Alternative investments fund (AIF) in Estonia
An investment fund (AIF) is a specially constituted entity whose assets can be invested in accordance with a predetermined investment policy. The purpose of an investment fund is to generate profits from the investment of its assets.
AIF is the most convenient structure for collective investment. Investors’ assets are attracted to their further use and placement in their interests following a predetermined investment policy under the company’s guidance that managed the fund.
An Alternative Investment Fund is the best solution for making collective venture capital investments and organizing investor funds in stocks, bonds, commodity indices, derivatives, currencies, cryptocurrencies, real estate, and other financial assets.
An investment fund in Estonia requires two structural units — the fund itself as a holder of property assets and the fund manager — the legal entity that manages one or more funds.
The fund manager manages the assets of a fund company or a contractual fund. It is important to note that one management company can manage several funds.
It is required to obtain a license to operate as a fund manager in a management company. Fund managers who want to manage euro funds and large-scale alternative investment funds also need to obtain a license.
In a small fund, a fund manager should apply for an operating licence as a small fund manager or register its activities with the Estonian Financial Supervision Authority (EFSA). This kind of manager can only manage non-public investment funds, meaning their business is primarily aimed at professional investors.
If a small unlicensed fund management company does not wish to apply for a licence as a small fund manager, they have to register their activities with EFSA. EFSA’s supervision over registered unlicensed small fund managers is limited to the registration and later data collection.
The decision by EFSA is usually made within two months of documents submission.
There are several types of funds. The type of investment fund chosen depends on the activity, the target investors and the amount of capital raised/assets managed:
1. A joint-stock fund (aktsiaseltsfond) — a fund established as a joint-stock company, its property cannot be divided into structural elements (sub-funds)
• participation in the fund in the form of ownership of shares
• can be closed and open
• limited scope for stock types and securities (no predominant shares, no debt receipts)
• upon establishment — the management and deposit contract is signed. The charter is agreed with FIE
• includes shareholders, board members and the council.
2. Contract fund (lepinguline fond) is a legal entity, the holder of property assets, which is formed from payments received by the sale of shares or other property or funds/property from investments and which belongs to the holder of the shares. The assets of the fund can be divided into structural elements, each of them must have a different investment policy (relevant if the fund consists of different types of property — real estate, securities, other assets).
• An investment prospectus is obligatory
• the fund cannot be reorganized into another fund
• the shareholder can always demand the redemption fund
• shares may contain different specific conditions (e.g. right of exchange, terms of ransom, voting rights, etc.)
• upon establishment — the fund manager and the depository shall be specified. The charter shall be agreed with FIE
• ruled by the meeting of the owners.
3. The limited partnership fund (usaldusfond) can manage its property or enter into a management agreement with the fund manager. Only a fund manager who is licensed to operate under the Investment funds act can act as a limited manager of a limited partnership fund or a general partner of a limited partnership fund that manages its assets.
The share in such a fund is freely alienated unless the agreement states otherwise. Equity holders should contribute to the fund.
The Estonian Real Estate Area provides fund managers with the possibility to organize the collection of investments and further management of collective assets within the framework of the simplified regulation of the manager of small alternative funds (small alternative fund manager). This regime makes it easy to create an investment fund in Estonia and allows partners to form flexible relations between themselves within the framework of the limited Partnership Agreement «LPA». The small alternative fund manager has the right to control several funds. Still, the total assets of the managed funds may not exceed €100 million, or in the case of investments of long duration (from 5 years or more) and no financial gain is used (credit arm), the total assets of the funds can reach 500 million euros.
As we already mentioned, cryptocurrency fund registration is not a difficult process. It consists of the following steps:
- Registration of the alternative fund management company, the fund manager (AIFM). You can easily do it using your e-Resident card, or by the power of attorneys, or by a visit to Estonia
- Registration of the fund’s management company with the Estonian Financial Supervisory Authority (EFSA)
- AML license from the Financial Intelligence Unit (FIU), which usually takes up to 60 days
- Registration of the fund. Once you succeeded with the first step, this process takes up to 5 days.
Company in Estonia OÜ assists in registering alternative investment funds in Estonia. We accompany and assist our clients in managing investment and financial structures from idea discussion until the project’s launch. Any collaboration usually starts with a consultation to discuss main principles and decide on the future company’s structure. During the next stage, we prepare a legal opinion on the subject of the fund’s activity and make a circulation map for registration. Preparations usually take up to 3 months.