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ICLG
The International Comparative Legal Guide to:
Alternative Investment Funds 2015
3rd Edition
A practical cross-border insight into Alternative Investment Funds work
Published by Global Legal Group, with contributions from:
Ali Budiardjo, Nugroho, Reksodiputro
Johnson Winter & Slattery
Attorneys-at-Law TRUST Ltd
Jones Day
Babbé Advocates
Keane Vgenopoulou & Associates LLC
Bonn & Schmitt
Lenz & Staehelin
Brodies LLP
Maples and Calder
Camilleri Preziosi
McCarthy Tétrault LLP
Cox Hallett Wilkinson Limited
PricewaterhouseCoopers AG
Dillon Eustace
Skadden, Arps, Slate, Meagher & Flom LLP
and Affiliates
Field Fisher Waterhouse LLP
Garrigues
GSG Attorneys at Law
Horten Advokatpartnerselskab
Steenstrup Stordrange
Travers Smith LLP
WTS Tax Legal Consulting
The International Comparative Legal Guide to: Alternative Investment Funds 2015
General Chapters:
Contributing Editor
Stephen G. Sims,
Skadden, Arps, Slate,
Meagher &Flom LLP
and Affiliates
1
Fundraising in 2015: Continuing Evolution – Stephen G. Sims, Skadden, Arps, Slate, Meagher
& Flom LLP and Affiliates
1
2
Regulation of Alternative Investment Fund Managers: The End of the Beginning?
Kirstene Baillie, Field Fisher Waterhouse LLP
4
Country Question and Answer Chapters:
3
Australia
Johnson Winter & Slattery: Shelley Hemmings & Andy Milidoni
4
Bermuda
Cox Hallett Wilkinson Limited: Jonathan Betts & Andrea Moniz-DeSouza
18
5
British Virgin Islands
Maples and Calder: Tim Clipstone
26
6
Canada
McCarthy Tétrault LLP: Sean D. Sadler & Nigel P. Johnston
33
7
Cayman Islands
Maples and Calder: Grant Dixon & Andrew Keast
40
8
Cyprus
Keane Vgenopoulou & Associates LLC: Thomas Keane
& Christina Vgenopoulou 46
Sub Editor
Nicholas Catlin
9
Denmark
Horten Advokatpartnerselskab: Claus Bennetsen
52
Senior Editor
Suzie Levy
10 England & Wales
Travers Smith LLP: Jeremy Elmore & Emily Clark
58
Group Consulting Editor
Alan Falach
11 Finland
Attorneys-at-Law TRUST Ltd: Mika J. Lehtimäki
66
Group Publisher
Richard Firth
12 Germany
WTS Tax Legal Consulting: Steffen Gnutzmann & Robert Welzel
71
13 Guernsey
Babbé Advocates: Robert Varley & Cian Lindsay
77
14 Indonesia
Ali Budiardjo, Nugroho, Reksodiputro: Freddy Karyadi & Christine Hakim
83
15 Ireland
Dillon Eustace: Brian Kelliher & Sean Murray
90
GLG Cover Design
F&F Studio Design
16 Liechtenstein
PricewaterhouseCoopers AG: Dr. Günther Dobrauz & Philipp Rosenauer
98
GLG Cover Image Source
iStockphoto
17 Luxembourg
Bonn & Schmitt: Marcus Peter & Aisling Whelan
104
18 Malta
Camilleri Preziosi: Louis de Gabriele & Andrew Caruana Scicluna
111
19 Mexico
Jones Day: Silvia Malagón Soberanes & Rodrigo Gómez Ballina
119
20 Norway
Steenstrup Stordrange: Klaus Henrik Wiese-Hansen & Christina Riisnes
123
21 Scotland
Brodies LLP: Andrew Akintewe
129
22 Spain
Garrigues: Luis de la Peña & Juan Ignacio González
135
23 Switzerland
Lenz & Staehelin: François Rayroux & Patrick Schleiffer
143
24 Turkey
GSG Attorneys at Law: Umurcan Gago & Emre Haykır
150
25 USA
Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates: Heather Cruz
& Anna Rips
158
Head of Business
Development
Dror Levy
Sales Director
Florjan Osmani
Commercial Director
Antony Dine
Account Directors
Oliver Smith, Rory Smith
Senior Account Manager
Maria Lopez
Sales Support Manager
Toni Hayward
Published by
Global Legal Group Ltd.
