Nontraditional Ιnvestment Fund (below mentioned as AIF) is an efficient option for mutual contributions and contributions in shares (both listed and unlisted), bonds, cryptocurrencies, and related products, real property objects, and similar valuable assets. The following is an overview of the main obligations of registering for establishing a small alternative investment fund and limitations on AIFs.
Regulatοry framewοrk for setting an AIF
- A properly formed AIF can become the basis for cryptocurrency fund, crowdfunding, property, or many other funds. The main obligations for opening a fund encompass are as follows:
- The volume of assets in the remit of the fund must not prevail EUR 100 million.
- It is obligatory to create a group consisting of 2 parties, which include the manager, and the fund itself, incorporated as an LP, in which both the manager and partners have the status of investing parties.
- The AIF may not sell shares to the public, however, it may plead to investors if this proposal to acquire part of the fund is presented to a maximal number of 150 individuals per EU member-state who are not solely professionals. The fund may also offer to acquire shares only to professionals by default. These individuals should buy parts of the fund with a value of a minimum of EUR 100,000 per one buyout.
- The lists of investing parties and the volume of their cοntributions are not publicly disclosed.
- The responsibility of investing parties is restricted solely to their contribution.
The procedure for the formation of an AIF
To start its operations in a duly manner staying in line with European Union law, the fund is obliged to pass the procedure of registering a fund and acquiring permissions, which entails the steps as follows:
- Company incorporation
The very initial step is the formation of a legal entity that will deal with the overseeing and handling of the institution’s cash flow. At the time of incorporation, there must be an appointed minimum of 2 committee members.
- Applying for permission to open the fund
A management cοmpany must receive appropriate approval from the regulative agency of the country in which the fund is being opened. The time necessary for a procession of an application normally lasts 2 months.
- Licensing of the Fund Manager
Along with applying for official approval, the manager must also apply for permission regarding anti-money laundering for a financing institution.
- Enlisting the company in the Company Register
Once approved by the regulator, an appropriate record on a fund must be done in the Registrar of companies of the jurisdiction of operation.
Limitations to the fund operation
Some limitations are implemented to the activity relating to proposing the fund’s shares to investing parties. It differs in each state, however, in some countries, for example in Estonian law restricts the fund to make proposals to the general public. In this country, the fund’s offer is not deemed public in the conditions described below:
- The overall value of the fund’s offer doesn’t surpass EUR 2,500,000 in a timeframe of one year for all European states;
- The proposal to buy the fund’s shares is solely presented to investors who buy them for at minimum EUR 100,000 as part of the separate offer;
- The proposal to buy fund’s shares is directed only at financiers, however, it differs in each jurisdiction;
- The proposal to buy fund’s offerings is directed at a maximal amount of 150 individuals or entities that are not financiers.
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