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Registration of investment funds

Registration of investment funds

Advantages of the Cyprus Private Fund:

There are no restrictions on the part of the Regulator as to the type of investments;
The process of obtaining a license is fairly simple and does not take much time;
The directors of the fund can act as an investment manager;
There is no minimum authorized capital;
There is no tax at source on the dividends paid, there is no capital gains tax;
The services provided by the fund’s investment manager are not subject to VAT.

The Investment Fund can, like other companies registered in Cyprus, enjoy the benefits of the country’s agreements on avoidance of double taxation.

Cyprus Investment Company (Cypriot Investment Firm / CIF / CIF) is a Cypriot organization specializing in providing investment services and investment activities. To this category, Cyprus legislation includes, in particular, the activity of brokers and dealers in the securities market, trust management of portfolio investments, investment consulting.

The provision of investment and support services in Cyprus is governed by Law 144 (I) / 2007 «on investment services, activities and regulated markets» (the «Law»).

The competent supervisory authority for investment companies in Cyprus is the Securities and Exchange Commission («CySEC»). CySEC is responsible for the proper application of the Law, examines applications for the issuance of licenses, issues directives and generally monitors the work of investment firms in the Republic of Cyprus. The CySEC office is located in Nicosia. CySEC maintains a public register of companies holding licenses.

Licensing of the Cyprus Investment Company (CIF).

The law regulates the following main types of investment activity subject to licensing:

Execution and transfer of orders in respect of certain financial instruments;
Execution of orders on behalf of clients;
Realization of transactions for own account;
Management of securities portfolios;
Investment advice;
Underwriting and / or placement of financial instruments on firm commitments;
Placement of financial instruments without firm commitments;
The operation of the Multilateral Trading Facility.

The Cyprus Investment Company («CIF») may have at least one of the above regulated activities.

CIF can also offer a wide range of regulated non-core activities:

Keeping and management of clients’ financial instruments, including depositary storage and related services, such as cash / security management;
Granting loans or loans to an investor to conduct a transaction on one or more financial instruments, in the event that the firm that provides the loan or loan participates in the transaction;
Providing advice on the capital structure, industrial strategy and related issues and advice and services on mergers and acquisitions;
Exchange of foreign currency, if this refers to the provision of investment services;
Investment research and financial analysis or other forms of general recommendations related to transactions with financial instruments;
Services associated with underwriting;
Investment services and activities, as well as related services related to derivative financial instruments.

Capital requirements CIF.

The initial minimum paid-in share capital of a CIF depends on the proposed activities:

Investment Services	Share capital (€)	Comments
Receiving and translating	200,000	Keeps funds and / or financial instruments of the client
Follow the instructions	200,000	Keeps funds and / or financial instruments of the client
Securities portfolio management	200,000	Keeps funds and / or financial instruments of the client
Providing investment advice	200,000	Keeps funds and / or financial instruments of the client
Receiving and translating	80,000	Does not store funds and / or financial instruments of the client
Providing investment advice	80,000	Does not store funds and / or financial instruments of the client
Work at your own expense	1,000,000
Underwriting of financial instruments and / or placement of financial instruments on the basis of a firm’s obligation	1,000,000
Placement of financial instruments without obligation of the firm	1,000,000
Work on the multilateral trading floor	1,000,000

The procedure for submitting an application for a license

A company that intends to obtain a license for investment activities is required to submit an application in a form that informs about the services and services that it will provide about the shareholders and directors of the company, the structure of the company. The application must be supported by the following documents:

Corporate documents (certificates, memorandum of association and articles of association);
The proposed amendments to the draft constituent contract and the charter of the company (to ensure that the company acts as an investment company);
Business plan;
Organizational structure of the company;
Internal documents of the CIF (regulations on operating activities, regulations on internal procedures, etc.);
A reference from a representative of the company who will represent the interests of the company in CySEC;
A confirmation from the company that it has or will have the original capital. At the final stage of the application consideration, CySEC requires that the entire amount of the initial capital be blocked until the license is granted;
Documents confirming the source of origin of the initial capital of the company;
Copy of the contract of professional liability insurance;
Information about service providers in third countries;
Information on the central counterparty, clearing systems and settlement systems; • Annual financial statements;
audit of financial statements for the last 3 years and consolidated financial statements of the group of companies of the companies (if applicable);
Certificates on the absence of the bankruptcy procedure and on the absence of previous convictions for the following persons:

— direct shareholders;

— members of the Board of Directors;

— senior management staff;

— other management personnel;

Certificates of lawyers and external auditors of the company.

CySEC may at any time request additional information to be provided.

To satisfy the requirements of CySEC, the applicant company can be either

(a) the newly created structure

(b) an existing company, with all necessary corporate changes required by CySEC to be conducted in the process of considering the application for a license. In other words, a CIF license can be granted to both a newly created company and an existing company.

CySEC must provide a CIF license, provided that the company meets all the requirements specified in the Law and in the relevant EU directives within 6 months.

Requirements for the organization, structure of the KIF

Head office

The head office of the CIF should be located in Cyprus and must be fully staffed. Employees working in the CIF and providing any of the types of investment services must be holders of certificates obtained after passing the appropriate exam at the Ministry of Finance of Cyprus.

Owners of CIF

CySec should have information about shareholders (both legal entities and individuals) that have a stake of 10% or more of the authorized capital of the CIF.

Board of Directors

The Board of Directors of the CIF must consist of at least two executive members and two independent non-executive members. CIF must also meet various organizational requirements. Management of the CIF should be carried out by a minimum of two persons who must have a sufficiently good reputation necessary experience to ensure reasonable and prudent management of the CIF.

Highlights of CIF taxation

The CIF is treated like any other Cypriot entity. Thus, the main points of taxation of CIF:

12.5% corporate tax, applied to the company’s net profit;
0% tax on dividends received from other companies in Cyprus;
0% taxation of dividends received from non-resident companies (provided that the exemption requirements for participation in the company are satisfied);
0% taxation of dividends distributed to non-resident shareholders;
0% on capital gains arising from the sale of securities / titles;
0% of the source tax for interest paid to residents and non-residents.

Stage of license issuance:

Creation of a new company, including the preparation of a special Memorandum and Articles of Association;
Preparation of the Application and all necessary documents

Personal questionnaires;
Organizational structure;
Operating instructions;
Business plan;
Compliance testing procedures;
Procedures for combating money-laundering;
Formalities of CySec;
Agreements on the provision of services;
Consultations on the specialists of the third party: accountants, auditors; bank specialists, internal audit specialists, technical support and trading platforms, executive brokers.3. Interaction with CySec.
- Submission of application and additional documentation;
- Answers to any CySEC comments regarding the application;
- Maintaining links between sponsors and CySEC;
- General review and coordination of issues related to the application
- Finalization of all approved documents for the final approval of the license
- Getting CySEC approval.

Planned schedule

Preparation of documents for filing 4-6 weeks;
CySEC verification for 6 months;
Answer questions, comments, requests from CySEC for 4 weeks.
CySec interviews with majority shareholders, directors and managers 1 week

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