59 Tanner Street
London SE1 3PL, UK
Tel: +44 20 7367 0720
Fax: +44 20 7407 5255
Email: info@glgroup.co.uk
URL: www.glgroup.co.uk
Printed by
Ashford Colour Press Ltd
June 2015
Copyright © 2015
Global Legal Group Ltd.
All rights reserved
No photocopying
ISBN 978-1-910083-47-5
ISSN 2051-9613
Strategic Partners
9
Further copies of this book and others in the series can be ordered from the publisher. Please call +44 20 7367 0720
Disclaimer
This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice.
Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication.
This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified
professional when dealing with specific situations.
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Chapter 8
Cyprus
Thomas Keane
Keane Vgenopoulou & Associates LLC
1 Regulatory Framework
Christina Vgenopoulou
(i)
Investment Manager
The appointment of an external investment manager is not
mandatory in the case of an AIF with a limited number of
persons (“AIF-LNP”) formed as an IFCC or IVCC. An
AIF-LNP formed as a limited partnership must appoint
an investment manager who undertakes the duties and
responsibilities of the general partner.
If the AIF is managed internally, the persons carrying out the
internal management must be approved as to their investment
experience and capacity by CySEC.
The external investment managers who can be appointed to
manage an AIF-LNP are:
1.1 What legislation governs the establishment and
operation of Alternative Investment Funds?
The Cypriot legislation that governs the establishment and operation
of AIFs is the Alternative Investment Funds Law of 2014 (the “AIF
Law”) which introduces a new regime for establishing non-UCITs
funds in Cyprus. The operation and establishment of AIFs in Cyprus
is also impacted by the Alternative Investment Fund Managers Law
of 2013 (the “AIFM Law”) which transposed Directive 2011/61/
EU (the “AIFM Directive”) into Cyprus law. Also of relevance are
the EU Commission Delegated Regulations and EU Commission
Implementing Regulations adopted by the EU Commission in
specified areas in order to ensure uniform application of the AIFM
Directive across the EU.
Upon enactment of the AIF Law, the ICIS-International Collective
Investment Schemes Law, previously governing the establishment of
non-UCITS funds in Cyprus, was repealed. The AIF Law provides
that a licensed (by the Central Bank of Cyprus) ICIS can continue
as an AIF in accordance with the AIF Law or as an AIFM, subject
to submitting an application to the Cyprus Securities & Exchange
Commission (“CySEC”) within eight months of the enactment of
the AIF Law for the grant of an authorisation. If no application is
submitted or no authorisation is granted, the ICIS must be dissolved.
1.2 Are managers or advisers to Alternative Investment
Funds required to be licensed, authorised or
regulated by a regulatory body?
An AIF may be either self-managed in circumstances where it is
established as an investment company and certain criteria regarding
its assets are met, or otherwise as a matter of choice in which case
the investment company is considered an AIFM and falls within the
AIFM Law, or is externally managed, where it appoints an external
portfolio manager who is:
46
■ a UCITS management company;
■ an Alternative Investment Fund Manager (licensed under
the AIFM Law);
■ a licensed investment firm (from any part of the world,
subject to conditions); or
■ in limited circumstances, an entity whose sole purpose is
the management of the specific AIF-LNP.
(ii)
Depositary
In accordance with the AIF Law and the AIFM Law, it is
necessary for a depositary to be appointed for an AIF, to
whom the assets of the AIF shall be entrusted for safekeeping.
(iii) Fund Administrator
A Cypriot AIFM, i.e. a legal person that has its registered
office in Cyprus and offers at least portfolio or risk
management services to any entity, be it Cypriot, EU or nonEU qualifying as an AIF, depending on the total assets under
management, is subject to either registration or authorisation.
The Cypriot AIFM must be authorised at least for the
provision of risk and portfolio management. The scope of
the AIFM’s licence can be restricted to certain investment
strategies. In circumstances where the AIF is set up as a selfmanaged investment company, the AIF itself is considered to
be the AIFM and thus investors with an interest exceeding
10% are considered qualifying shareholders.
