On 4 June 2016, on the basis of the Act of 31 March 2016 (implementing Directive 2011/61/EU), the Act of 27 May 2004 on Investment Funds and Management of Alternative Investment Funds (hereinafter: “Act on Funds”) was amended. The new regulations introduced significant restrictions on freedom of business activity consisting in raising capital from many investors with the thought of investing that capital in accordance with a specific investment policy for the benefit of those investors (hereinafter: “Investment Activity”).
Until 4 June 2016, operations of commercial companies that conducted the Investment Activity otherwise than in the form of an investment fund was carried out based on general terms, which means that an activity of this type was not regulated. From 4 June 2016, new regulations have been in force, changing significantly the conditions of operation of such entities.
The most important changes for commercial companies conducting the Investment Activity include:
1. Closing the list of legal forms of entities conducting the Investment Activity. From 4 June 2016, the Investment Activity may be carried out exclusively by:
- Undertakings for Collective Investment in Transferable Securities (hereinafter: UCITS);
- Alternative Investment Funds (hereinafter: AIF), which include Specialized Open-end Investment Funds (hereinafter: SOIF), Closed-end Investment Funds (hereafter: CIF), Alternative Investment Companies (hereafter: AIC).
Conducting the Investment Activity is forbidden for entities not mentioned above and is subject to criminal liability.
Article 287 of the Act on Funds [Investing in assets without permit]
1. Whoever performs, without the required permit or contrary to the conditions laid down in the Act, an activity consisting in investing assets of natural persons, legal persons or organizational units without legal personality, gathered by way of an offer of entering into an agreement whose subject matter is participation in such an undertaking, in securities, money market instruments or other property rights shall be liable to a fine of up to PLN 10,000,000 and a custodial sentence of up to 5 years.
2. Whoever commits the act referred to in Paragraph 1, acting on behalf or to the benefit of a legal person or organizational unit without legal personality, shall be liable to the same penalty.
Article 295 of the Act on Funds [Activity without permit or entry in the register]
Whoever performs, without the required permit or entry in the register, the activity referred to in Article 32(2), Article 45(1), (1a), (2) or (2a), Article 70e or Article 209, shall be liable to a fine of up to PLN 10,000,000 or a custodial sentence of up to 5 years or to both these penalties jointly.
2. The requirement for obtaining authorization of the Polish Financial Supervision Authority for those AICs whose total value of assets exceeds a PLN equivalent of the amount of EUR 100,000,000, and in the case where the AIC manager manages only companies that do not apply the AIF leverage and whose shares can be repurchased after at least 5 years from the moment of purchase - an equivalent of the amount of EUR 500,000,000.
3. The requirement for registration in the register of managers of AICs kept by the Polish Financial Supervision Authority for those AICs whose total value of assets does not exceed a PLN equivalent of the amount of EUR 100,000,000, and in the case where the AIC manager manages only companies that do not apply the AIF leverage and whose shares can be repurchased after at least 5 years from the moment of purchase - an equivalent of the amount of EUR 500,000,000.
4. Supervision of the Polish Financial Supervision Authority as the authority exercising supervision over the financial market over and the performance of the Investment Activity by AICs. Which results, among other things, in reporting obligations of AICs towards the Polish Financial Supervision Authority.
Moreover, the Act of 31 March 2016 established a transitional period from 4 June 2016 to 4 June 2017 for entities that conducted the Investment Activity and were not investment funds to meet the new requirements. Until 4 June 2017, these entities were able to carry out their operation on the basis of the previous regulations. After that date, the Investment Activity may be conducted only by Undertakings for Collective Investment in Transferable Securities and Alternative Investment Funds (including Alternative Investment Companies).
In the case where an entity carrying out the Investment Activity filed an application, by 4 June 2017, for authorization to perform the activity by the AIC manager or for entry in the register of managers of AICs, the Investment Activity may be conducted by this entity on the basis of the previous regulations until a final decision on the filed application is issued. Filing the application results in individual prolongation of the transition period for this entity.
Jarosław Rudy, Partner, Legal Adviser