Serbia to Adopt Alternative Investment Funds Act
Serbia to Adopt Alternative Investment Funds Act
On its way to becoming an EU Member State, Serbia has been harmonizing its law with the EU acquis. As one step forward to opening Chapter 9 – Financial services, the Serbian Ministry of Finance in cooperation with other members of the working group has prepared the proposal of the Alternative Investment Funds Act (Act), which implements Directive 2011/61/EU on Alternative Investment Fund Managers and respective Level 2 EU regulations in Serbian legislation. USAID Cooperation for Growth Project (CFG) assisted the Ministry of Finance in finalizing the proposal of the Act. The CFG Project aims to stimulate SME growth by expanding access to a greater variety of financial instruments, and considers adopting the Act an important step in achieving this goal.
On 29 March 2019, the Ministry of Finance published the Proposal of the Act for public debate. As announced by the Ministry, the public debate was concluded on 17 April 2019 and all interested parties were given the chance to submit their comments to the proposal of the Act.
Reasons for Adopting the Act
Beside harmonization of Serbian law with EU law, one of the main aims for adopting the Act is the improvement of the Serbian financial market and development of micro, small, and medium-sized businesses (MSMEs). Namely, the Serbian economy is primarily comprised of MSMEs, which are currently facing difficulties in accessing affordable financial and business development services, since they are not able to meet commercial banks’ demands for loans. Such difficulties have diminished this sector’s contribution to Serbia’s economic growth. As expected, the alternative investment funds (AIF) could be one of the potential ways of financing of MSMEs.
What will the Act bring?
The Act will introduce many novelties into Serbian legislation. Firstly, the Act defines managers of alternative investment funds (AIFM) and the conditions which these managers must fulfill. Depending on the value of the portfolio of the AIFs managed by AIFM, the Act distinguishes two types of AIFM: small and large. If the value of the portfolio of the AIFs managed by AIFM exceeds 75 million EUR (or 25 million EUR if AIFs use financial leverage), the AIFM must be organized as a large AIFM. Consequently, if the value of the portfolio of the AIFs managed by AIFM amounts to less than the above figure, it can be organized as a small AIFM. The main difference between small and large AIFM is in the requirements which those AIFMs must fulfill in order to be granted a license.
Additionally, the Act introduces a wide range of different forms for the establishment of the AIFs. An AIF may be organized as AIF which can be marketed publically or as one which can be marketed only to professional investors and semi-professional investors (investors who invest at least EUR 50,000 into one AIF and have proven knowledge and experience in the capital market). AIFs which can be marketed only to professional and semi-professional investors can be organized in different forms, including venture capital funds and private equity funds.
Each AIF must have a depositary which is appointed by the AIFM. A depositary is responsible for the monitoring of the AIFs’ cash flow, keeping AIFs’ assets, as well as, for ensuring that investors money and funds belonging to the AIF is booked correctly on accounts opened in the name of AIF or AIFM acting on behalf of AIF.
The Securities Commission, as a competent body for monitoring the implementation of the Act, will enact numerous bylaws which will further regulate AIFMs, AIFs, and depositaries.
This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.
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