1.
AIFM-authorised in accordance with the AIFM Law;
2.
a management company authorised in accordance with OpenEnded Undertaking for Collective Investments Law; or
3.
IF-authorised in accordance with the Investment Services
and Activities and Regulated Markets Law, Law 144/207 (as
amended) (“Cyprus MiFID”).
In the case of Cypriot entities already authorised for asset management
under either Cyprus MiFID or Open-ended Undertakings for
Collective Investment (UCI) law, Law 78(I)/2012 (“UCITs Law”)
and involved as principal managers in the management of an AIF,
where AIFM Law authorisation thresholds have been exceeded in
order to continue managing the AIF, investment firms must waive
their licence under Cyprus MiFID and apply to be authorised as
AIFMs.
Each self-managed AIF and each external manager of an AIF,
where they are not authorised AIFMs, are subject to registration
in accordance with section 4(3) of the AIFM Law, in the Special
Register of sub-threshold AIFMs maintained by CySEC.
On the other hand, UCITS management companies can keep their
UCITS management company licence and apply to be additionally
authorised as (double-licensed) AIFMs. The latter is possible
without having to provide any additional initial capital, apart from
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1.3 Are Alternative Investment Funds themselves
required to be licensed, authorised or regulated by a
regulatory body?
(e)
information on arrangements made for the delegation and
sub-delegation of functions to third parties.
Furthermore, an AIFM shall provide to CySEC information on the
AIFs it intends to manage; specifically:
(a)
information about the investment strategies;
(b)
In accordance with the AIF Law, the establishment and
commencement of operations of an AIF requires the prior
authorisation of CySEC. In the case where the AIF is a self-managed
investment company, the process of authorisation of the AIF is in
accordance with the AIFM Law and the self-managed AIF will have
to comply with the provisions of the AIF Law and the AIFM Law.
information on where the master AIF is established if the AIF
is a feeder AIF;
(c)
the rules or instruments of incorporation of each AIF the
AIFM intends to manage;
(d)
information on the arrangements made for the appointment of
the depositary; and
(e)
In the case of a self-managed AIF, which also falls to be regulated
under the AIFM Law, there is a partial exemption for sub-threshold
funds. These sub-threshold funds will not have to comply with the
full rigours of AIFM Law. The thresholds provided in the AIFM
Law are (i) €100m (including assets acquired through leverage); or
(ii) €500m provided that the AIF is not leveraged and investors have
no redemption rights for the first five years.
any additional information for each AIF the AIFM intends to
manage.
CySEC shall not grant authorisation if (a) it is not satisfied that
the AIFM will be able to meet the relevant conditions, (b) the
minimum capital requirements are not met (for an AIF which is
internally managed, at least EUR 300,000, and where an AIFM is
appointed as external manager of AIFs, at least EUR 125,000), (c)
the persons who effectively conduct the business of the AIFM are
not of sufficiently good repute and are not sufficiently experienced,
(d) the shareholders or members of the AIFM that have qualifying
holdings are not suitable taking into account the need to ensure the
sound and prudent management of the AIFM, and (e) the head office
and re-registered office are not located in the Republic.
1.4 Does the regulatory regime distinguish between
open-ended and closed-ended Alternative Investment
Funds (or otherwise differentiate between different
types of funds) and if so how?
An AIF can be established either as an: (A) open-ended fund, where
investors have the right to redeem/repurchase their units upon
request at (i) any time, or (ii) regular intervals not exceeding one
year; or (B) closed-ended fund, where investors have the right to
redeem/repurchase their units upon request at (i) regular intervals
exceeding one year but less than five years (with the exception of
venture capital funds constituted in accordance with EU Regulation
345/2013 in which the initial period of redemptions may be extended
up to 10 years from their incorporation date), or (ii) a specific point
of time which is defined in the fund rules or the instruments of
incorporation.
1.5 What does the authorisation process involve?
In order for a licence to be obtained, an application package needs
to be submitted to CySEC for approval. The main components of
the application package include information on the fund manager (if
the fund is not self-managed), the custodian, the board of directors
(in case of a company), the prospectus (if applicable), the Key
Investor Information document (if necessary), financial statements,
the Procedures Manual, etc.
