Liechtenstein will enact the new law on asset management (VVG) as at 1 January 2006. This makes Liechtenstein fully compliant with the EU Directives 2004/39/EG of the European Parliament and European Council dd. 21 April 2004 on markets for financial instruments (to amend earlier EU Directives 85/611/EWG and 93/6/EWG and 2000/12/EG and to cancel the EU Directives 93/22/EWG).
This enables any asset manager – contrary to the asset managers in Switzerland – to be active from within Liechtenstein in (e.g.) Germany or Italy as an asset manager without having any subsidiary or branch in the respective country, and without applying for a new license in the respective place of activity. The activity can be exploited within the so-called free movement of services (freier Dienstleistungsverkehr). The local Liechtenstein Financial Supervisory Authority (FMA – Finanzmarktaufsicht) will simply report such an activity to the respective foreign Authority (e.g. BAFIN in Germany).
Until the end of 2005, the asset management was regulated by the law on trustees dd. 9 December 1992 with amendments. Generally speaking, in future only banks and specially licensed asset managers (which are also security houses according to the EU Directive 2004/39/EG) will have the exclusive right to perform asset management. Licensed trustees will benefit from transitional regulations.
An asset management company must fulfil the following provisions in order to receive a license:
- to have the legal form of a juridical person or partnership;
- The statutory domicile and the main place of administration must be in Liechtenstein;
- The company must have adequate staff and organisational presence in order to fulfil its purposes;
- The management must be done by at least two persons who are able to act and are trustworthy. One of these two managers must be effectively active and heading the company. He must also fulfil personal obligations (see below).
- to have a qualified auditor;
- to have an equity of CHF 100'000.00 at least (or value in USD or EURO).
The company must also submit a business plan showing the organisation, financial planning, marketing activities and has to disclose the ownership to the Authority.
The Financial Supervisory Authority will decide upon an application within 6 months.
The relevant manager must have the following characteristics:
- He must have a EEA citizenship (also Swiss citizenship on the basis of contracts between the states).
- He must be capable of performing his obligations in the asset management corporation. The Authority will consider his other obligations, the organisation of the company and his living address.
- He must have an adequate education and practice in order to be qualified. The business activity must be at least 3 years in the respective asset management field (100 per cent job).
- He must be really active in the company and be the managing head of it. He must be physically present in Liechtenstein, considering the organisation and nature of work.
- He must be an associate or employee with a working contract.
The asset management company can with the consent of the Authority delegate certain activities to third parties. However the company stays liable and has to supervise and control the delegated person.
The asset management company must consider special regulations issued by the Authority and the professional asset management association. There are special duties to identify and document the clients, their risk profile, to disclose all relevant risks to the client, the costs, the asset management policy etc. Principally, these regulations stem from the EU Directives and had to be integrated into the Liechtenstein law.
The asset management company must set up accounts to be audited every year. The auditing includes much more than simply auditing if the figures in the account respect the true and fair view principle. There are further reports to be supplied to the FMA on a shorter periodical basis.
Liechtenstein fulfils the respective EU Directives which enables Liechtenstein asset management companies to perform their services in other EEA member states. Liechtenstein does also have to allow the free asset management services in Liechtenstein by asset management companies in other EEA member states. There are certain regulations for third party countries which cannot benefit from the EU Directives. This especially concerns Swiss corporations with asset management activity in Liechtenstein.
The asset management companies are submitted to a prudential supervision, and the Liechtenstein FMA will exchange information with the respective Authorities of the other EEA member states in order to combat abuse of the asset management licenses and to make sure the free movement of services within the EEA member states. The rights of the FMA go extremely far, but do only reflect the provisions of the respective Directives which had to be integrated into the own Liechtenstein law.
Finally it must be pointed out that Liechtenstein has a transitional period until 2009 regarding the right of EEA citizens to live freely in Liechtenstein. This means that any EEA citizen – having the adequate qualification – can have his business and work in Liechtenstein, but is not allowed to settle and buy private houses in Liechtenstein. So the right of free movement of persons is restricted to that extent: Due to special arrangements with Brussels, there are every year only around 60 EEA citizens (plus their family members) allowed to move to and take up residency in Liechtenstein (residency and domicile is the same in Liechtenstein). This right is given under special procedures set up in the relevant law. It is also noteworthy that special foreign tax laws to "combat" the transfer of domicile to Liechtenstein by special tax charges (as seen in Germany or France) is seen by the ECJ as contrary to the Art. 43 EG (earlier Art. 52 EG) of the EU contract, and therefore such "leave taxes" are unlawful.
The asset management of own assets – so-called family offices – does not fall below the asset management law. Such family offices with substance in Liechtenstein can be very attractive in the legal form of a partnership by Swiss asset managers in order to optimize the tax planning. For Liechtenstein partnerships with partners living in Switzerland, the right to tax income and assets of the partnership and the partners is regulated by the Swiss practice to avoid double taxation between Swiss cantons. And these provisions will also apply to Liechtenstein.
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.