EIF PRIVATE FUND
Legal Form An EIF may be established as a limited company, protected cell company, unit trust or limited partnership. Private Funds are generally established as limited companies.
Conditions for Subscription Promotion of an EIF must be restricted to investors who are deemed to be Experienced Investors under Gibraltar's financial services legislation. Under the legislation an Experienced Investor is a person or body who, at the time of the investment falls into one of the following categories:
  • a body corporate which has net assets in excess of €1,000,000 or which is part of a group which has net assets in excess of €1,000,000;
  • an unincorporated association which has net assets in excess of €1,000,000;
  • the trustee of a trust where the aggregate value of the cash and investments which form part of the trust's assets is in excess of €1,000,000;
  • an individual whose net worth, or joint net worth with that person's spouse, is greater than €1,000,000, excluding the person's principal place of residence:
  • a participant who has a current aggregate of €100,000 invested in one or more experienced investor funds;
  • a participant who invests a minimum of €50,000 in an experienced investor fund and who has been advised by a professional adviser to invest in the fund and the fund's administrator has received confirmation of such advice;
  • a participant who is a professional client, as defined under the Financial Services (Markets In Financial Instruments) Act 2006; or
  • a participant in a fund that has re-domiciled to Gibraltar where the Authority (the Gibraltar Financial Services Commission) has permitted the inclusion of such participant either in respect of a specific fund or generally in respect of funds or category of funds from a certain jurisdiction.
These requirements are not cumulative so it is sufficient for an investor to invest €100,000 and not have to prove any of the other conditions.		 May be promoted if the following conditions are satisfied:
  • the offer is addressed directly to an identifiable category of persons by the promoter or agent;
  • the members of this category of persons are the only persons who may accept the offer;
  • the prospective investors must have sufficient information in order to evaluate the offer; and
  • the scheme will remain a Private Fund for a year from the date of offer.
Directors An EIF must have at minimum of two Directors licensed to act as EIF Directors by the Gibraltar Financial Services Commission. There are no specific requirements for Directors and a Private Fund can be managed by a single Director.
Depositary An EIF that is open ended must have a depositary. Its role is to provide safekeeping of cash and securities that the EIF owns. Where an EIF has a depositary, the depositary shall be such person as the Financial Services Commission may authorize to act as depositary (if Gibraltar registered). However a registered office in Gibraltar is not required and if an EIF wishes to maintain a foreign depositary the EIF is required to ascertain that the Financial Services Commission has no objections. There is no requirement to appoint a depositary.
Administrator The administration of an EIF can either be performed by a Gibraltar resident collective investment scheme administrator authorized for this purpose or an external administrator established in the European Economic Area or in a jurisdiction with a legislative or regulatory regime that provides at least equivalent protection to Gibraltar in relation to the administration of funds and which has obtained the consent of the Financial Services Commission to be used as an administrator of EIFs in general, or a specific EIF. It is not a legal requirement to appoint an administrator although without a fund administrator there is a significant potential liability for the operator or manager of the Private Fund if there are multiple investors involved with regular reporting/subscriptions/redemptions.
Offering Document An EIF must issue an offering document that is consistent with industry standards and which will allow an investor to make an informed investment. The offering document must comply with the minimum requirements imposed by the financial services legislation. Private Funds generally produce an offering document in order to ensure that the investors have sufficient information in order to evaluate the offer.
Reporting An EIF shall have an annual audit of its financial statements performed by a statutory auditor. The audited financial statements are required to be made available to the Financial Services Commission. Accounts require publishing at Companies House in accordance with EU accounting requirements. A Private Fund would be exempt from appointing an auditor and the audit of accounts if it qualifies as a small company.
Taxation An EIF may obtain an exemption from the Commissioner of Income Tax on any tax on investment income. There is no capital gains tax, inheritance tax, or wealth tax in Gibraltar. There is a stamp duty of £10 on the creation of share capital of a company and on any increase in share capital. The option of obtaining an exemption is available to a Private Fund. However, because Gibraltar has a territorial basis of taxation, under the Gibraltar Income Tax Act, income tax is only payable upon income which accrues in or is derived from Gibraltar. On the above basis, many Gibraltar companies are not liable to pay tax in Gibraltar as they do not do business inside the Gibraltar economy.
Limitation on number of Investors None Fifty
Umbrella Structure An umbrella fund structure can be set up as a protected cell company under the Gibraltar Protected Cell Companies Act 2001. This enables the establishment of one single legal entity with different and completely segregated cells, or sub-funds which are traded as individual investment funds. Each cell can be used for specific investment objectives and strategies or even for specific clients and the assets and liabilities of each cell are "ring-fenced" from those of the other cells. Cells within the umbrella fund can be utilized until the purpose of their creation is achieved at which point the specific cell can be closed and the assets distributed to the cells' investors as appropriate. Under Gibraltar law there is no limit on the number of cells created. This option is not available to Private Funds.
Authorization Process For an EIF it is sufficient for the Fund to incorporate, appoint its service providers, produce its offering document and resolve to establish itself as an EIF. There is no regulatory pre-approval necessary prior to establishment. Instead, within ten (working) days of establishing itself, an EIF must notify the Financial Services Commission of its establishment and provide a copy of the EIF's offering documents and the memorandum and articles, and a legal opinion from a senior Gibraltar counsel stating that the EIF was set-up in accordance with the applicable financial services legislation.

Alternatively, an EIF has the option to notify the Financial Services Commission at least ten (working) days before the EIF is established in order to establish itself as such.

Further a form signed by the administrator and the licence fee should be provided.		 None.
Regulatory Status An EIF is subject to the regulation of the Financial Services Commission. Unregulated.
Company Secretary An EIF is required to appoint a Company Secretary who will incorporate the vehicle and deal with the ongoing filings. A Private Fund will be required to appoint a Company Secretary who will incorporate the vehicle and deal with the ongoing filings.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.