An AIFM may manage AIFs only if it is authorised by CySEC and
only if it meets the conditions for authorisation. Within 30 calendar
days from the date on which the AIFM passes the thresholds set out
in the law, it must submit an application to CySEC for authorisation
as an AIFM.
The application must be accompanied by the following:
(a)
information on the persons effectively conducting the
business of the AIFM;
(b)
information on the identities of the AIFM’s shareholders or
members that have qualifying holdings and on the amounts
of those holdings;
(c)
a programme of activity setting out the organisational
structure of the AIFM;
(d)
information on the remuneration policies and practices; and
Cyprus
the EUR 125,000 minimum initial capital already provided for
under Law 78(I)/2012.
Cyprus
The authorisation period lasts three months from the date on which
the complete file is submitted (this may be extended for another
three months). In order for an application to be approved, it must
be authorised to provide at least portfolio and risk management
Alternative Investment Funds.
1.6 Are there local residence or other local qualification
requirements?
An AIF and an AIFM applying for authorisation under the AIF Law
and AIFM Law respectively, as well as the directives adopted by
CySEC thereunder, must meet certain threshold criteria, one of which
is that the AIF and AIFM must have their head office in Cyprus.
Further, if the AIF and AIFM are to be tax resident in Cyprus, their
management and control must be located in Cyprus, which will mean
that all or a majority of the directors will be resident in Cyprus.
In the case of the appointment of an external manager and depositary,
these do not have to be resident in Cyprus; they can be from another
EU Member State so long as they are appropriately regulated in
their home Member State.
1.7 What service providers are required?
The service providers that will be appointed to an AIF will depend
on the type of AIF being established but will involve, as required
by AIF Law:
■
an external manager (unless the AIF is a self-managed
investment company); and
■
a depositary.
In addition, in the case of an AIF that is self-managed, an independent
valuer may be appointed. Further, although not provided for in the
AIF Law or the AIFM Law, it is common practice to also appoint a
fund administrator, whose primary responsibility will be to carry out
NAV calculations and provide fund accounting and transfer agency
services.
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Keane Vgenopoulou & Associates LLC
1.8 What co-operation or information sharing agreements
have been entered into with other governments or
regulators?
2.3 What are the principal legal structures used for
managers and advisers of Alternative Investment
Funds?
Under the AIF Law, there is an obligation imposed on CySEC to cooperate with the competent authorities of the other Member States,
with the European Securities and Markets Authority (“ESMA”) and
the European Systemic Risk Board (“ESRB”) whenever necessary,
for the purposes of carrying out their duties under the AIF Law
or Directive 2011/61/EU accordingly, and in light of this, CySEC
shall immediately supply them with all the information required.
Furthermore, the Commission shall communicate information to the
competent authorities of the other Member States, ESMA and ESRB
relating to the potential systematic concequences of AIFM activity.
The Commission may also receive requests for, or itself request, the
co-operation of the competent authorities of the other Member States
in supervisory activities. With regard to competent authorities of a
third country, the Commission may communicate information to
them so long as the provisions of s.9 of the Processing of Personal
Data (Protection of Individuals) Law are complied with, and the
Commission believes that this communication is necessary for the
purposes of the law and Directive 2011/61/EU.
The AIF Law does not contain any provisions prescribing the legal
form to be used for managers and other advisers. The principal legal
form used for managers of AIFs is a private limited liability company.
2 Fund Structures
2.1 What are the principal legal structures used for
Alternative Investment Funds?
The principal legal structures permitted by the AIF Law are:
(a)
(b)
(c)
Common funds – these are constituted under contract law
by means of a deed of constitution executed under seal by a
management company. A common fund is an unincorporated
entity and does not have legal personality. It acts through the
management company.
Investment companies – an investment company is a limited
liability company incorporated under the Companies Law
cap. 113 (as amended) and can be either fixed capital or
variable capital. An investment company can either be selfmanaged or appoint an external manager.
