Answer ... AIFMs registered in Cyprus are structured as companies limited by shares, as this a requirement under the law.
Answer ... A management company is a private limited liability company established under the Companies Law (Cap 113). In effect, a management company has a separate legal personality from its members and such members have limited liability, according to their participation in the capital of the company. Additionally, the taxation rules mentioned in questions 8.1 and 8.2 are applicable to a management company.
Answer ... Alternative investment fund managers (AIFMs) under the AIFM Law must be authorised by the Cyprus Securities and Exchange Commission (CySEC).
Answer ... An AIFM will be granted authorisation if CySEC is satisfied that:
- it meets the conditions of the AIFM Law, including the initial capital and own funds provisions;
- the persons who effectively conduct the business of the AIFM are of sufficiently good repute and sufficiently experienced;
- the shareholders or members of the AIFM are suitable; and
- the head office of the AIFM is located in Cyprus.
CySEC may refuse to grant authorisation to an AIFM if the effective exercise of its supervisory functions is prevented by:
- close links between the AIFM and other persons; or
- laws, regulations or administrative provisions of a third country governing natural or legal persons with which the AIFM has close links, or difficulties in the enforcement of such laws, regulations or administrative provisions.
Answer ... An application for authorisation should be submitted to CySEC, consisting of the application form available from CySEC, accompanied by information on the AIFM, the managed AIFs and any additional information that is requested. An applicant will be notified of CySEC’s decision within three months of submission of a duly completed application; this period may be extended if deemed necessary by CySEC. The authorisation must be used within 12 months of grant; otherwise, it is withdrawn.
Answer ... An AIFM must be a limited liability company with its registered office and central management in Cyprus. In addition, a minimum initial capital of €125,000 is required if the AIFM will be acting as an external manager. However, if the AIFM is an internally managed AIF, the initial capital must be €300,000. Finally, the business of the AIFM must be conducted by at least two persons who are of good repute and sufficiently experienced. An important restriction is that different persons should conduct the risk and portfolio management functions.
Answer ... Any provisions for the issue, redemption and transfer of units, as well as any related restrictions, must be included in the instruments of incorporation of the AIF and comply with the provisions of the law. The external manager or the board of directors, if the AIF is internally managed, may decide on the suspension of the redemption or repurchase of units. Such suspension is allowed only if there are exceptional circumstances justifying the suspension or if the instruments of incorporation allow for such action.
Answer ... According to the AIFM Law, CySEC will grant authorisation to an AIFM in Cyprus if, among other things, the shareholders or members which have qualifying holdings are suitable, taking into account the need to ensure the sound and prudent management of the entity.
Answer ... An AIFM may delegate functions to a third party under certain conditions, according to the AIFM Law. The AIFM must inform CySEC prior to the delegation of functions and such delegation should be justified by objective reasons. Furthermore, the third party to which the functions of the AIFM will be delegated should have sufficient resources to undertake the relevant tasks, and the persons who effectively conduct its business should have sufficient experience and be of good repute. Notwithstanding the above, the AIFM should be in position to establish that the third party is qualified to undertake, and is capable of undertaking, such functions. The AIFM cannot delegate its functions to the extent that it can no longer be considered the manager of the fund or to the extent that it becomes a letterbox entity.
The AIFM cannot delegate the risk and portfolio management functions to the depositary or to any other entity whose interests may conflict with those of the AIFM or its investors.
Answer ... According to the AIFM Law, external AIFMs may also manage undertakings for collective investment in transferable securities (UCITS), provided that they are duly authorised under the UCITS Law.
An AIFM requires an additional authorisation under the Investment Services and Activities and Regulated Markets Law if it will provide the following services:
- management of portfolios of investments, including those owned by pension funds and institutions for provision for occupational retirement, in accordance with Article 19, paragraph 1 of Directive 2003/41/EC, following mandates given by investors on a discretionary, client-by-client basis; or
- non-core services which include investment advice, safekeeping and administration relating to shares or units of collective investment undertakings, and the receipt and transmission of orders regarding financial instruments.