Alternative Fund in accordance with Section 15 of the Act on Investment Companies and Investment Funds (ZISIF)
An “alternative fund” or “mini-fund” is a form of asset management that is comparable to the management of investment funds. This is a simplified regime that allows the management of funds that are not offered to the public and contain a smaller amount of assets.
Obligation to register at the CNB
The administrator of such a fund must be entered in the list of persons managing assets comparable to management, pursuant to Section 15 of the Act on Investment Companies and Investment Funds (ZISIF), which is maintained by the Czech National Bank (CNB). The obligation to register precedes the actual start of the administration.
The advantage of this method of asset management is that it does not require a CNB permit, nor is it subject to CNB supervision, and the administration associated with this method of asset management is significantly simpler. The whole process of registering an entity in accordance with Section 15 ZISIF in the CNB register is also less expensive.
The amount of investment in the alternative fund
The alternative fund does not have a minimum size or minimum investment amount.
The value of the assets may not exceed EUR 500,000,000, in some cases EUR 100,000,000 (if part of the assets is acquired using leverage or the assets may be paid out to the investor before five years have elapsed).
The process of establishing an alternative fund
The alternative fund is established by a legal entity, pursuant to Section 15 ZISIF par. 1, and for this purpose, it is the most suitable form of a limited liability company (s.r.o.).
For the creation of an alternative fund, it is necessary to create preparatory documentation, in particular the investment strategy, and subsequently submit an application to the CNB for registration in accordance with Section 15 of the ZISIF. The registration is only evidentiary in nature and does not provide any authorization. However, a breach of the obligation to register could lead to the liquidation of the company by a court and a fine of up to CZK 10 million.
The procedure for registration on the CNB list should take place within five days, and the total time for the creation of an alternative fund, pursuant to Section 15 ZISIF, including company formation, processing of supporting documentation, and registration on the list, pursuant to Section 15 ZISIF, is usually within thirty days.
The investment strategy can be subsequently changed, but such a change must be notified to the CNB in advance.
Alternative fund reporting to the CNB
The Alternative Fund is obliged to fulfil its reporting duties towards the CNB using the SDNS application through four statements:
- OFZ (ČNB) 10-04 “Quarterly balance sheet of the manager/main administrator/managed fund”
- OFZ (ČNB) 34-01 “Report of the fund of qualified investors”
- OFZ (ČNB) 36-01 “Report of the manager within the meaning of Article 3(3) of the AIFMD”
- OFZ (ČNB) 37-01 “Report on a managed fund within the meaning of Article 3(3) of the AIFMD”
Reporting duties of the alternative fund
The registered person must not give the false impression that his/her activities are subject to the CNB’s supervision. Among other things, it is obliged to inform on the designated business documentation and on the Internet that it is not subject to the CNB’s supervision.
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