Limited liability partnerships (“LLPs”) – an LLP is registered
in accordance with the provisions of the Partnership and
Business Names Law, cap. 116 (as amended). An LLP will
have one or more general partners and one or more limited
partners and will be constituted by a partnership agreement.
The management of the LLP is conducted by the general
partner, who shall assume all responsibilities of the external
manager for the purposes of the AIF Law.
The AIF does not permit the use of unit trusts as a legal form to
constitute an AIF.
All the foregoing fund types can also be structured as umbrella
funds with separate sub-funds.
2.2 Please describe the limited liability of investors.
In the case of a common fund, as it does not have legal personality,
the liability of an investor is limited contractually to the amount
agreed to be contributed to the AIF. In the case of an investment
company, the liability of an investor is limited to the amount, if
any, unpaid on its shares. In the case of an LLP, the liability of
the limited partners (which will be the investors) is limited to the
amount contributed or undertaken to be contributed. A limited
partner will not have any liability for the debts of the LLP.
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Cyprus
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2.4 Are there any limits on the manager’s ability to
restrict redemptions in open-ended funds or transfers
in open-ended or closed-ended funds?
There are no statutory or regulatory limitations on the ability to
restrict redemptions or transfers. This is, however, a matter for the
fund documents, which may indeed contain such restrictions.
2.5 Are there any legislative restrictions on transfers of
investors’ interests in Alternative Investment Funds?
There are no legislative restrictions on the transfer of investors’
interests, or with respect to LLPs. Further, the fund documents may
put in place restrictions or procedures to be followed in order to be
effective.
3Marketing
3.1 What legislation governs the production and offering
of marketing materials?
The principal legislation that should be mentioned in the context of
marketing materials is:
■
the AIF Law;
■
the AIFM Law;
■
the Prospectus Law, Law 114(I)/2005 (as amended) (the
“Prospectus Law”); and
■
Cyprus MiFID.
These laws cover the manner of marketing, the approval of
marketing materials and the required minimum content.
3.2 What are the key content requirements for marketing
materials, whether due to legal requirements or
customary practice?
Whilst the laws mentioned in question 3.1 above do contain
provisions as to the marketing of AIFs, in general there are very
few content requirements relating to marketing materials of an AIF.
The overriding principle, however, is that marketing materials must
be clear, fair and not misleading, and must contain all information
necessary to arrive at a reasoned investment decision.
The provisions of the AIFM Law have introduced some important
changes in this area by requiring, as set out in section 30 of the
AIFM Law, certain disclosures that must be made to investors
relating to AIFs they manage prior to an investor taking a decision
to invest. Whilst the information required to be given is largely
consistent with what is customarily given to investors, the AIFM has
imposed requirements for greater detail to be provided.
Where an AIF is required to publish a prospectus as it is carrying
out a public offer, the content of the prospectus must comply with
the Prospectus Law. The requirement to issue a prospectus can, in
the context of an AIF, be avoided through one of the exemptions
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3.3 Do the marketing or legal documents need to be
registered with or approved by the local regulator?
Save for the provisions of the AIFM Law and the Prospectus Law,
there is no requirement for marketing materials or legal documents
to be registered with or approved by CySEC. Under the AIFM Law,
the AIFM must submit certain marketing information to CySEC
20 days prior to engaging in marketing activities, and any material
changes to these materials must be approved in advance by CySEC.
Where the AIF is obliged to issue a prospectus, it must be approved
by CySEC prior to issue, and any changes made at any time must
likewise be approved.
3.4 What restrictions are there on marketing Alternative
Investment Funds?
The AIFM Law has introduced a definition of “marketing” as being
the direct or indirect offering or placement in the EU, at the initiative
of the AIFM or on behalf of the AIFM, of units of an AIF it manages
for or with investors.
The AIFM Law also introduces an EU-wide passporting system
which allows a Cyprus-regulated AIFM to manage and market
Cypriot and EU AIFs throughout the EU. The marketing of AIFs
on a pan-European basis is only to professional investors who are
defined as investors who are professional clients or who may on
request be treated as professional clients within the meaning of
Cyprus MiFID.
The marketing of non-EU AIFs does not fall within the passport
regime and thus the marketing of non-EU AIFs in Cyprus will be
subject to local laws and regulations.
