UCITS is a pan-European Fund product which when established in one EU country can be sold cross boarder within the EU under a harmonised legislative framework without any requirement for additional authorisation. UCITS is the result of the evolution of mutual fund legislation to ensure better investor protection.
In June 2012 the Cyprus House of Representatives enacted the Open-Ended Undertakings for Collective Investment Law of 2012 (UCI Law of 2012). Under these laws UCITS are considered to be a fund of collective capital that is comprised of investments in transferable securities, money market instruments, deposits and other investments and whose operation is based on the principle of risk diversification and whose units can be liquidated by the unit holder on request using the assets of the organisation. It has no legal standing and the investors are represented by the Fund Management Company.
Therefore the following under the law are not considered UCITS:
Cyprus Securities and Exchange Commission (CySEC) is the regulatory and supervisory authority for the operation of the Collective Investment Schemes. The intense regulation by the Cyprus Securities and Exchange Commission (CySEC) therefore affects the following:
A local UCITS may take the following legal forms:
Main provisions for the UCITS Fund are as follows:
It is possible to form funds in Cyprus and manage them from an approved institution outside Cyprus (in another EU country). In addition cross boarder marketing provisions are now simplified to a regulator notification which permits a UCITS to be marketed in another member state within 10 days after receipt of notification letter with the key investor information in order to be able to assess the risks associated with the specific UCITS.
A Mutual Fund focuses on establishing a pool of transferable securities and other liquid financial assets which either separately or jointly belong to unit holders and whose operations are governed by the Common Fund Regulation.
A Management Company is required to be appointed in order to apply for and obtain the license to operate by CySEC due to the fact that the Mutual Fund is not a legal person. The application has to meet the following criteria:
A Variable Capital Company is a limited liability company with share holdings which have been registered under the UCITS Law 220 (I) 2004. The share capital of the company is determined upon registration of the company but the shares do not have a nominal value since their value will vary according to the net asset value of the assets divided by the total number of shares issued. These companies have the exclusive purpose of investment of their pooled assets in transferable securities, money market instruments and cash (in the form of bank deposits). The company can manage its own assets but not the assets of other companies. The assets of the company are kept under a custodian.
Legal Form of UCITSMutual FundVariable Capital Investment Companies CIC)Regulatory AuthorityCyprus Securities & Exchange Commission (CySEC)Cyprus Securities & Exchange Commission (CySEC)Capital Requirements:EUR 200,000For umbrella funds minimum capital requirement is applied at the sub fund levelEUR 200,000EUR 300,000 if self managed. For umbrella funds minimum capital requirement is applied at the sub fund levelRequirements:Management Company required Custodian – required Administrator – must be Cyprus BasedCan appoint a Management Company or be self managed through it’s Board of Directors Custodian – required Administrator – must be Cyprus BasedStipulations on location of operation:Must have a place of business within the Republic of Cyprus.Must have a place of business within the Republic of Cyprus.Statutory Application Fee:EUR 1,800 EUR 200 – 400 per sub-fundEUR 1,800 EUR 2,500 for self managed EUR 200 – 400 per sub-fundAnnual Regulatory Fee:EUR 1,800 EUR 200 – 400 per sub-fundEUR 1,800 EUR 2,500 for self managed EUR 200 – 400 per sub-fundReporting RequirementsAudited Annual ReportUnaudited semi-annual report. Quarterly summarized statements of assets and expensesApproximate timescale for formation:Approx. 2 months from application filingCan take up to 6 months for a VCIC that is self managed.
*Individual quotation provided based upon requirements.
UCITS are subject to taxation like any other Cyprus entity. This means the following:
The following are the most significant in relation to UCITS:
Eltoma Corporate Services can provide the following services in relation to UCITS:
Fund Administration Services:
Eltoma Corporate Services and its Partners can assist with the daily operations and perform general administrative tasks including:
Please contact Eltoma Corporate Services for a consultation.
The primary objective of an International Collective Investment Scheme (ICIS) is the collective investment of funds. A combination of favourable factors have lead to Cyprus becoming the one of the most popular and attractive jurisdictions in which to set up an ICIS.
Cyprus is an established, reputable international financial centre with full EU membership. Through its advantageous taxation system, excellent infrastructure and banking system and the existence of an extensive double tax treaty network Cyprus is an ideal and effective location for the establishment of an ICIS.
A crucial aspect in the success of ICIS is the competitive tax regime. Just like any other Cypriot Entity an ICIS is subject to a flat 10% Corporate Tax Rate on annual net profits earned worldwide.
