The Alternative Investment Organisation Act 2018
A recent vote by members of the Cyprus government will see the current legal and regulatory infrastructure for collective investments funds (IFs) undergo progressive modernizations.
With the main objective being to protect the rights of investor, the new Alternative Investment Organisation Act 2018 will replace current legislation and update the existing framework that oversees investment funds. Further, taking into consideration industry best practices globally, and predominantly in the European Union, the new Act will seek to regulate how alternative investment structures are created and function, including those that are self-managed and also Registered Alternative Investment organisations.
What are the changes?
The new provisions of the Alternative Investment Organisation Act 2018 will focus primarily on the following aspects of AIFs:
- AIF’s that do not require authorization by CySec (the Cyprus Securities and Exchange Commission), but whose supervising manager must be licensed.
- The formation of an AIF as a limited partnership, be it with or without a separate legal personality.
- Capital of the AIF at formation.
- The role of a depositary, depending on what AIF is being established.
- Handing of the management function to AIF management.
- The establishment of variable capital companies subject to the requirements of Cyprus Companies Law.
- In accordance with the new Act, persons who receive or are considered to receive dividends from collective investment undertakings or other collective investment funds will be subject to a special contribution at a rate of 17%, in the same way as those receiving dividends from companies.
What does this mean for Cyprus?
The fund sector will be positively impacted with alternative investment bills providing opportunities for the registration of diverse types of funds, and opening the way for investment fund options in all jurisdictions. Further, the island can now cement itself as a sought after investment hub, taking into account favourable legislation and regulations, and funds diversity.