Newsletter No.3 – December 2018
New Registered Alternative Investment Funds (RAIFs) and their registration process with CySEC
As of 30 July 2018, Cyprus has introduced a groundbreaking possibility regarding Alternative Investment Funds. The Law 124(I)/2018 has incorporated in the regime governing Alternative Investment Funds (“AIFs”) the possibility to set up Registered Alternative Investment Funds (as are now widely known as “RAIFs”), without the requirement of prior operation authorisation of the fund by the Cyprus Securities and Exchange Commission (“CySEC”). This will facilitate the set up and reduce the time and cost to create an AIF upon fulfilment of the specified criteria.
The criteria which must be fulfilled for an alternative investment fund to be eligible to be set up as a RAIF are the following:
(i) It must be an externally managed AIF, either by a Cyprus or an EU AIFM. If the RAIF is established as a limited partnership, it can also be managed by an EU UCITS Management Company, an EU Mini Manager or an EU Investment Firm under the condition that the RAIF invests at least 70% of its assets to illiquid assets or if the RAIF is closed ended.
(ii) It must be exclusively addressed to professional or/and well-informed investors.
(iii) The regulation or the constitutional documents (as the case may be) must expressly provide that it is governed by the provisions of the AIF Law regarding RAIFs.
In light of the above requirements, it is derived that the RAIF is an entity which although not authorised by CySEC prior to its registration, it is indirectly supervised and regulated by CySEC through the RAIF’s external manager, therefore remaining an adequately safe and regulated vehicle.
Types and legal forms of RAIFs
A RAIF may be open or closed ended, umbrella or single scheme and may be registered as:
(i) A common fund;
(ii) An investment company (variable or fixed capital); or
(iii) A limited partnership (with or without separate legal personality).
A RAIF has no requirement for initial capital, however, there are certain minimum thresholds with respect to its assets under management. A RAIF must possess assets of at least €500.000 for each investment compartment within 12 months from the date of its registration in the RAIF register, through the means of capital raising form investors. CySEC may extend the 12-month period for up to additional 12 months, if this is deemed necessary. Capital commitments for the acquisition of units will not be accounted for the calculation of the RAIF’s assets under management.
The appointment of a depositary is mandatory for all types of RAIFs. Eligible depositaries may be credit institutions, investment firms and institutions which are subject to prudential regulation and ongoing supervision.
An AIF which fulfils the requirements of the AIF Law to be set up as a RAIF, must submit the required information and follow the registration procedure laid down in its recently issued Directive DI124-01. Within 1 month from its registration with the Registrar of Companies / the signing of the rules of incorporation of a common fund (as the case may be), the RAIF’s external manager must submit (through the designated Form 124-00-01) to CySEC the following information:
- Certificate of incorporation (if applicable)
- Information regarding the investment strategy the External Manager’s policy regarding risk and leverage, and other characteristics of the RAIF that intends to manage
- RAIF’s rules or instruments of incorporation
- Information regarding the appointment of Depositary
- Offering Document of the RAIF
- External Manager’s licence
- External Auditor’s and Legal Advisor’s confirmations
- Representative’s confirmation
CySEC, within one month, upon receipt of all the required information and upon evaluating whether the External Manager is eligible to manage the RAIF, proceeds with the registration of the RAIF in the RAIF register.
Our law firm E. TZIONI & ASSOCIATES LLC, may offer the following services:
- Support you in finding the ideal RAIF structure to meet your requirements, from a legal, regulatory and governance perspective.
- Support you in the setting up of the RAIF, preparation of the constitutional and all necessary documents of the RAIF vehicle and preparation of the full CySEC notification package.
- Provide you with ongoing corporate support services throughout the lifetime of the RAIF such as appointment of persons possessing the CySEC Advanced Certificate on the board of directors of RAIFs, corporate and legal support.
For more information please contact Mrs Eleni Tzioni at firstname.lastname@example.org and on +357 22932293.