3.5 Can Alternative Investment Funds be marketed to
retail investors?
The AIFM Law (section 67) provides that CySEC may permit the
marketing of AIFs to retail investors whether on a domestic or crossborder basis and whether they are EU or non-EU AIFs. CySEC must
give its prior authorisation to such marketing. CySEC, in giving
such authorisation, has the power to impose additional obligations
on the AIFM or AIF which supersede the requirements where AIFs
are marketed to professional investors.
3.6 What qualification requirements must be carried out
in relation to prospective investors?
The AIFM Law does not contain any generally applicable
qualification requirements with respect to prospective investors.
However, an AIFM will need to examine and take account of the
circumstances of the investor to determine at the very least if they
are professional or retail investors.
3.7 Are there additional restrictions on marketing to
public bodies such as government pension funds?
There are no additional or specific restrictions that apply to
marketing to public bodies.
3.8 Are there any restrictions on the use of intermediaries
to assist in the fundraising process?
There are no particular restrictions on the use of intermediaries,
however where they are engaging in regulated activities they will in
turn need to be regulated by CySEC.
3.9 Are there any restrictions on the participation by
financial institutions in Alternative Investment Funds
(whether as sponsors or investors) arising from the
2008 financial crisis?
Cyprus
provided in the Prospectus Law, for e.g. a minimum subscription per
investor of EUR 100,000 or if the AIF is offered to fewer than 150
investors per EEA State. Further, the Prospectus Law is unlikely to
apply to open-ended vehicles.
Cyprus
There is nothing in the AIFM Law or AIF Law that prevents a
financial institution from participating in an AIF, however issues
may arise under the regulatory regime applicable to the financial
institution.
4Investments
4.1 Are there any restrictions on the types of activities
that can be performed by Alternative Investment
Funds?
The AIF Law prohibits an AIF from engaging in any activities
other than those permitted under the AIF Law. An AIF cannot
be connected to an entity that is not, or whose activities are not,
covered by the AIF Law.
4.2 Are there any limitations on the types of investments
that can be included in an Alternative Investment
Fund’s portfolio whether for diversification reasons or
otherwise?
The AIF Law provides for the imposition by CySEC, through
directives, of investment restrictions for AIFs, but to date no such
directives have been issued by CySEC. This does not mean there are
no restrictions but it does mean that there are currently no guidelines
from the Regulator. This needs to be clarified.
4.3 Are there any restrictions on borrowing by the
Alternative Investment Fund?
There is nothing in the AIF Law that prohibits or restricts borrowing
by the AIF.
5 Disclosure of Information
5.1 What public disclosure must the Alternative
Investment Fund make?
The AIF Law does not contain any public disclosure requirements
for an AIF. Any documents filed with CySEC as part of the
regulatory process are not matters of public record. However, where
an AIF is admitted to listing on a stock market or regulated market
or a multilateral trading facility, the AIF will have to comply with
the disclosure requirements of that market whether it is located in
Cyprus or elsewhere. In addition, a quoted AIF will have to comply
with the provisions of the EU Transparency Directive (2004/109/
EC).
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Cyprus
5.2 What are the reporting requirements in relation to
Alternative Investment Funds?
The primary obligation as regards reporting requirements is that the
external manager of an AIF or a self-managed investment company
is obliged to submit without undue delay to CySEC:
■
the prospectus of an AIF and any amendments if applicable;
■
the annual report for each year; and
■
half-yearly reports.
Annual and Half-Yearly Reports
These reports need to be delivered to CySEC and made available
to investors:
(a)
six months from the end of the financial year for yearly
reports; and
(b)
two months from the end of the six-month period for halfyearly reports.
CySEC has the power to prescribe by directive as to the content of
the half-yearly reports, however it has not done so to date.
The AIF Law and AIFM Law also impose disclosure requirements
on AIF Depositaries and AIFMs as regards the disclosure of their
annual reports. An AIFM is obliged to make an annual report
available to investors (on request) and to CySEC, within six months
from the end of each financial year. In the case of a listed AIF, the
Transparency Directive (transposing national legislation), requires
the provision of additional information. The depositary has similar
obligations and must disclose annual reports within six months of
the end of the financial year.
