The draft Act on Investment Companies and Investment Funds was approved by the Lower Chamber of Parliament (the “Act”). If adopted, this Act will replace the current Act No. 189/2004 Coll., on Collective Investments and will come into effect on its publication in the Collection of Laws. Some provisions will not, however, be applicable until the New Civil Code comes into effect on 1 January 2014.
The main objectives of the Act are:
- to implement the relevant EU directives regulating the area of collective investments, namely the Alternative Investment Fund Managers Directive (AIFMD) and the Directive on Undertakings for Collective Investments in Transferable Securities (UCITS); and
- to establish a modern and attractive environment for collective investments in the Czech Republic.
The most important changes proposed by the Act include the following:
- New forms of investment funds: the Act allows for the existence of investment funds in forms other than a joint-stock company and a unit trust (these are the only two forms possible under the current legislation). According to the Act, investment funds will also be able to exist in the form of (i) a joint-stock company with variable capital (i.e. a SICAV); (ii) a trust; (iii) a limited liability partnership which includes a newly introduced variant of a limited liability partnership issuing investment certificates; (iv) a limited liability company; (v) Societas Europaea; and (vi) a co-operative.
- Division of the internal management activities of a fund: the activities of a fund’s internal management will be divided between (i) an administrator who will maintain the administration of the fund (e.g. the accountancy, legal and tax issues); and (ii) a manager who will manage the portfolio and be responsible for risk management.
- More restrictive rules on the liability of a depository: the rules regarding the liability of a depository will be stricter.
- A Czech National Bank’s permit is not required for funds managing smaller portfolios: investment funds managing assets with a value of up to EUR 100,000,000 will not be subject to supervision by the Czech National Bank and will only be subject to a registration duty.
- New classification of qualified investor funds: qualified investor funds will no longer be classified as collective investment funds (under the current legislation qualified investor funds are a sub-category of special collective investment funds).
- Impact of the Act on a broader group of subjects: the provisions of the Act will also apply to Czech entities administering or managing the portfolio of foreign investment funds.
The draft Act will next be discussed by the Upper Chamber of Parliament and therefore may be amended further.
To keep you informed about the important changes that will be introduced by the Act a series of Law Now articles will be published in the coming months.