The market for multi-purpose investment vehicles in the Netherlands is well established and developed. This article sets out the key regulatory and civil law drivers in structuring multi-purpose investment vehicles.
Investment vehicles are subject to the Dutch Act on Financial Supervision (the AFS, Wet op het financieel toezicht) when offering participation rights in the Netherlands. The Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM) are the Dutch regulators.
TYPES OF INVESTMENT VEHICLES
For regulatory purposes, investment vehicles are divided into two main types.
Investment companies (beleggingsmaatschappijen)
Investment companies have legal personality (see below for types of entities that may be used). Shares in these legal entities create participation rights in the company. Investment companies manage their fund portfolio on behalf of the participants (shareholders) in their own right.
Investment funds (beleggingsfondsen)
Investment funds lack legal personality (see below for types of entities that may be used). These funds include assets that are managed and maintained by a separate legal entity that acts as a management company (beheerder), as required by the AFS.
Investment companies and investment funds are, for regulatory purposes, further divided into two categories.
Open-ended investment vehicles issue, redeem or repay participation rights (shares) of participants at the request of their participants.
Closed-ended funds are investment vehicles that do not issue, redeem or repay participation rights (shares) of their participants at their request.
Investment companies and the managers of investment funds may not offer rights of participation in the Netherlands without a regulatory licence issued by the AFM. However, an investment vehicle may benefit from relevant exemptions to the licence requirement, which include, inter alia:
- offerings of participation rights are solely aimed at qualified investors as defined in the AFS (including institutional investors);
- denomination of participation rights is at least €50,000; and
- participants must subscribe for at least €50,000.
Transferable participation rights in closed-end investment vehicles qualify as securities under the European Prospectus Directive 2003/71 and the AFS and are subject to a prospectus requirement if they are offered to the public in the Netherlands. The AFM must approve the prospectus.
Non-transferable participation rights in open-ended investment vehicles are not subject to the Prospectus Directive 2003/71, but their manager must publish a different type of prospectus that does not require AFM approval.
Investment vehicles are also subject to prudential regulations in relation to their financials. The prudential requirements include, inter alia:
- minimum capital requirement of €225,000 if the value of assets under management exceeds €250m; and
- minimum capital requirement of €125,000 if the value of assets under management is less than €250m.
CIVIL LAW ASPECTS
Investment vehicles are commonly structured using the following vehicles:
- Private company with limited liability (Besloten vennootschap met beperkte aansprakelijkheid or BV);
- Public company with limited liability (Naamloze vennootschap or NV); or
- Limited partnership (Commanditaire vennootschap or CV).