5.3 Is the use of side letters restricted?
There is nothing in the applicable law or regulations that prohibits
the use of side letters. Any side letters that are utilised will, however,
have to comply with the AIF Law and applicable regulations and
directives. The guiding principle which must be taken into account
is that all unitholders/investors must be treated equally, unless
differentials are clearly set out in the fund documents.
6Taxation
6.1 What is the tax treatment of the principal forms of
Alternative Investment Funds?
AIFs falling within the provisions of the AIF Law do not benefit
from any special treatment. AIFs are subject to tax in accordance
with the provisions of the Income Tax Law and the SCD Law, as
all other entities; the only tax benefit derived is exemption from the
provisions of the Stamp Duty Law.
The tax treatment of the AIF will largely depend on the nature of its
income. Looking at each type of income in turn:
Dividend: dividend income, if the AIF is a limited company, will be
exempt from income tax in Cyprus. The dividend income will also be
exempt from SCD so long as it is derived from trading activities or the
underlying tax is substantially greater than that applicable in Cyprus.
Interest: in the event that the interest is earned in the ordinary course
of business it will not be subject to the SCD Law but will be taxable
under the Income Tax Law as business income at the rate of 12.5%.
Capital Gains: Cyprus tax law provides that any gain or profit
earned by the sale of shares is exempt from income tax.
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Cyprus
In view of the above, any distributions to investors of the AIF are not
subject to withholding taxes in Cyprus, both as a result of Cyprus
law and as a consequence of the provisions of the double tax treaties
Cyprus has concluded.
6.2 What is the tax treatment of the principal forms of
investment manager/adviser?
Investment managers and advisers do not benefit from any special
tax treatment and, if they are Cyprus tax-resident entities, will be
liable to tax at the rate of 12.5% as is usually applicable.
6.3 Are there any establishment or transfer taxes levied
in connection with an investor’s participation in an
Alternative Investment Fund or the transfer of the
investor’s interest?
There are no establishment or transfer taxes levied or applicable
in Cyprus. Any participation in a Cyprus AIF by subscription or
transfer does not generate any charge or levy to tax.
6.4 What is the tax treatment of (a) resident and (b) nonresident investors in Alternative Investment Funds?
The tax treatment of a resident and non-resident is, obviously,
different. Firstly, a non-resident is not subject to any tax in Cyprus,
unless the profit or gain relates to an interest (either directly or
through a shareholding) in immovable property in Cyprus, in which
case there is a charge to capital gains. A non-resident of Cyprus is
not liable to tax in Cyprus.
A Cyprus tax resident, whether he acts on a personal basis or
corporate basis, will be liable to tax in Cyprus on the income
generated, whether interest or dividend. However, as regards any
gain or profit on the sale of shares, a Cyprus tax resident will be
exempt from any tax on such gain or profit.
6.5 Is it necessary or advisable to obtain a tax ruling from
the tax or regulatory authorities prior to establishing
an Alternative Investment Fund?
There is no particular benefit to be obtained from a tax ruling, given
the clarity of opinion on the application of applicable laws. It is,
however, common practice to obtain such a ruling.
6.6
What steps are being taken to implement the US
Foreign Account and Tax Compliance Act 2010 (FATCA)
and other similar information reporting regimes?
On 2 December 2014, the US and Cyprus signed an intergovernmental
agreement (“IGA”) to implement in Cyprus the Foreign Account
Tax Compliance Act (“FATCA”). The type of IGA signed is Model
1, meaning that the financial institutions will report the FATCArequired information to the local competent authority who will
report on to the IRS, rather than reposting directly to the IRS. The
Cyprus competent authority is the Ministry of Finance. In summary,
the IGA requires financial institutions to collect certain types of
information relating to (a) depository and custodial accounts held by
US persons, (b) interests in investment entities held by US persons,
and (c) insurance policies or annuities having a cash value held by
US persons.
The types of entity covered by the IGA include funds coming within
the definition of investment entities.
ICLG TO: ALTERNATIVE INVESTMENT FUNDS 2015
© Published and reproduced with kind permission by Global Legal Group Ltd, London
Keane Vgenopoulou & Associates LLC
6.7 Are there any other material tax issues?
There are no other material tax issues that need to be considered.
