Contributed By Travers Smith LLP
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.
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:
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.