Investmentfunds & Hedge funds formation
Switzerland as one of the most liberal and transparent fund markets in Europe
With the enactment of the new federal Collective Investment Schemes Act (CISA) Switzerland emerges as one of the most liberal and transparent fund markets in Europe.
Already today, Switzerland ranks first worldwide in private wealth management, holding a share of 28 % (followed by the Caribbean and Luxemburg with each 15 %) and second in Europe in the fund market measured in total of assets (19 %).
Due to its key values of political and macro-economic stability, of its outstanding reputation as a traditional banking centre and the over-all moderate regulation, Switzerland has to be considered as the upcoming investment destination in Europe.
Tailor-made collective investment schemes are preferred instruments of private banking and become more and more important while wealthy clients aim at setting up their personal solutions, individually tailored along with their respective needs and goals. Since January 2007, new laws provide important opportunities to interested clients.
New Rules since January 2007 - Regulation of funds under CISA
The implementation of the new CISA, enacted by January 1, 2007, is part of an integral reform project for the regulation of the Swiss financial market. Due to this ongoing process a number of questions of detail remain to be resolved.
CISA provides new legal structures for collective investment vehicles primarily used for hedge funds and venture capital along with further novelties. There is a qualified investor concept, a new prime broker concept resolving a major problem for single hedge funds in Switzerland, a simplified prospectus regime and an extended simplified approval process thus enhancing time-to-market matters, to name only a few.
Regarding funds regulation, CISA features the introduction of a limited liability partnership structure ("Kommanditgesellschaft für kollektive Kapitalanlagen", Art. 98ff CISA) and the open ended mutual fund SICAV ("société d´investissement à capital variable", Art. 36ff CISA) as most prominent innovations.
Introduction of the Limited Liability Partnership (LLP) under CISA
To begin with, only qualified investors are permitted as limited partners, such as affluent individuals with at least CHF 2 mio financial assets under management, institutional investors et cetera - after all typical investors for tailor-made investment schemes.
As opposed to a contractual fund structure the stock holders of a SICAV have no claim against the fund management but a stake in the SICAV itself, with membership and controlling rights alike shareholdes of a joint-stock company but limited by the articles of association of the SICAV.
Likewise, a limited liability partnership is entered into the commercial register and has equally the exclusive goal of collective investment. The liability of the general partner is unlimited but it has to be noted that the general partner can be a Swiss-domiciled joint stock company (as opposed to Swiss obligation law under which only natural persons may act as general partners). The limited partners are only liable up to their respective contributions.
Opportunities to be evaluated
With the two novel forms of incorporation Switzerland combines two of the most prominent legal forms for alternative investments like hedge funds and private equity vehicles. Substantial regulatory and self-regulatory efforts still have to be made to implement the new framework.
In the transition period clients should seek competent advise in order to bridge the shortcomings of the new regulation which is still in its infancy.
Numerous legal questions remain to be resolved in detail - particularly with respect to the drafting of the relevant documentation which has to pass the SFBC as supervising authority in a closely monitered approval process.