Raising Capital

Investment Funds and Raising Capital

In our previous article titled “Investment Funds in Cyprus – Learn everything you need to know” we talked about what are funds, the difference between UCITs and AIFs, AIFs in Cyprus but also about RAIFs and Umbrella Funds. Here, we are giving you a definition of “Raising Capital” as well as some specifications.

The commercial activity of taking direct or indirect steps by an undertaking or a person or entity acting on its behalf (typically, the AIFM) to procure the transfer or commitment of capital by one or more investors to the undertaking, for the purpose of investing it in accordance with a defined investment policy should amount to the activity of raising capital.

When capital is invested in an undertaking by a member of a pre-existing group, for the investment of whose private wealth the undertaking has been exclusively established, this is not likely to be within the scope of raising capital.
The fact that a member of a pre-existing group invests alongside investors not being members of a pre-existing group should not have the consequence that the criterion ‘raising capital’ is not fulfilled. Whenever such a situation does arise, all the investors should enjoy full rights under the AIFMD.

‘Family members’ means the spouse of an individual, the person who is living with an individual in a committed intimate relationship, in a joint household and on a stable and continuous basis, the relatives in direct line, the siblings, uncles, aunts, first cousins and the dependents of an individual.

Raising Capital from a number of investors

An undertaking that is not prevented by its national law, the rules or instrument of incorporation, or any other provision or arrangement of binding legal effect, from raising capital from more than one investor should be regarded as an undertaking that raises capital from a number of investors. This should be the case even if it has in fact only one investor.

An undertaking that is prevented by its national law, the rules or instrument of incorporation, or any other provision or arrangement of binding legal effect, from raising capital from more than one investor should be regarded as an undertaking that raises capital from a number of investors if the sole investor:

  • Invests capital which is has raised from more than one natural or legal person with a view to investing it for the benefit of those persons; and
  • Consists of an arrangement or structure which in total has more than one investor for the purpose of the AIFMD.

Who can invest in the Fund-Eligible Investors?

  • AIF: Unlimited Investors, Retail, Professional or Well-informed – unless established as a private company.
  • AFILNP: Up to 50 Investors, Professional or Well-informed only
  • RAIF: Unlimited Investors, Professional or Well-informed only – unless established as a private company.

See the diagram below for more details:

types of AIFs

Professional Investor: An investor considered a professional client, who has the experience and expertise to make his/her own investment decisions and assess the risks involved. To be considered a professional client, the investor must comply with the criteria prescribed in the Markets in Financial Instruments Directive (MiFID) 2004/39/EC.

Well-informed Investor: Not considered a professional investor and (i) must confirm in writing that he/she is a qualified investor aware of the risks involved with an investment in the relevant AIF and (ii) makes an investment of a minimum of €125,000 or has been evaluated by a licensed bank/credit institution, an authorised investment firm or an authorised Management Company that he/she has the expertise, experience and knowledge in evaluating the suitability of an investment opportunity.

Retail Investor: An investor who does not meet the requirements listed above.

How can CX Financia help you?

At CX Financia, we have helped clients structure and establish their businesses in Cyprus – some of which required support with their AIF.

We will be happy to discuss your enquiries with you and assist you. You can have a look at our Investment Firms or Investment Funds Services for more information. If you have any additional questions, you can send us an email at info@cxfinancia.com.

 

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