Alternative Investment Fund (AIF) in Estonia is the most convenient structure for collective investment, into which the investors' assets are collected for the purpose of their further use and placement in their interest in accordance with a predetermined investment policy under the direction of the company managing the fund (The General Partner).
Alternative Investment Fund (AIF) in Estonia is the best solution for collective investments and investments in shares (listed and unlisted), bonds, derivatives, currencies, cryptocurrencies and crypto-products, real estate objects and other valuable financial assets.
In 2016, Estonia introduced attractive legislation for collective private equity and venture capital funds, very similar to the investment models in the UK and Luxembourg. However, the costs of setting up are significantly lower.
The Benefits of a Small Alternative Investment Fund in Estonia
Registration of the Small Alternative Investment Fund in the Republic of Estonia provides certain benefits, which include:
Multiple options: Management of total assets of up to 500 million euros.
Easy incorporation: Simplified registration form in 30-60 days.
Universal investment portfolio: Ability to manage stocks (listed and unlisted), derivatives, cryptocurrencies and crypto-products, real estate and other financial assets and commodities.
Full confidentiality: The lists of investors (Limited Partners) in the fund and the size of their investments are not public information.
Limitation of liability: The material liability of investors is limited to the amount of their investment (contribution) in the fund.
Small Alternative Investment Fund Structure
For the operation of the Small Alternative Investment Fund (AIF) in Estonia, two legal entities must be registered in the Commercial Register of the Republic of Estonia:
The Fund Manager (OÜ)
The fund manager is a commercial organisation whose main activity is the management of one or more funds, i.e. the management of investors' financial assets with the aim of maximizing profit at minimal risk.
A small fund manager has the right to manage several funds, but the total assets of the managed funds may not exceed €100 million, or in the case when the investments are made for long periods of time (from 5 years or more) and no financial leverage (debt ratio) is used, the total assets of the funds may reach €500 million.
Limited Partnership Fund (LPF)
Limited Partnership Fund (LPF) is the easiest to register and to manage, and the most common legal form for the Small Alternative Investment Fund, also called "Special Fund".
Limited Partnership Fund (LPF), as a form of legal entity, is a type of Limited Partnership, specified in the Commercial Code of Estonia. The members of the LPF are: at least one General Partner, whose role is most often assumed by Fund Manager, and at least one Limited Partner, i.e. an investor.
Steps of Small Alternative Investment Fund Registration
In order for the Fund to properly start its operations in accordance with Estonian and EU legislation, it is necessary to go through the process of registration and obtaining permits, which consists of the following steps:
Registration of a Fund Management Company
Establishment of a company (OÜ, Limited by Shares) that will act as Fund Manager (Fund Management Company). The registration process on Estonian Commercial Register takes between 1 and 5 business days. The company must have at least 2 (two) board members. There are no other additional requirements.
Obtaining Authorisation to Register the Fund
To incorporate the Limited Partnership Fund (LPF), a Fund Management Company must obtain authorisation from the Financial Supervision Authority (FSA). The regulator must provide the constituent documentation of the future Fund and other materials and documents specified in the law. The period for consideration of an application is up to 60 days.
Obtaining the AML License by the Fund Manager
In addition to obtaining approval from the Financial Supervision Authority (FSA), the manager of a Small Alternative Investment Fund must also obtain an AML license for a funding institution from Financial Intelligence Unit (FIU). The period for consideration of an application is up to 60 days.
This application can be submitted to the Financial Supervision Authority (FSA) in parallel with the application for Limited Partnership Fund (LPF) registration.
Registration of the Fund in the Commercial Register of Estonia
Certain restrictions apply to the activities and certain details relating to the process of offering the Fund's shares to investors.
In accordance with Estonian legislation, the Small Alternative Investment Fund is not entitled to offer its units to the public.
At the same time, in accordance with the law, the Fund's offer is not considered public in the following cases (at least one of the following rules must be observed):
- The total value of the offer of the Fund's units does not exceed the amount of EUR 2,500,000 during a period of one year for all EU countries;
- The offer to purchase Fund's units is only made to investors who purchase Fund units for at least EUR 100,000 as part of the respective individual offer;
- In the context of the offer for the purchase of units, the nominal value of a unit is at least EUR 100,000;
- The offer to purchase Fund's units is directed only for professional investors;
- The offer to purchase Fund's units is directed at a maximum of 150 legal entities or natural persons who are not professional investors per EU country.
For more detailed information related to Fund Managers and the Funds, please use the link below:
AlphaLAW team consists of specialists who have experience in capital management and understand the specifics of capital management. Our experienced team takes care of all issues, from setting up the structure of the management company (the Fund Manager), its registration with the Financial Supervision Authority (FSA), drafting the AIF prospectus, preparing all necessary documents, filing and defending the prospectus with the FSA to registering the LPF in Estonian Commercial Register (Äriregister). Upon additional agreement, we also provide FULL support of funds in their day-to-day business after registration.