CYPRUS ALTERNATIVE INVESTMENT FUNDS

A. INTRODUCTION

Cyprus is dynamically positioning itself as one of the top emerging investment fund centres in Europe. The fully upgraded and modernised legislative and regulatory framework, which is in full compliance with the European legislation, has enhanced competiveness and has placed the country in the league of important jurisdictions for the Alternative Investment Funds industry.

B. WHO CAN BENEFIT FROM THE SET UP OF A FUND

Conducting business through a fund, a vehicle which operates under more strict and transparent rules than normal limited liability companies, gives the ability to raise capital from private and institutional investors who are not really interested in being involved in the day to day management of their investment but seek a good return on their investment in accordance with the risk they chose to undertake.

C. WHY SET UP A FUND IN CYPRUS

Cyprus being an EU Member State has a lot to offer in the financial services sector and the Funds industry in particular. With its efficient and up-to date regulation, which is fully harmonised with the related EU Directives, provides a framework in which Fund Managers and Funds can operate efficiently.

D. TYPES OF ALTERNATIVE INVESTMENT FUNDS IN CYPRUS

E. THE REGISTERED ALTERNATIVE INVESTMENT FUND (RAIF)

1. Authorisation Process

The Cyprus Securities and Exchange Commission (CySEC) is the regulatory authority, responsible under the AIF Law for the licensing and supervision of Alternative Investment Funds in Cyprus.

2. Legal Forms

A RAIF may be established and operate as open-ended or close ended fund and take the following legal forms:

3. Fund Manager

Due to the fact that RAIFs are not subject to authorization from CySEC, the supervision is performed indirectly through its Fund Manager. Therefore, it is required that a RAIF is Externally Managed by a Cyprus or EU Alternative Investment Fund Manager (AIFM) or a third country AIFM under the passporting system, with Cyprus as the member state of reference.

4. Depositary Requirements

The appointment of a Depository for the safekeeping of the RAIF’s assets is mandatory for all types of RAIFs.

5. Investment Strategy

A RAIF’s permitted investment strategy is generally wide in order to meet its main objectives of a fast, efficient and flexible fund structure. However, a RAIF cannot pursue a Money Market policy, act as a Loan Origination Fund or a Fund of Funds. All other investment strategies are permissible.

6. Eligible Investors

One of the preconditions for the registration of a Cyprus RAIF is that it must be addressed exclusively to professional and well-informed Investors and it is not possible to be marketed to retail investors.

7. Limitation on Number of Investors

A Cyprus RAIF has no restriction as to the number of investors. It can have an unlimited number of investors.

8. Initial Capital Requirements

There are no initial capital requirements for the RAIF registered in Cyprus.

9. Value of Assets under Management

RAIFs must hold assets of at least €500.000 for each investment compartment within 12 months from the date of registration, through the means of capital raising from investors

10. Fund Taxation

Cyprus based funds and their investors can benefit from a favourable tax environment. A RAIF will be subject to Corporation tax at 12.5% on the resulting net profits without any imposition of taxes on the net assets of the Fund.

F. FUNDS AT A GLANCE

G. THE FUTURE OF FUNDS IN CYPRUS

The transformation of the investment funds regime in Cyprus in combination with the island’s strategic geographic position, attractive tax environment and the experienced professional service sector has made Cyprus the rising star of the EU funds jurisdictions.

H. HOW KINANIS LLC CAN ASSIST

Our dedicated Financial Services team is ready to assist clients with:

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Christos P. Kinanis

Christos P. Kinanis

Mr. Kinanis is a practicing Lawyer in Cyprus with 35 years experience in the Law profession. Author of various articles on Legal and Tax matters.