Cyprus
7Reforms
7.1 What reforms (if any) are proposed?
Thomas Keane
Christina Vgenopoulou
Keane Vgenopoulou & Associates LLC
2 Makarios Ave. Atlantis Building, 2nd Floor
Office 201, Mesa Yeitonia
Limassol 4000
Cyprus
Keane Vgenopoulou & Associates LLC
2 Makarios Ave. Atlantis Building, 2nd Floor
Office 201, Mesa Yeitonia
Limassol 4000
Cyprus
Tel: +357 2525 7900
Fax: +357 2525 2820
Email: tkeane@kvlaw.eu
URL: www.kvlaw.eu
Tel: +357 2525 7900
Fax: +357 2525 2820
Email: cvgenopoulou@kvlaw.eu
URL: www.kvlaw.eu
Thomas, who is one of the two founding partners, has over 20 years
of experience in the profession. His areas of practice include all areas
of corporate and commercial law but with particular focus on banking,
asset finance, corporate finance, project finance (across all sectors),
capital markets, M&A, structured products, financial services, EU &
competition and arbitration.
Thomas also provides, particularly in the banking, funds, insurance
and financial services sectors, compliance and regulatory advice to
ensure that such regulated entities comply with their ongoing statutory
obligations.
Thomas also has experience with drafting legislation and has in the
past drafted legislation relating to investment funds for the Central
Bank of Cyprus.
He is a regular speaker at international conferences and has published
many articles in leading legal periodicals.
Thomas was previously with one of the largest law firms in Cyprus,
spending eight years as a partner.
Professional Qualifications: Admitted: Irish Bar; Cyprus Bar.
Academic Qualifications: B.A. (Law) – University of Limerick 1988;
LL.M. – University of London 1989; B. L. – Barrister 1992.
Cyprus
Currently there are no reforms proposed.
Christina is a founding partner of the firm and has over eight years
of experience in the profession. Her practice focuses on all areas of
corporate and commercial law but she specialises in corporate finance,
financial services, trusts, taxation, banking (domestic and international)
arbitration and energy. She provides advice to financial institutions
regarding their day-to-day operations and specialised projects with
emphasis on transactions where international partners are involved.
In the corporate sector, Christina has advised on transactions in a
variety of industries. Her experience covers all aspects of corporate
and commercial law from strategy and due diligence to the drafting
and negotiation of all related contracts and agreements.
Christina frequently publishes articles in legal periodicals across all
areas of her practice but in particular energy, investment funds and
taxation.
Christina was a senior associate with one of the largest law firms in
Cyprus prior to founding the firm.
Professional Qualifications: Admitted: Cyprus Bar.
Academic Qualifications: LL.B. – University of Kent at Canterbury;
LL.M. Commercial and Corporate Law – University of London.
Professional Memberships: Member of Cyprus Bar.
Professional Memberships: Member of Irish Bar; Member of Cyprus
Bar; Member of the Society of Trust and Estate Practitioners (“STEP”);
Member of the European Communities Trade Mark Association
(“ECTA”).
Keane Vgenopoulou & Associates LLC was established in November 2012 by the two named partners Thomas Keane, Barrister at law and advocate
and Christina Vgenopoulou, Advocate.
The underlying objective of the partners has been the creation of a law firm able to cater for the complex needs of business in the 21st century by
offering legal knowledge of the highest level as well as a keen understanding of the modern business environment and the needs of our clients. To
that effect the firm applies a cross-disciplinary approach combining, legal, regulatory as well as tax considerations. We are a full-service law firm
but have particular experience and expertise in the areas of financial services, banking, capital markets, corporate, M&A, EU law, anti-trust (EU and
Cyprus), corporate finance, asset and project finance, intellectual property, energy, taxation and public procurement.
With over 30 years of collective experience the firm stands for technical excellence, quality of service and integrity. We are well placed to provide full
and complete solutions to the most demanding standards to meet the needs of our clients.
ICLG TO: ALTERNATIVE INVESTMENT FUNDS 2015
© Published and reproduced with kind permission by Global Legal Group Ltd, London
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