIF (if self-managed) or the External Manager is subject to authorization and compliance with the AIFMD.
If no: The AIF (if self-managed) or the External Manager is not subject to compliance with the AIFMD.
The AIF Law allows umbrella funds, which are collective investment schemes that exist as single legal entities with multiple sub-funds (investment compartments), each one of which can have its own investment policy.
Listing of AIFs
Under the AIF Law, an AIF can be listed on any recognized stock exchange in the EU or a third country.
Transitional provisions framework for existing ICIS
Three options are available to the existing ICIS:
- Maintain their current operational structure by submitting the necessary documents, in order to comply where required, with the AIF Law and continue their operation as AIFs with limited number of investors. In this case, the investment funds continue to operate on the basis of the authorization received by the CBC without any further authorization by CySEC.
- Submit their application to CySEC for the authorization to operate as an AIF.
- Submit their application to CySEC for the authorization to operate as AIFM (Alternative Investment Fund Manager).
The application must be submitted within four months after the AIF Law came into force, this means by the 27th of November 2014. The ICIS submitting an application are allowed to continue their operations until the communication of the decision of CySEC to them.
In case of non-compliance with any of the above options, private ICIS must be dissolved and liquidated with six months following the expiration of the four months compliance deadline. Dissolution and liquidation will be carried out under the provisions of the repealed ICIS Law.
One-Stop-Shop Service for the AIF set-up
Our comprehensive package includes the following:
Providing our clients with the analysis of the provisions and the implications of the new AIF Law.
Advising on the most suitable forms of AIFs for the reorganization of existing ICIS and the establishment of new AIFs.
Submission of the application to CySEC and the ongoing monitoring of the status of the application.
Drafting the necessary legal documents for the incorporation and the establishment of the AIF.
Ongoing provision of administrative services including the appointment of nominee officers, office facilities, administration of affairs, accounting, audit, tax services etc.
For more details as to how can we help you, please contact us now.