New provisions on investment funds in Liechtenstein
Dr Helene Rebholz
Dr Dr Batliner & Dr Gasser
Vaduz
Dr Helene Rebholz (Bio)
Liechtenstein is in the process of implementing several EU directives and ordinances: the so called 'Ucits IV package', specifically directive 2009/65/EG, as well as the directive 2011/61/EU on the administrators of alternative investment funds). This will lead to a complete renewal of the Liechtenstein law on investment fund regulation. Instead of the Investment Undertakings Act (Investmentunternehmensgesetz, IUG) dating back to the year 2005, two completely new laws will be enacted, namely the Law on Undertakings for Collective Investments in Securities (Ucits-G) and the Law on the Administrators of Alternative Investment Funds (AIFM-G).
With these two new laws, Liechtenstein follows the terminology established in European regulations on investment undertakings and in a timely fashion (or even well before the expiration of the respective delays) has implemented the harmonised European law standards. The new laws aim to clarify regulatory aspects and to ease the processes of cross boarder activities with regard to the administration as well as the distribution and marketing of investment funds.
Furthermore, the two new acts are completely in line with a principle which Liechtenstein has always held very high, namely to grant swift approval procedures ('time to market').
The law on Specific Undertakings for Collective Investments in Transferable Securities (Ucits-G)
The new Liechtenstein Ucits-G (including an ordinance further defining and clarifying certain provisions of the act) has entered into force on August 1 2011.
Whilst the 'old' IUG only recognised two types of potential legal structures for Liechtenstein investment funds, according to the new Ucits-G, the following legal forms are permissible:
- collective trust (unit trust)
- corporate form, company limited by shares (FL-SICAV)
- contract form (investment fund)
The government of Liechtenstein may allow additional legal forms by way of ordinance. Liechtenstein therefore offers a comprehensive variety of legal forms, which is unique within Europe and offers broad opportunities for appropriate structuring.
The new legal provisions are rather complex and therefore also a challenge to the Liechtenstein Financial Market Authority. Nevertheless, the Liechtenstein law provides for very swift approval procedures with regard to new products (normally within ten working days). In addition, the law provides for the legal assumption that approval has been granted, if the Liechtenstein Financial Market Authority does not oppose within certain delays (approval fiction).
It is obvious that these swift procedures can only be implemented and are only realistic if filings are done with standard forms and standard documentation, which standard documentation is in the process of being established in close cooperation between the Liechtenstein Fund Association and the Liechtenstein Financial Market Authority. Using the standard documentation will guarantee swift procedures but will also grant legal security and certainty to the market participants, that any and all relevant mandatory provisions have been considered and are contained in the fund documentation.
In this context, the 'simplified prospectus' of the IUG will - again in implementing European law standards - be substituted by the standardised 'KII/KID', the Key Investor Document/Information. This underlines and supports the clear goal of the new Liechtenstein laws, namely to guarantee appropriate and effective protection to the investors.
Further more, the new Ucits-G contains comprehensive and detailed provisions on cross boarder mergers of funds as well as on master-feeder structures, which offer wide and flexible restructuring opportunities in a surrounding of legal certainty on the basis of detailed legal provisions.
The Law on the Administrators of Alternative Investment Funds (AIFM-G)
The new Liechtenstein AIFM-G is still in the process of being enacted and is planned to enter into force in summer 2012.
One of the outstanding and most substantial new sections of the European law standards – and therefore also the Liechtenstein law – is the new EU passport not only for regulated Ucits but now also for management companies of alternative investment funds. The AIFM-G shows a totally new approach by regulating in detail the prerequisites for approval of as well as the constant supervision of fund management companies rather than regulating the products.
Thus, not only funds which qualify as Ucits, but also fund management companies of alternative investment funds and, therefore, alternative investment funds as such, are able to be active and distributed within the entire EEA (European Economic Area) once they have obtained approval in Liechtenstein and are therefore EU passported. This offers numerous new options and chances specifically with regard to cross border services of fund administration companies as well as asset management companies. Naturally, this is not only to the benefit of Liechtenstein management companies but also to the benefit of fund management companies domiciled in the European Union but also in non-EEA states. Provided they dispose of an EU passport, the Liechtenstein market and, as a consequence, the Swiss market is open and accessible to them.
Furthermore, also within the AIFM-G, a broader variety for legal forms for Liechtenstein investment undertakings is available. In addition to the legal structuring possibilities as provided by the Ucits-G and as mentioned above, the AIFM-G in addition allows investment undertakings in the legal form of a Personengesellschaft: namely in the form of a Kommanditgesellschaft, which is very close to the common law partnership limited.
Conclusion
With the Ucits-G (in force since August 1 2011) and the AIFM-G (to enter into force approximately in summer 2012) Liechtenstein disposes of a modern investment undertaking law in compliance with European law standards. This offers the opportunity to extend business activities by making use of the EU passport not only to Liechtenstein fund management companies, but also foreign fund managers can benefit from the new harmonised Liechtenstein regulations, the EU passport and specifically from the swift and pragmatic approach and praxis of the Liechtenstein Financial Market Authority.