Investment Funds

Content:

• Act on Management Companies and Investment Funds
• Drivers for the Introduction of a New Legal Regime
• The key principles of the new amendments
• Introductory Electronic Brochures (including annexes)
• Appropriate Cooperation Arrangements and Tax Agreements as a Condition for the Marketing of non-EU Alternative Investment Funds in the Czech Republic (including annexes) 

Act on Management Companies and Investment Funds

The Czech Parliament has adopted a new Act on Management Companies and Investment funds (“the Act”). The new law came into force on 19 August 2013 and repeals the previous legislation on investment funds which entered into force in 2004.

The Act incorporates the UCITS IV directive, AIFMD and other relevant legal acts of the European Union, follows on the directly applicable regulations of the EU and lays down the rules for the management and administration of investment funds and foreign investment funds as well as marketing of these funds in the Czech Republic.

Drivers for the Introduction of a New Legal Regime

The principal driver is to create a modern regulatory framework for the investment fund industry.

See also Czech Push to Lure Hedge Funds Eyes Luxembourg Not Cyprus.

The key principles of the new amendments

• A stratified regulation and oversight of investment funds (“lighter regime” for Qualified Investors Funds (QIFs), “full regime” for retail funds)
• A variety of legal forms for investment funds (incl. an investment company with variable capital (SICAV), a trust or a limited liability partnership by shares (SCA))
• A structure that is suitable for all investment strategies including both traditional and alternative investment products
• No detailed investment restrictions or leverage rules for QIFs
• No special restrictions on use of prime brokers
• No distribution restrictions for QIFs (apart from investor qualification as informed investor)
• No limitations on promoter if a promoter is a financial institution

Introductory Electronic Brochures

To the entry into force of the Act, we publish the electronic brochures that should provide for fundamental and concise information about the investment fund business in the Czech Republic.

The first group of brochures summarises specificities of each categories of investment funds in terms of the constituting, management, administration, depositary functions, prime brokerage, marketing, investment limits and some other issues.

1. UCITS Fund: 01-Electronic-brochure-investmend-fund-business-StF-EN (.PDF, 441 kB)
2. Non-UCITS Fund: 02-Electronic-brochure-investmend-fund-business-SpF-EN (.PDF, 409 kB)
3. Money Market Fund: 03-Electronic-brochure-investmend-fund-business-FPT-EN (.PDF, 406 kB)
4. Short-term Money Market Fund: 04-Electronic-brochure-investmend-fund-business-KFPT-EN (.PDF, 402 kB)
5. Real Estate Fund: 05-Electronic-brochure-investmend-fund-business-FNe-EN (.PDF, 526 kB)
6. Qualified Investors Fund: 06-Electronic-brochure-investmend-fund-business-FKvI-EN (.PDF, 499 kB)
7. European Venture Capital Fund: 07-Electronic-brochure-investmend-fund-business-EuVECA-EN (.PDF, 403 kB)
8. European Social Entrepreneurship Fund: 08-Electronic-brochure-investmend-fund-business-EuSEF-EN (.PDF, 401 kB)

The second group of brochures introduces the rules for marketing of the units and shares of investment funds in the Czech Republic.

9. Marketing of units or shares in case of an EU AIF and an EU AIFM: 09-Electronic-brochure-investmend-fund-business-Marketing-UCITS-EU-AIF-non-EU-AIFM-EN (.PDF, 330 kB)
10. Marketing of units or shares in case of an EU AIF and a non-EU AIFM: 10-Electronic-brochure-investmend-fund-business-Marketing-EU-AIF-non-EU-AIFM-EN (.PDF, 326 kB)
11. Marketing of units or shares in case of a non-EU AIF and an EU AIFM: 11-Electronic-brochure-investmend-fund-business-Marketing-non-EU-AIF-EU-AIFM-EN (.PDF, 409 kB)
12. Marketing of units or shares in case of a non-EU AIF and a non-EU AIFM: 12-Electronic-brochure-investmend-fund-business-Marketing-non-EU-AIF-non-EU-AIFM-EN (.PDF, 376 kB)

Appropriate Cooperation Arrangements and Tax Agreements as a Condition for the Marketing of non-EU Alternative Investment Funds in the Czech Republic

The AIFMD requires, inter alia, in relation to non-EU AIFs to be marketed in the EU these conditions to be met:

1. appropriate cooperation arrangements are in place between the competent authorities of the Member State of reference and the supervisory authority of the third country where the non-EU AIF is established in order to ensure at least an efficient exchange of information that allows the competent authorities to carry out their duties in accordance with the AIFMD,
2. the third country where the non-EU AIF is established has signed an agreement with the Member State of reference and with each other Member State in which the units or shares of the non-EU AIF are intended to be marketed which fully complies with the standards laid down in Article 26 of the OECD Model Tax Convention on Income and on Capital and ensures an effective exchange of information in tax matters including any multilateral tax agreements.

In terms of the Czech Republic the following arrangements comply with the aforementioned criteria:

• List of countries with a cooperation agreement between the Czech National Bank and the supervisory authority of a non-EU country relating to efficient exchange of information: EN-List-of-supervisory-authorities-CNB-2014-03-19 (.PDF, 128 kB) 
• List of states with a tax agreement between the Czech Republic and the non-EU country complying with the standards laid down in Art. 26 of the OECD Model Tax Convention on Income and on Capital and ensures an effective exchange of information in tax matters: EN-List-of-Agreements-Countries-2014-03-19 (.PDF, 166 kB)

Therefore, AIFs in these jurisdictions are to be marketed or to continue to be marketed into the Czech Republic in accordance with applicable legal regimes. See also rules for marketing of the units and shares of investment funds in the Czech Republic.