• Cyprus Self-Managed AIFLNP
    How does the Organisational Chart look like?

    By B2B Lateral Thinking Solutions

    30-08-2017

    We are often asked by our clients what the minimum requirements for licensing a self-managed Alternative Investment Fund with Limited Number of Persons (AIFLNP) in Cyprus are in terms of functions and personnel.

    The organisational chart below outlines the minimum key functions that such a fund will need to have in place. Depending on the fund’s scope, nature, scale and complexity of its activities, the Cyprus Securities and Exchange Commission (CySEC) could request more people or functions to service the fund.


    AIFLNP organisational chart

    Board of Directors

    1. The board is responsible for the overall portfolio management of the fund (and any subfunds).
    2. One of the executive directors will need to be named as the responsible person for the portfolio management function, say Executive Director A.
    3. The law requires at least two executive directors, however, the regulator, not always but often, requires at least one non-executive director to be added to the fund’s board for compliance purposes.
    4. It is possible for a board member to be located overseas for as long as the majority of the board is located in Cyprus and that director does not perform any key duties.

    External Auditor

    1. This function is assigned to an independent licensed audit firm.

    Fund Administrator

    1. This function can be performed internally or outsourced. Currently, there are no licensing requirements for fund administration in Cyprus. However, it is expected that the regulator will introduce such requirements in the near future.
    2. When performed internally, the fund will need to appoint a person for this function.

    Risk Manager

    1. This function can be outsourced or performed internally.
    2. When outsourced, the person responsible for the function should be named, along with the company the function is outsourced to.
    3. When run internally, the executive director that does not perform portfolio management can perform this function, say Executive Director B.
    4. Where it is justified by the scope, nature, scale and complexity of the fund’s activities, the law allows for the same person to exercise this role combined with internal audit and/or regulatory compliance.

    Internal Auditor / Compliance Officer

    1. Same as per the Risk Manager requirements.

    Anti-Money Laundering Compliance Officer

    1. Until recently, it was possible to have this function outsourced.
    2. Going forward, this function has to be performed by a senior staff member who has the ability, knowledge and expertise, say Executive Director B.

    Depositary

    1. This function is undertaken by a financial institution.
    2. When this institution is an investment firm, it needs to:
      • be authorised to safeguard clients’ funds and financial instruments; and
      • have minimum capital of EUR 730,000; and
      • meet certain organisational requirements.
    3. The depositary can be based in Cyprus or abroad.
    4. The fund may not appoint a depositary when:
      • its total assets do not exceed EUR 5m; or
      • its investors do not exceed five persons; or
      • its assets are not subject to custody.

    Legal Advisors

    1. Outsourced to licensed legal advisors.

    General comments

    1. The above structure indicates the absolute minimum number of people to be utilised and to achieve this the scope, nature, scale and complexity of the fund’s activities should be such that it is possible for a small number of individuals to operate the fund.
    2. Depending on the nature and the activities of the fund, the regulator may request more functions, eg an IT function.
    3. All key position holders will need to be assessed by the regulator for being fit and proper.
    4. People responsible for Compliance, Risk, AML Compliance, Portfolio Management and Risk Management should all hold the ‘advanced certificate’ from CySEC.

    Limitations of a Self-Managed AIFLNP

    1. Total assets, including any assets acquired through use of leverage, do not exceed EUR 100m.
    2. Total assets, where the AIFLNP does not employ leverage and its investors have no redemption rights exercisable during a period of 5 years following the date of initial investment, do not exceed EUR 500m.
    3. Number of investors is limited to 75. If the fund will be in the form of a private company, the number of investors, together with the management shareholders, cannot exceed 50 persons. It is expected that the legal framework will be amended in order to allow AIFLNPs in the form of private companies to be able to acquire up to 75 investors.
    4. Investors need to be well-informed or professional.
    5. No distribution of the fund is allowed.

    Related Article: Cyprus Self-Managed Alternative Investment Funds with Limited Number of Persons (AIFLNP) - Compliance Calendar.

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  • The information provided in this article is for general information purposes only. The information is not intended to be comprehensive or to include advice on which you may rely. You should always consult a suitably qualified professional on any specific matter.

B2B Lateral Thinking Solutions

B2B Lateral Thinking Solutions is a boutique consultancy operating from Cyprus and servicing private, corporate and institutional clients. Our team of dedicated, passionate and highly qualified professionals assists numerous clients across the EU, Russia and CIS countries. Lateral thinking is not only a name. Lateral thinking defines how we approach problems and our work ethic. We partner up with our clients to uncover solutions through indirect avenues and by employing creative thinking.

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Cyprus Self-Managed AIFLNP - How does the Organisational Chart look like? We are often asked by our clients what the minimum requirements for licensing a self-managed Alternative Investment Fund with Limited Number of Persons (AIFLNP) in Cyprus are in terms of functions and personnel.

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