The International Collective Investment Schemes (ICIS) or in layman’s terms, Private Funds, are probably one of the best vehicles through which promoters may raise money from up to 100 investors worldwide and at the same time offer such investors a great deal of protection, with respect to safety of assets, valuations and that the company is operating under EU laws.
Cyprus is increasingly becoming a popular base where many ICIS formations are structured, since it has the unique advantage of providing an EU framework combined with all the tax advantages as well as very competitive rates.
The most popular ICIS structures made from Cyprus are the variable capital ones, whereby when there is demand from investors to subscribe to the shares or units, the capital increases as the new shares/units are issued, and when investors exit the company, the shares/units are canceled.
The original shareholders have the added advantage of subscribing to voting shares, while offering non-voting shares to new investors. As stated previously, the only limitation of an ICIS is that it can only raise money from up to 100 investors. Once it passes the 100 mark, then it is treated like a public fund and has to go through a different registration and management process.
At the moment, the supervision and regulation of ICIS is done by the Central Bank of Cyprus, while in other EU countries, the task is undertaken by the equivalent of the Cyprus Securities & Exchange Commission in member states.
So for the promoters, or those wishing to raise money, an ICIS is extremely advantageous since there is no restriction on how much money can be raised or in what type or types of assets, the money will be invested, provided that the objectives of the funds, where it will invest, etc. are clearly stated in its business plan submitted to the Central Bank of Cyprus in the Offering Memorandum (OM), which is the document through which the ICIS raises money from investors.
The OM will also clearly state how an ICIS accepts money (on monthly, quarterly, semi-annually and so on) and under what terms and conditions investors may exit out of the fund, offering a lot of flexibility for the company.
An ICIS however offers a lot of protection to investors. All the assets are placed under a reputable Custodian Bank, based in Cyprus or abroad, which holds the assets on behalf of all investors. This means the promoter cannot run away with the assets or do as he pleases. All ICIS should also have an independent Administrator, based in Cyprus, which will calculate the Net Asset Value of the ICIS on which shares/units will be purchased and sold and it will also issue/redeem the units.
A regulated firm, with portfolio management license (such as Eurivex) also acts as the overall fund manager to make sure that the actual investments are made according to Board of Directors decisions and defined in OM, that the ICIS operates in full compliance with MiFID rules and make sure that the promoters accept money from investors by following the EU Know-Your-Customer (KYC) and Anti-Money Laundering (AML) rules. This means the only risk undertaken by investors is the actual risk of investment whereas in all other respects they are fully protected.
By having at least one member of the Board of the ICIS a Cyprus resident and since Eurivex, a Cyprus Investment Firm is the manager of the company, this will allow the ICIS to qualify for all the Cyprus double taxation advantages signed with more than 45 countries, since it is proven beyond doubt that “effective management” of the ICIS is carried out from Cyprus.
So, a Cyprus ICIS offers protection to investors (assets with custodian bank, valuation made by independent Administrator and overall fund management by regulated firm), it also gives the promoters the legal framework through which to raise money and invest in any project in the world (it has to be stated in OM), but it also qualifies for all the tax advantages that Cyprus offers.
Shavasb Bohdjalian is an approved Investment Advisor and CEO of Eurivex Ltd., a Cyprus Investment Firm, authorized and regulated by CySEC, license no. 114/10. Forex Brokerage and Investing in markets and trading on leverage is highly risky and it may not be suitable to all investors since it carries a high degree of risk and you can lose more than your initial investment.
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