RegCORE Client Alert | German Regulatory Developments
Quick Take
In a publication dated 9 September 2025, the German Federal Financial Supervisory Authority (BaFin) published a draft of the revised 'Information sheet on the authorisation procedure for an AIF management company pursuant to section 22 of the German Capital Investment Act (KAGB)' (the Information Sheet). Comments were able to be submitted until 30 September 2025.1
In the updated draft of the Information Sheet, BaFin provides
more detailed information on the documents required as part of the
underlying authorisation process for an AIF management company (but
not UCITS management company). In particular, BaFin has clarified
the information required for assessing professional
competence.
In addition to various merely editorial adjustments, the changes
primarily comprise clarifications and supplementary explanations
regarding the conditions and requirements requested by BaFin in the
authorisation procedure. The aim of the revision is to simplify and
accelerate the authorisation procedure for AIF management
companies.
For AIF management companies, this means that certain procedural steps may be accelerated due to clearer guidelines from BaFin regarding the documents and evidence to be submitted to it as part of the authorisation process. However, the requirements themselves do not comprise any simplification, but remain essentially unchanged and still demanding.
Key takeaways from the consultation 17/2025
The majority of the adjustments primarily involve a more precise and detailed presentation of the requirements requested by BaFin which make the authorisation procedure under section 22 KAGB clearer and more transparent, but do not represent any simplification in terms of content:
- What is new is that BaFin may now require a timely confirmation from an auditor when proving the initial capital (section 25 paragraph 1 number 1 KAGB), which applies to both newly established and existing AIF management companies.2 In addition, existing AIF management companies may also be required to provide evidence of so-called fund volume-dependent own funds based on the value of the assets under management (fondsvolumenabhängige Eigenmittel, section 25 paragraph 1 number 2 KAGB) and to cover potential professional liability risks (section 25 paragraph 6 KAGB) by a corresponding auditor's confirmation.
- The information on assessing the professional suitability of managers has been supplemented and BaFin has recommended consulting with BaFin at an early stage regarding the suitability of potential candidates.3
- The regulations governing licensing requirements have been clarified: Despite the outsourcing of risk or portfolio management, the management must be professionally qualified, and eligibility for licensing will be assessed independently of previous registrations.4
For the most part, these changes do not represent any simplification, instead they rather only serve to clarify and specify the respective requirements. Although the clearer presentation by BaFin ensures greater transparency and may increase traceability, the time and administrative effort required by AIF management companies remains high or is even increasing due to more extensive documentation and reporting requirements.
One potentially controversial point concerns applicants who manage so-called 'old funds' (i.e., funds that were launched before the KAGB came into force in 2013). The revisions make clear that investment companies that are to be taken over for management and have previously been managed as GmbH & Co. KG or AG must be converted into the legal form of an investment limited partnership (InvKG) or investment stock corporation (InvAG) before permission is granted by BaFin.5
Professional competence of managers
The Information Sheet emphasises fit & proper expectations extensively along with the principle of overall responsibility of the management.6 According to this principle, all managers are jointly responsible for the proper organisation of the business and its continuous development, regardless of internal rules on responsibilities. It is assumed that all managers have a basic understanding of portfolio management, risk management and regulatory requirements. This knowledge must be substantiated by tangible evidence, such as proof of activity, work experience or relevant training.
When applying for a licence to manage specific assets through an AIF management company, the focus of the assessment of the professional suitability of the managers is on their theoretical and practical knowledge of the assets in question. The CV of a manager must therefore provide detailed information on their knowledge as to each asset covered by the respective licence. This also applies to knowledge of services and ancillary services in accordance with section 20 paragraph 3 sentence 1 KAGB, if these are to be provided.
When appointing several managing directors for portfolio management, the responsibilities of individual managing directors may be limited to specific assets. In such cases, proof of knowledge of the assets for which they are responsible is generally sufficient. These regulations must be clearly presented in the organisational chart of the AIF management company.
Key considerations for practice
Urgent request from BaFin
With a view to the requirements regarding the suitability of managers of a fully licensed AIF management company, it is recommended to discuss the qualifications of potential candidates with BaFin at an early stage.7 Knowledge gained in merely registered AIF management companies is often not sufficient, especially in the area of risk management.
In the case of registered AIF management companies, risk management processes are often not structured comprehensively enough to meet the respective requirements of a fully licensed AIF management company. An assessment of suitability in portfolio management and risk management can be carried out before applying for a licence. Fully licensed AIF management companies must have at least two full-time managers. Other constellations require individual consultation with the BaFin, whereby the availability of the designated managers must be taken into account.
Comprehensible presentation of planned business activities in the business plan
A business plan for an AIF management company must contain comprehensive information and structures. It is essential to provide details of potential investors and the planned business volume, including the number of investment funds and the targeted assets under management (AuM).8
The business plan should contain the addresses and contact details of the AIF management company and its managers, as well as the date on which business operations are to commence. Where necessary, market research and discussions with potential investors, particularly in the case of special AIFs, must be documented.9
A comprehensible description of the business organisation is required, including information on the number of employees at the start of business, the use of parent company resources, planned branches abroad and planned cross-border services without the establishment of branches. The IT equipment of the AIF management company must also be described.10
In addition, the planned internal control procedures11 and an audit plan for the first three financial years must be presented from a risk perspective.12 The organisational chart of the AIF management company should show the distribution of responsibilities within the management team and the complete functional separation of portfolio management and risk management up to management level, including in the event of representation.13 Finally, a description of potential conflicts of interest and the measures taken to avoid them is required, particularly in the case of intra-group outsourcing and its control.14
Outlook
The new specifications make the licensing procedure for AIF management companies clearer and more transparent in terms of requirements, which may, depending on BaFin's workload, contribute to the potential for faster and more legally certain decisions. This is especially if applicants are truly able to identify potential queries in advance in the manner that the Information Sheet aims to cater for.
Unsurprisingly, BaFin continues to attach great importance to the professional competence of management, a robust organisational structure and effective risk management in order to strengthen investor protection and ensure market stability. Given the tone of the revisions to the Information Sheet, those wishing to submit relevant BaFin applications will want to incorporate these requirements into their own planning at a perhaps a comparably earlier stage than has previously been the date.
Footnotes
1. Redline version available under: https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Konsultation/2025/neu/kon_17_2025_Aenderungen_Konkretisierungen_Merkblatt_Erlaubnisverfahren_fuer_eine_AIF_Kapitalverwaltungsgesellschaft.html.
2. Cf. section A.1.a) of the Information Sheet.
3. Cf. section A.4. of the Information Sheet.
4. Cf. section B.2. of the Information Sheet.
5. Cf. section A.7. of the Information Sheet.
6. Cf. section A.4. of the Information Sheet.
7. Cf. section A.4. of the Information Sheet.
8. Cf. section A.7.b) - f) of the Information Sheet.
9. Cf. section A.7.b) of the Information Sheet.
10. Cf. section A.7.c) of the Information Sheet.
11. Cf. section A.7.d) of the Information Sheet.
12. Cf. section A.7.e) of the Information Sheet.
13. Cf. section A.7.f) of the Information Sheet.
14. Cf. section A.7.g) of the Information Sheet.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
