Cyprus – Establishing an alternative investment fund

El Perú antes de 1990

Si usted no es peruano y escuchaba hablar del Perú antes del año 1990 es muy probable que las noticias hayan sido negativas, tales como la catastrófica economía, la violencia terrorista y la falta del “Estado de Derecho” o “Rule of Law”, que no es otra cosa que el sometimiento de los poderes públicos a las leyes.

A fines de los años 60, un gobierno militar sustituyó, una vez más, una precaria democracia que trataba de convivir en el entorno internacional post segunda guerra mundial.  Mientras muchos países del mundo abrían sus economías y apostaban por la inversión, en Latinoamérica el camino preferido era diferente.  Reivindicando nacionalismos y luchas sociales, el golpe de estado de 1968 guio al Perú a ser una economía centralizada y controlada desde el Estado.  Se restringió la inversión extranjera, se limitaron las iniciativas privadas y se promovió la actividad económica estatal.

En los años 80’s, a pesar que se sucedieron dos gobiernos civiles elegidos democráticamente, se hizo poco por cambiar las bases económicas planteadas por el gobierno militar anterior, quizás, solo para demostrar que las economías dirigidas no son sostenibles.  Simultáneamente, la violencia terrorista impactaba negativamente, no solo en la seguridad, sino en la economía, destruyendo la poca infraestructura y la tranquilidad necesaria para invertir.

Las reformas legislativas de los 90´s

Pero en 1990, un nuevo gobierno entendió que eran necesarias reformas radicales para cambiar la situación que amenazaba el futuro del Perú.  De manera unilateral se decidió liberalizar la tenencia y cambio de moneda extranjera, reducir los aranceles de importación y dar prioridad a la inversión privada frente a la Estatal, lo que fue seguido por una ola de privatizaciones.

Un papel a destacar en dicha coyuntura es el del Decreto Legislativo 662, “Ley de Promoción de las Inversiones Extranjeras” promulgado el 29 de agosto de 1991.

Garantías del Estado a los inversionistas extranjeros

Este Decreto modificó de un día para el otro la concepción económica del Perú, mediante el cual, ahora el Estado Peruano: (1) promueve y garantiza las inversiones extranjeras efectuadas y por efectuarse, en todos los sectores de la actividad económica; (2) reconoce la igualdad de trato para los inversionistas nacionales y extranjeros; (3) elimina requisitos previos para la inversión; (4) protege la propiedad privada; (5) promueve igualdad de condiciones en cuanto a la propiedad intelectual de inversionistas nacionales y extranjeros; (6) confiere a los inversionistas extranjeros el derecho a la libertad de comercio e industria, así como a comerciar con el exterior; (7) permite la libre transferencia de moneda extranjera; (8) garantiza el uso del tipo de cambio más conveniente en el mercado, e incluso, (9) implementa un mecanismo de estabilidad jurídica, mediante el cual, el inversionista puede mantener un régimen legal determinado por un período de 10 años, dádosele así seguridad a los planes de inversión en un mediano plazo.

Eliminación de restricciones a la inversión

Finalmente, destaca entre las disposiciones complementarias de este Decreto que, a partir de su vigencia, quedan derogadas todas las leyes que limitan o restrinjan de alguna manera la inversión extranjera.

Al día de hoy, han pasado poco más de 25 años desde la entrada en vigencia de esta Ley y queda claro que fue el camino correcto.  El Perú se encuentra ahora insertado en la economía mundial y ha afrontado con éxito el reto del crecimiento económico y social, habiendo rescatado a millones de personas de la pobreza extrema con el crecimiento sostenido de la clase media.

Asimismo, a través de la integración comercial, se han firmado múltiples acuerdos comerciales y de protección de inversiones, tanto bilaterales como multilaterales, consintiendo a los inversionistas la posibilidad de acudir a foros internacionales a fin de presentar eventuales reclamos en contra del Estado Peruano, en el caso que sus inversiones se vieran afectadas indebidamente por el Estado.

Cabe destacar que, desde la entrada en vigencia de esta ley, han sido pocos los casos en los cuales un inversionista extranjero se ha visto en la necesidad de acudir a alguna de estas instancias internacionales, lo que se explica por el alto respeto que han tenido los sucesivos gobiernos por la inversión privada y extranjera.

Conclusión

De esta manera, podemos concluir que no solo los inversionistas extranjeros gozan de los mismos derechos que los inversionistas nacionales, sino que, incluso, teniendo el derecho a acudir a foros internacionales, tienes mayores derechos que los inversionistas locales.

El autor de este artículo es Frank Boyle.

Cyprus is emerging as a new investment fund centre in Europe following the efforts for evolving and upgrading the regulatory and compliance framework which was initiated in the late 1990s. The enactment of the Alternative Investment Funds Law, No. 131(I)/2014 (AIF Law) is the latest development which aimed at the creation of an attractive and competitive environment for further enhancement and development of the alternative funds industry in Cyprus. The AIF Law replaced the previous regime under which Cyprus managed to develop into a regional domicile for investment funds and their managers.

The following possibilities for alternative investment funds (AIFs) were introduced by the AIF Law:

• Umbrella funds with multiple investment compartments/sub-funds which may adopt different investment policies and manage different pools of assets
• Transferability of shares
• Public offerings of AIF’s shares or units
• Listing of securities issued by AIFs

AIFs may be open-ended or closed-ended and may take one of the following legal forms:

• Fixed Capital Company
• Variable Capital Company
• Limited Partnership
• Common Fund (contractual)

The relevant rules applicable to the respective legal form are based on Anglo-Saxon common law principles which are incorporated in Cyprus law (company law, partnerships law and contract law etc.).

