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 ;
– 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. 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)
– 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
– 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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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.”