Presentation Transcript

1. Alternative Investment Fund (AIF) -An attractive structure

   4th June 2014 Andreas Yiasemides Director, Treppides Fund Services
2. Table of Contents 1. Cyprus Framework for Funds 2. Current Framework - ICIS 3. Alternative Investment Funds (AIFs) – New Framework
3. Cyprus Framework for Funds Alternative Investment Fund (AIF) Private Equity Funds Hedge Funds Real Estate Funds Other Funds Legislation per country (domestic) – no EU Directive for the operation of this category of funds across EU
4. Cyprus Framework for Funds EU Directive 61 – transposed into local legislation in Cyprus It provides general principles governing the organization and operation of Alternative Investment Fund Managers (AIFM), including rules for the authorization and supervision In Cyprus, International Collective Investment Schemes (ICIS) – only type of AIF for the time being New law has been drafted regarding AIF – under legal review
5. ICIS - Introduction In May 1999, Cyprus introduced legislation enabling the establishment and regulation of International Collective Investment Schemes (‘ICIS’). Under the above legislation, the Central Bank of Cyprus (‘CBC’) is the regulatory and supervisory authorityfor ICIS and may, upon a written application, recognize an International Collective Investment Scheme.
6. ICIS - Introduction Licensing Requirements In order to establish an ICIS, the prior approval of the CBC has to be obtained. To obtain such approval, the Bank must be provided with such information so as to be satisfied as to the competence of the directors, promoters, managers or trustees, as the case may be, and that their probity is such as to render them suitable to act in their respective capacities. Expected to move under Cyprus Securities and Exchange Commission(CySEC)
7. Purpose of ICIS The purpose of an ICIS is the collective investment of the funds injected in such schemes by the unit holders. It allows a number of investors to: collectively join their investment assets have these professionally managed and invested by independent fund managers and extract their profits in a tax efficient manner obtain a Cyprus passport
8. Legal form of ICIS An ICIS can take the following legal forms: International Fixed Capital Company (‘IFCC’) International Variable Capital Company (‘IVCC’) International Unit Trust Scheme (‘IUTS’), and International Investment Limited Partnership (‘IILP’) All four types of ICIS may be established with limited or unlimited duration.
9. Types of ICIS An ICIS marketed to the general public An ICIS marketed solely to experienced investors; or A private international collective investment scheme (only 100 or less investors)
10. Private ICIS Main characteristics: Cannot be offered/ marketed to the general public Maximum number of investors <100 Investors do not have to be experienced The right to transfer its units is restricted Is not required to apply the investment restrictions There is no minimum subscription amount
11. Typical Structure The Cyprus ICIS INVESTORS INVESTMENT FUND CUSTODIAN COMMITTEE ICIS FUND FUND BOARD FUND OF ADMINISTRATION DIRECTORS AUDITORS DIRECT SPV 1 SPV 2 SPV 3 INVESTMENT INVESTMENT 1 INVESTMENT 1 INVESTMENT 2 INVESTMENT 2 INVESTMENT 3 INVESTMENT 3 EU NON - EU EU NON - EU EU NON - EU
12. 4 Types of Professionals Custodian Administrator Auditor Investment Manager (not required by ICIS law) Professionals involved The Cyprus ICIS
13. The custodian bank has two roles: to maintain the bank accounts in the name of the ICIS where subscriptions are remitted directly so as to carry out money laundering tests on the transferred money and to ensure that withdrawals are in accordance with the scope and objectives of the ICIS to keep in safe custody the titles of investments made by the ICIS Professionals involved Custodian
14. Funds must appoint a company to carry out the administration work of the scheme. The said company must be based in Cyprus and be approved by the CBC. It will usually provide in respect of the Fund: Accounting Calculation of net asset valuation (NAV) Maintenance of the share registrar Performance of procedures required for transfer and redemption of units Professionals involved Administrator
15. Must be appointed at the incorporation of the scheme. The auditor, who must be a Cypriot based audit firm, needs to be approved by the CBC Its duties include: Annual audit of the financial statements based on IFRS Review of the activities and the compliance with the relevant Cypriot laws Carrying out specific reporting duties for CBC Professionals involved Auditor
16. (i) Internally, through the executive Directors appointed on the Board (where the ICIS takes the form of a Variable Capital Company) or General Partner (where the ICIS takes the form of a Limited Partnership). (ii) Externally, through a third party company registered in Cyprus or in any other overseas jurisdiction where there is adequate supervision of financial services firms and is approved by them to act as Investment Manager of the particular Scheme. Professionals involved Investment Manager
