Last Updated February 27, 2019

Law and Practice

Contributed By Travers Smith LLP

Authors



Travers Smith LLP investment funds group comprises four partners and 15 other dedicated fee earners, based in London. The group focuses on funds, investors and intermediaries in the private equity, infrastructure, debt, real estate and listed equities sectors. It has constantly been at the forefront of developing market practice and thought on relevant changes for the investment funds industry, including the European Alternative Investment Funds Managers Directive and, more recently, the potential impact of Brexit. The funds tax group advises on the structuring of investment funds to maximise their tax efficiency for investors and managers. The investment funds group sits alongside the firm’s market-leading private equity M&A practice, one of the largest transactional teams of private equity lawyers in the City. The funds finance practice combines expertise from the firm’s fund formation and finance practices to advise lenders that provide subscription line and other facilities to real estate funds. Travers Smith also advises real estate funds on the borrower side. The investment funds group is best known for private funds and closed-end listed funds.

Private closed-ended Funds

The statutory framework in the UK requires that an English limited partnership is registered as such. This entails providing an application for registration to the (public) Registrar for Limited Partnerships (held at Companies House), providing certain details including the name of each limited partner and the amount of capital contributed by each limited partner. This will be conclusive evidence that an English limited partnership came into existence on the date of registration. Any changes to these details during the continuance of the English limited partnership must be similarly registered within seven days of the relevant change.

The key document for private closed-ended funds is the limited partnership agreement; this is a freely negotiated contract, with very few provisions prescribed by law, and not available publicly. All parties will heavily negotiate the agreement prior to its execution. Other key fund documentation often used include side letters (providing certain investors with specific terms required for their specific circumstances), the subscription agreement for investors to subscribe for a commitment and be admitted as a partner in the limited partnership and the investment management agreement for the fund to appoint the manager.

Listed closed-ended Funds

An ITC is typically a UK public limited company which has been approved by Her Majesty's Revenue & Customs (HMRC) as an ITC for the purposes of the relevant tax legislation. Investment trusts are subject to special tax rules (discussed below). Similarly, a REIT is typically a UK public limited company which has been approved by HMRC as a REIT for the purposes of the relevant tax legislation. REITs are also subject to special tax rules (discussed below).

A key consideration when setting up an ITC or REIT is that the eligibility conditions (and post-launch, the ongoing requirements) set out in the relevant tax legislation are met in order to gain the tax advantages enjoyed by these vehicles. Tax lawyers should be engaged early in the process to provide advice on the steps necessary for a company to meet these requirements. Offers in respect of ITCs and REITs are subject to the obligation to publish a prospectus under the domestic legislation incorporating the EU Prospectus Directive. The other key document produced will be the investment management agreement for the fund to appoint the manager.

Since January 2018, under the Packaged Retail and Insurance Based Products (PRIIPs) Regulation a short, standardised disclosure document containing key information about the product being offered, a key information document (KID), must also be produced and published for investment products marketed to retail investors in the EEA.

Open-ended Funds

By comparison, open-ended funds are relatively easier and cheaper to set up, notwithstanding the fact that the fund itself requires prior regulatory authorisation. Open-ended funds have their own constitutional documentation, depending upon which type of vehicle is being set up:

  • a trust deed in the case of an AUT;
  • an instrument of incorporation in the case of an OEIC; and
  • a co-ownership or partnership deed in the case of an ACS.

In each case, the documents set out the features, powers and rules governing each authorised fund. For both UCITS and NURS funds, however structured, there are very detailed operational requirements. Day-to-day operations are then detailed in the fund's prospectus.

Travers Smith LLP

10 Snow Hill
London
EC1A 2AL

+44 20 7295 3000

+44 20 7295 3500

david.patient@traverssmith.com www.traverssmith.com
Author Business Card

Authors



Travers Smith LLP investment funds group comprises four partners and 15 other dedicated fee earners, based in London. The group focuses on funds, investors and intermediaries in the private equity, infrastructure, debt, real estate and listed equities sectors. It has constantly been at the forefront of developing market practice and thought on relevant changes for the investment funds industry, including the European Alternative Investment Funds Managers Directive and, more recently, the potential impact of Brexit. The funds tax group advises on the structuring of investment funds to maximise their tax efficiency for investors and managers. The investment funds group sits alongside the firm’s market-leading private equity M&A practice, one of the largest transactional teams of private equity lawyers in the City. The funds finance practice combines expertise from the firm’s fund formation and finance practices to advise lenders that provide subscription line and other facilities to real estate funds. Travers Smith also advises real estate funds on the borrower side. The investment funds group is best known for private funds and closed-end listed funds.

{{searchBoxHeader}}

Select Topic(s)

loading ...
{{topic.title}}

Please select at least one chapter and one topic to use the compare functionality.