Investment management - establishing an asset management company in Cyprus
Cyprus has always been and remains a good choice for registration of European investment companies and European funds, as well as asset management companies for European funds. The main reasons for this are: favorable taxation, transparent registration and licensing procedures, well-developed legislation and law-enforcement practice, and much more.
If you have not decided yet where to register the asset management company and whether it worth to register it in Cyprus, then this article is for you!
Legislation on the activities of asset management companies in Cyprus
The main laws regulating the activities of asset management companies in Cyprus are:
- The Law on Investment Services, Investment Activities and Regulated Markets (144 (I)) of 2007, based on The Markets in Financial Instruments Directive (MiFID);
- The Law on Alternative Investment Funds (56 (I)) of 2013, which reflects The Alternative Investment Fund Managers Directive (AIFMD)
- Open-Ended Undertakings for Collective Investment (UCI) Law 78 (1) 2012, which reflects The Undertakings for Collective Investment in Transferable Securities IV Directive (UCITS IV);
- Law on Alternative Investment Funds, 131 (I) 2014 (AIF Law);
- Companies Law.
The Cyprus Securities and Exchange Commission (CySEC) is the main national authority that regulates funds, their asset management companies and marketing funds.
The regulation of asset management companies in Cyprus
The Cyprus legislation, governing the activities of asset management companies, complies with all European industry standards. This means that Cyprus asset management companies are subject to strict requirements regarding asset valuation, liquidity, risk management, and accountability to regulators and investors. Simultaneously, many services may be provided by third parties that specialize in providing such services.
Requirements for asset management companies in Cyprus
1) Asset management company for UCITS funds in Cyprus
UCITS can be managed by an external management company, or be self-managing. If the USITS fund is organized as self-governing, then it should be built on the basis of an investment company with variable capital - in this case, it will be managed directly by the board of directors of the fund. In addition, the self-managed fund will have to meet the following requirements:
- minimal initial capital € 300,000 euros;
- organizational structure complying with the requirements of the law;
- at least 2 directors with experience regarding the business in which the company is engaged.
If the fund is managed by an external management company, then such a company for the USITS fund should be organized as a limited liability company, have a registered office in Cyprus, and its management bodies should also be in Cyprus. Of course, such a company must obtain a CySEC license to operate as an asset management company (asset management license). Other requirements for asset management companies include:
- minimal initial capital € 125,000, that must be fully paid in euros. If the value of the assets managed by such a company exceeds 250 million euros, then the capital of the management company should be increased on 0.002 percent from exceeded 250 million, up to a maximum 10 million euros;
- an appropriate shareholder structure, organizational structure and personnel, with all the necessary financial and technical resources to provide services according to the law, and without putting at risk the interests of the retail funds under its management;
- the specialists who are managing such a company must have the necessary experience regarding the management of UCITS.
The foreign asset management companies, licensed in another EU Member State are allowed to provide services in Cyprus either remotely or by establishing permanent representative offices in Cyprus, in case of notification CySEC in accordance with the UCITS Law.
2) Asset management company for AIF funds in Cyprus
As well as with USITS funds in Cyprus, AIF funds can be self-managed, or managed by an external management company. If the AIF fund is organized as self-governing, then it should be built on the basis of an investment company (both with fixed and variable capital) and must be managed by the board of directors. In addition, such a company will have to meet the following requirements:
- minimal initial capital € 300,000 euros;
- proper share ownership structure, organizational structure and qualified staff;
- at least 2 directors with the required experience regarding the business in which the company is engaged.
If AIF is managed by an external company, then such a management company must have a proper license to manage the AIF. Such a management company is also known as AIFM.
The management company for AIF in Cyprus should be organized as a limited liability company, have a registered office in Cyprus, its management bodies must be in Cyprus, and also it must obtain a CySEC asset management license before starting any asset management related activities.
Among other requirements to AIFM are the following:
- The minimal initial capital is the same as for external management companies for UCITS funds;
- An appropriate share ownership structure, organizational structure and qualified staff;
- At least two directors with the required experience regarding the business in which the company is engaged.
As well as in case of UCITS asset management companies, foreign asset management companies for AIF, licensed in another EU Member State are allowed to provide their services in Cyprus also through establishing of a permanent representative office in Cyprus.
If you need more detailed information on obtaining a license for asset managing in Cyprus, or creating an investment fund in Cyprus, SBSB experts will be happy to help you and answer all of your questions!