17. Procedures ‘Proper and fit’ test for directors and managers: Professional qualifications Experience Reputation and capital resources Education Registration The Cyprus ICIS
18. Procedures Documentation Questionnaire to be completed by the Directors, controlling shareholders accompanied by CV, police clearance certificate, passport copy, and references. Memorandum and Articles of Association, Partnership Agreement or Trust Deed and all third party service provider’s agreements. Private Offering Memorandum (not required by the Law but recommended) Registration The Cyprus ICIS
19. Cyprus ICIS Operation Registration Opening of cash account for the fund in the custodian bank Subscription of investors for the units of the fund through administrator Investments made by the fund utilising investors’ money Redemptions of units by the investors at specified dates and at a specified percentage through the administrator
20. Cyprus AIFS AIFS – New Framework New law has been drafted regarding AIFS – under legal review February 2013, CySEC issued a proposed legislation entitled Alternative Investment Fund Law 2013 CySECexpected to become the Regulatory Authority under the new law (currently is CBC) for AIFs
21. Legal form of AIFS An AIF can take the following legal forms: Fixed Capital Company (‘FCC’) Variable Capital Company (‘VCC’) Limited Partnership (‘LP’) , and Common Fund (‘CF’) All four types of AIFS may be established with limited or unlimited duration.
22. Types of AIFS Alternative Investment Fund with Unlimited Number of Persons which: may be marketed either to well-informed or retail investors have investor shares which are freely transferable may be listed, and in the case of AIF marketed to Retail investors, may be traded are subject to minimum capital requirements equal to EUR 125.000 or EUR 300.000 in the case of self-managed fund are subject to certain investment restrictions for the purpose of risk spreading and ensuring liquidity
23. Types of AIFS Alternative Investment Fund with Limited Number of Persons which: may not exceed the total number of 75 investors may be marketed only to well-informed investors are not externally managed by an AIFMD authorised manager and/or their assets under management do not exceed the AIFMD thresholds, being (i) EUR 100mm (incl. leverage) or (ii) EUR 500mm have investor shares which are freely transferable only if their transfer does not result in the AIF having more than 75 investors
24. Investor Classification Two classifications of investors: Well-informed Investor A Professional Client, as such term is defined in the MiFID; OR One that meets the following two requirements: Confirms in writing that he/she is a qualified investor and that he/she is aware of the risks involved with an investment in the relevant AIF; and (1) investment made in AIF is at least EUR 125.000 OR (2) expertise, experience and knowledge in evaluating an investment opportunity properly, have been certified by a licensed bank/credit institution, an authorised investment firm or an authorised Management Company Retail Investor An investor, other than well-informed, i.e. which does not meet the requirements above
25. Five Key Benefits Flexibility: Any asset can be included in the investment strategy of the AIF (under certain conditions) Transparency: Annual audited and half yearly reports to be sent to the CySEC and the investors (contain financial statements, information on borrowing, portfolio information, NAV) Tax Incentives: Cyprus AIF benefit from significant tax incentives / Establishment for taxation purposes can very difficulty be challenged Regulation: EU directives / business friendly jurisdiction (no onerous reporting requirements) Low set-up and operational costs: Easy and cost efficient to set up and maintain Cyprus funds Benefits of AIF The CyprusAIF
26. TaxIncentives Cyprus AIF enjoy significant tax incentives: No subscription tax on the net assets of the fund; An AIF is treated identically as any other Cypriot entity, hence enjoys 12.5% flat corporation tax on annual net profits earned worldwide. Exemption from tax on profits from sale of shares and other instruments. No withholding tax on income repatriation (dividends paid to unitholders). No capital gains tax on disposal of shares/units by the holders. Capital gains from the sale of immovable property situated outside Cyprus is tax exempt. A wide network of Double Tax Treaties in place with more than 50 countries worldwide. Benefits of AIF The CyprusAIF
27. QUESTIONS? THANK YOU Our Cyprus Office: Treppides Fund Services Ltd, 9 Kafkasou Street, Treppides Tower, Aglantzia, 2112 Nicosia, Cyprus Tel : +357 22 678944 Fax: +357 22 681887 www.treppidesfs.com info@treppidesfs.com