Cyprus Alternative Investment Funds (AIFs) “In a nutshell” – the new law.
Cyprus Alternative Investment Funds (AIFs) types
Unlimited Number of Investors
– Addressed to retail, professionals and well-informed investors (Minimum capital €125,000 and €300,000 if self-managed)
– Addressed to professionals and well-informed investors (Minimum capital €125,000 and €300,000 if self-managed)
Limited Number of Investors
Addressed to well-informed investors (up to 75 investors) with no minimum capital requirements (for private limited liability companies up to 50 investors). €50.000 minimum capital for self managed funds
A well-informed investor should be an investor who is aware of the risks, invest minimum €125,000 or assessed by a credit institution or investment firm
Why a Cyprus Alternative Investment Fund (AIF) with Limited Number of Investors?
– No investment restrictions;
– No investment diversification requirements;
– No initial capital requirements;
– No formal leveraging restrictions;
– No custodian/depositary is required (safeguarding titles deeds etc), if
+ assets are less than €5 million or
+ less than 5 investors, or
+ all investments are considered not to be subject to custody (assets subject to custody include financial instruments that are
capable of being registered in a financial instruments account maintained with the depositary or are able to be physically delivered to the depositary);
– Minimum reporting requirements;
– Low set up and administration costs;
– Dividends distributed to foreign Investors (foreign tax residents) are not subject to Cyprus tax. Dividends distributed or deemed to be distributed to Cyprus tax residents are subject to 3% special defense contribution (17% applies for Cyprus Companies to Cyprus tax residents);
– There is no tax on redemption of units;
– Cyprus Investment Fund formation automatically creates Cyprus economic substance ;
– In almost all cases Cyprus Investment Funds generate exempt income i.e. the sale of shares, stocks, securities, etc, therefore the Cyprus Investment Fund potentially is not subject to Cyprus tax;
Legal forms of Alternative Investment Funds (AIFs)
– Fixed or Variable Company (80% of Cyprus Investment Funds are Variable Companies)
– A Common Fund
Managers can be:
– A UCITS management company
– Licensed under the AIFM Directive
– A licensed Investment Firm from any part of the world, subject to conditions
– A Mini Manager. The scheme will be applicable to managers with Assets Under Management (AUM) up to €100m with leverage or €500m with no leverage
– Private Offering Memorandum (POM) describing the strategy, investors’ returns, risks associated, service providers, etc.
– Procedures manual
– For directors (should be “fit and proper”):
+ Copy of passport and recent utility bill;
+ Reference reports (Last 10 years);
+ Bank reference letter;
+ Lawyer reference letter;
+ Copy of university diplomas etc translated officially in the English language;
+ Clean criminal record report translated officially in the English language;
+ Cyprus Securities and Exchange Commission (CySEC) questionnaire form;
– Details of Investment Manager (if applicable), Auditors, Custodian, Administrator
– An application fee approx. €2000
Umbrella structures with multiple investment compartments which allow the management of different pools of assets with different investment policies, the assets of each such pool of being ring-fenced (no transfer of liabilities or claims between sub-funds)
The time scale for set up
Approximately 12 weeks provided there are no deficiencies in the application documents
Reporting (Limited Number of Investors)
– Annual audit
– Central Bank of Cyprus. Monthly or Quarterly Statistical reporting
– Cyprus Securities and Exchange Commission (CySEC)
+ Annual information
+ Reporting on prevention of money laundering and terrorist financing
– Provide to investors a Net Asset Value (NAV) quarterly report
– A Cyprus Alternative investment Fund can obtain an International Securities Identification Number (ISIN) number.
– A Cyprus Alternative Investment Fund of Unlimited Number of Investors may be listed.
– A Cyprus Alternative Investment Fund (AIF) marketed to retail investors may be listed and traded on a recognized stock exchange in the EU or in a third country.
Registered Alternative Investment Funds (RAIFs)
Major characteristics of Registered Alternative Investment Funds (RAIFs):
– No licensing required by the Cyprus Securities and Exchange Commission (CySEC) and only required to notify the Cyprus Securities and Exchange Commission (CySEC), which maintains a register of Cyprus Registered Alternative Investment Funds RAIFs).
– Addressed to professional/well-informed investors
– Managed by Alternative Investment Fund Managers (AIFM) in Cyprus or in an EU Member State
– No capital requirements
– No investment restrictions
– Obligation for depositary
–maybe open- or closed-ended and stand-alone or with an umbrella structure
– may take the form of a mutual fund, an investment company with fixed or variable capital, or a limited partnership,
– Unlimited number of investors
PKF/ATCO Limited can offer:
– Advice and application to the Cyprus Stock Exchange, on behalf of clients, to obtain approval;
– Assistance in drafting the offering memorandum, incorporation, and legal documents;
– Provision of administrator services i.e. act as a registrar and transfer agent for the Fund’s Shares / Units, maintain the Share Register of all Shares / Units, processing of Investors applications and redemptions of shares / Units, calculate and issue the net asset valuation of the Alternative Investment Fund, calling and conducting of all shareholders’ meetings, compliance by the Fund with applicable anti-money laundering regulations, provides accounting and other administrative services to the Alternative Investment Fund, be responsible for the day-to-day work, etc;
– Arranging the provision of external audit and tax services.
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