Important instrument for Increasing legal certainty in the design of investment structures
With the introduction of the German Investment Code (KAGB) around five years ago as part of the implementation of the AIFM Directive, the supervisory regulation of investment structures has been significantly expanded. In addition to the EU Directive-compliant undertakings for collective investment in transferable securities (so-called UCITS funds), all alternative investment funds (AIFs) have been included in the regulation. Under the Alternative investment funds This includes, for example, investment funds that do not invest in traditional asset classes such as shares or fixed-interest securities, but rather in unlisted company investments (private equity funds), infrastructure, renewable energies, property development projects, etc.
In practice, when designing investment structures (e.g. in the field of renewable energies or co-investments in the venture capital sector), the question often arises as to whether the vehicle through which money is raised from investors can be considered a Investment assets within the meaning of. § Section 1 (1) KAGB. If this is the case, the personal scope of application of the KAGB (and also the InvStG) with far-reaching consequences. This begins, for example, with the fact that only certain legal forms (special assets, Investment KG or Investment AG) are available for the project and therefore, for example, a German GmbH cannot be used as a capital collection vehicle. In addition, a licensed capital management company is required as the "fund" manager and a depositary. Finally, the other investment restrictions and investment limits of the KAGB must be taken into account. If all of this is not observed, there is a risk of considerable sanctions and possible intervention by the German Federal Financial Supervisory Authority ("BaFin").
Whether a specific investment structure constitutes an investment fund is often not easy to determine in individual cases. This is due to the broad, cross-legal form definition of investment assets in Section 1 (1) KAGB, according to which any (i) undertaking for collective investment (ii) which collects capital from a number of investors (iii) in order to invest it in accordance with a defined investment strategy (iv) for the benefit of the investors and (v) which is not an operating company outside the financial sector qualifies as an investment fund. For the individual cumulative definition criteria of an investment fund, see also BaFin, letter of interpretation on the scope of application of the KAGB and the term "investment fund" dated 14 June 2013. A risk-diversified investment in certain assets is not relevant to the question of the existence of an investment fund.
It should be noted that not only equity investments based on company law, but also the provision of debt capital (remunerated on a profit-related basis), mezzanine capital, profit participation capital and similar can lead to the existence of investment assets. In practice, this leads to often lead to great legal uncertainty. The same applies with regard to the elements of the offence "collection of money" and "defined investment strategy". On the other hand, there is a great need for market participants to obtain sufficient legal certainty in view of the considerable potential consequences of carrying out an unauthorised investment transaction.
To achieve this legal certainty, it is a regular option, with BaFin within the scope of a binding negative information to clarify the question that the proposed investment structure is not an investment fund within the meaning of Section 1 (1) KAGB, meaning that the scope of application of the KAGB is not fulfilled and therefore no transaction requiring a licence exists.
Yours TAXGATE Team has extensive experience in taking the above-mentioned regulatory requirements into account when structuring and implementing investments and in obtaining the relevant negative information from BaFin and will be happy to provide you with further information at any time.
Dr Thomas Elser is a tax consultant and partner at TAXGATE, a law firm specialising in transactions, investments and tax compliance.