In addition the following tax advantages exist:
The establishment and regulation of International Collective Investment Schemes are governed by the International Collective Investment Schemes Law 47(1)/1999. Under this Law the Central Bank of Cyprus is the Regulatory Authority for Schemes. Other laws which are applicable to the ICIS are the Cyprus Companies Law, the Business Names Law and the International Trust Law. Under the current legislation a Scheme may take one of the following forms:
All of the above may be established with limited or unlimited duration however the structure must provide adequate protection for the unit holders.
An ICIS may be designated as one of the following:
ICIS marketed to the General PublicICIS marketed to the experienced investorsPrivate international collective investment schemeDescriptionServices can be provided to the general public.Must contain in its constitutional documentation and offering memorandum clearly defined rules and procedures in order to ensure the marketing is restricted to experienced investors. Experienced investors are legal / physical person who provide financial services or frequently enter into investment transactions.Its constitutional documentation restricts the right to transfer its units and limits the number of unit holders to 100. A Private ICIS is prohibited from marketing directly to the public.Regulating AuthorityRegulated by the Central Bank however any ICIS which is intended to be offered to the public requires clearance by the Cyprus Securities and Exchange Commission.Regulated by the Central BankRegulated by the Central BankMinimum Capital Requirements:USD 200,000.00 but must be approved by the Central BankUSD 50,000.00No minimum capital requirementRequirements:Must appoint a manager who must be approved by the Central Bank.Must Appoint a Trustee to hold the assets of the scheme.Must appoint a manager who must be approved by the Central Bank.Must Appoint a Trustee to hold the assets of the scheme.A bank regards a private ICIS as a private arrangement and therefore because it needs less regulation is not obliged to appoint a manager or trustee.Stipulations on location of operation:Must have a place of business within the Republic of Cyprus.Must have a place of business within the Republic of Cyprus.Must have a place of business within the Republic of Cyprus.Bearer UnitsMay issue bearer units but require the prior approval of the Central Bank.Prohibited from issuing bearer unitsProhibited from issuing bearer unitsStatutory Application Fee:USD 1,500.00USD 1,000.00USD 500.00Statutory Inspection Fee:USD 1,500.00USD 1,000.00USD 500.00Reporting Requirements:All ICIS’s must prepare and submit the following: Annual Report– Financial Statements, information on borrowing, portfolio information, Trustee Report (where applicable) Audit Report. Half Yearly Report – Balance sheet, Income & expenditure account, Statement of the sources from which the total ICIS has been generated, Statement of duties, charges and fees paid out, Statement of income distribution or allocation.Approximate timescale for formation:Approx. 12 weeksApprox. 8 weeksApprox. 8 weeks
*Individual quotation provided based upon requirements.
The information and documentation requirements of the Central Bank of Cyprus in support of an application include the following:
The Central Bank must be satisfied as to the competence of the directors, promoters, managers (where applicable); they must pass the “fit and proper” test as laid down by the Central Bank of Cyprus.
Following the approval of Central Bank the ICIS will be designated as either a scheme to be marketed to the general public, a scheme marketed solely to experienced investors or a private international collective investment scheme.
The setting up of a regulated International Collective Investment Scheme in Cyprus requires professional regulated services. Eltoma Corporate Services, in conjunction with the client, undertakes the provision of all professionals required for an ICIS to become licensed, established and operational. The roles required are summerised below:
The scheme may be managed in one of two ways:
A Board of Directors, Trustees or Partners (depending on which type of ICIS is formed) manages the funds affairs and exercises control over its daily business and activity. A funds management must be primarily located in Cyprus where management and control is carried out.
This role is carried out by an established bank (either in Cyprus or another jurisdiction) which is appointed as the custodian to hold and safeguard the assets placed under the ICIS.
Upon the formation of an ICIS Auditors must be appointed and are responsible for the annual audit, bi-annual monitoring and reporting and other compliance functions.
Responsible for drafting various documentation such as the Memorandum and Articles of Association in the case of variable capital company (or Partnership Agreement or Trust Deed) in addition to attending to the legal formation, licensing and regulatory requirements of the ICIS both upon and after formation.
Eltoma Corporate Services provide consultancy services with regards to the formation of ICIS. We assist from commencement of the process at the application stage right through to providing assistance with on-going requirements. Eltoma Corporate Services provide the following services:
Please contact us for a consultation and quotation.