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Cyprus Investment Funds in a “Nutshell”

 

December 2017

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 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 millions 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;

Taxation benefits

–     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 ;

–     Advantages of Cyprus Double Tax Treaty network (Currently there are over 50 Cyprus Double Tax Treaties in force);

–     In almost all cases Cyprus Investment Funds generate exempt income i.e. 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)

–     Company, Fixed or Variable Company (80% of Cyprus Investment Funds are Variable Companies)

–     Partnership

–     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 (expected to pass into law). The scheme will be applicable to managers with Assets Under Management (AUM) up to €100m with leverage or €500m with no leverage

Procedure requirements

–     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;

+   CV;

+   Reference reports (Last 10 years);

+   Bank reference letter;

+   Lawyer reference letter;

+   Copy of university diplomas etc translated officially in English language;

+   Clean criminal record report translated officially in 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 Funds

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)

Time scale for set up

Approximately 12 weeks provided there are no deficiencies in the application documents

Reporting (Limited Number of Investors)

–     Accounting, Financial Statements, and tax compliance – annual tax return (IR4)

–     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

Other

– A Cyprus Alternative investment Fund can obtain 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 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

may be 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 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, provide 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.

Contact us

Please contact us for a free personal consultation at:

Email: [email protected]

 

The authors expressly disclaim all and any liability and responsibility to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this website.

Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances.

PKF Cyprus firms are member firms of the PKF International Limited network of legally independent firms and do not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.”

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