AIFs may have a limited or unlimited duration.

Investor Classification

AIFs may be established either to be marketed to retail investors or to professional and/or well informed investors (see below for the exception applicable to AIFs with limited number of persons). Investor classification is to be made on the following basis:

• Professional Investor: For an investor to be considered as professional investor the requirements for professional clients under Markets in Financial Instruments Directive 2004/39/EC (MIFID) must be satisfied. A basic characteristic of professional investors is the fact that they possess the experience, knowledge and expertise to make their own investment decisions and to properly assess the risks they incur.

• Well-Informed Investor: A well-informed investor is not a professional investor within the above meaning but one who:
  • confirms in writing the well-informed investor status and awareness of the risks related with the proposed investment; and
  • makes an investment of at least €125.000 or has been assessed as having the expertise, experience and knowledge in evaluating the suitability of the investment opportunity in the AIF by a credit institution, investment firm or a management company for Undertakings for the collective Investment in Transferable Securities (UCITS Management Company)
• Retail Investor: A retail investor is an investor who does not fulfil the above requirements so as to be classified as a professional or well-informed investor.

Types of AIFs

The AIF Law allows for the establishment of AIFs to be addressed to an unlimited number of investors as well as for funds addressed to a limited number of persons (maximum 75) who may only be professional and/or well-informed investors.

AIFs to be addressed to an unlimited number of investors must to comply with minimum initial capital requirements i.e. €125.000 if externally managed and €300.000 if self-managed.

AIFs may be subject to investment restrictions depending on the investor type, the category of the assets to be held in their portfolio and the overall investment policy to be adopted. On the other hand, AIFs with limited number of investors are subject to a lighter legal and regulatory framework and are not subject to investment restrictions or investment limits.

Management of AIFs

AIFs may be managed externally by a manager appointed to perform the management of the portfolio of assets and related services. Different entities may undertake this role depending on the type of AIF:

• For AIFs with unlimited number of investors the external manager may be:
  • An Alternative Investment Fund Manager (AIFM) established under local law or under the Alternative Investment Fund Managers Directive
  • A UCITS Management Company established under local law or under the Undertakings for the collective Investment in Transferable Securities Directive
  • A MIFID Investment Firm established under local law
  • An AIFM established in a third country but complying with the relevant provisions of the local legislation
• For AIFs with limited number of investors the external manager may be:
  • A MIFID Investment Firm established under local law or the MIFID
  • A UCITs Management Company established under local law
  • An entity established under local law solely for the purpose of managing a specific AIF with limited number of investors
  • An entity established in a third country and licensed to provide asset management services and subject to prudential supervision

In the case of AIFs which are companies, the AIF Law provides the option of self-management whereby the management of the portfolio of assets is performed by the board of directors subject to certain restrictions (cap on value of the assets under management, restrictions on leverage, lock-up periods).

Depositary

The depositary of an AIF may be a credit institution or a MIFID Investment Firm or other entity which is subject to prudential regulation and ongoing supervision and which is eligible to act as depositary under its home state legislation.

 The depositary must have its registered office in Cyprus or in another member state of the European Union or in a third country, provided that the Cyprus Securities Exchange Commission has signed with the competent authorities of the third country a Memorandum of Understanding for Cooperation and Exchange of Information.

Under certain circumstances it is possible for small AIFs with limited number of persons not to appoint a depositary.

Utilisation of the AIFs

AIFs may be utilised for investments in a wide range of asset classes. Such funds have been established for investments in debt and equity securities as well as real estate and private equity. In a structure with multiple investment compartments/sub-funds, different compartments/sub-funds may invest in diverse asset classes.

Key benefits

• Cost-efficient and simple set-up process with fees being significantly lower than in the more mature fund centres e.g. Ireland and Luxembourg
• A single and accessible regulator for the alternative funds and their managers
• Flexibility as to the asset classes that may be included in the AIF portfolio
• Transparency, reporting and risk management aiming at investor protection
• Regulated environment in line with the European Union regulatory framework for Alternative Investment Fund Managers, MIFID Investment Firms and UCITSs
• Passporting of the marketing of funds in the European Union where the manager is an AIFM
• Redomiciliation in and out of Cyprus is possible

Taxation

Cyprus’ growth in this sector has been driven by the country’s tax treaty network, originally rendering it a jurisdiction for launching investments funds with investments primarily into Russia, the former Soviet republics and Eastern Europe but recently also in Asian countries.

Main aspects of tax treatment in Cyprus:

• Subject to 12.5% flat corporation tax
• Exemption from tax on dividends received by the AIF
• Exemption from tax on profits from sale of securities or other instruments (except where the securities are in companies owning immovable property in Cyprus)
• No subscription tax on assets of funds
• Exemption on capital gains tax from the sale of immovable property located outside Cyprus
• No capital gains tax on disposal of shares/units by the holders
• Benefiting from an extensive network of more than 50 double tax treaties offering interesting tax planning opportunities

In a rapidly changing funds industry, the options and opportunities available for the setting up and operation of alternative investment funds under the Cyprus regulatory regime are worth exploring by fund managers, investors and their advisors.