The objective of Alternative Investment Companies (AIC) is to obtain funds from multiple investors and invest them in order to increase capital. For what purpose? An investor who transfers funds to an AIC believes that he will achieve greater profits this way. He assumes that this solution will be more profitable than investing funds on his own. What exactly are AICs and how do they function? You will find out from the article below.
Table of Contents
- What is an Alternative Investment Company?
- Alternative Investment Company in Poland – the scope of operations
- Permissible legal forms of AICs
- Management of an Alternative Investment Company
- Alternative Investment Company in Poland – Summary
What is an Alternative Investment Company?
An Alternative Investment Company (AIC) is an alternative investment fund that is different from the ones specified in art. 3(4)(2) of the Act on Investment Funds and Management of Alternative Investment Funds. Thus, AIC is an alternative to specialized open-end and closed-end funds created and operating under the Act.
Alternative Investment Company in Poland – the scope of operations
The only subject of AIC’s activities (apart from exceptions specified in the Act), is to collect assets from multiple investors for the purpose of investing them according to their interests. It must be pursued in compliance with a specific investment policy.
The corporate documents describe the scope of AIC’s business operations. The subject of its activity must be also revealed in the KRS. In addition to the indication of a formal subject of activity in the company’s agreement or articles of association and in the KRS, the factual operations are also significant. Examining documents that show investment objectives is necessary to confirm the real activity. These documents include a prospectus, publications issued by the company, and information about the company’s activities directed to third parties.
The activity of AIC consists of acquiring assets to invest them further. The allocation of assets by AIC must follow a specified investment policy. Therefore, an AIC must develop and adopt an investment policy that determines guidelines for investing, e.g. with regard to:
- investing in certain categories of assets or adhering to certain restrictions on assets’ allocation
- implementing adopted strategies
- investing in certain geographical regions
- adhering to restrictions on financial leverage
- respecting the minimum holding periods,
- respecting other limitations aimed at ensuring risk diversification
Permissible legal forms of AICs
An Alternative Investment Company can conduct business in the form of:
- a capital company, including European company,
- a limited partnership or a limited joint-stock partnership, where the only general partner is a capital company (including a European company)
Management of an Alternative Investment Company
The manager of an AIC is an entity that manages the company. The manager’s operations include at least managing the company’s investment portfolio and the risks associated with its activities.
If an AIC has a form of a capital company, we deal with the so-called internal management of an AIC. It means that the company itself performs the duties of an AIC’s manager. If an AIC has a form of limited partnership or limited joint-stock partnership, only the capital company being the AIC’s general partner can be a manager. Such a capital company operates as an external manager of the AIC.
According to art. 70a(1) of the Investment Funds Act, only a capital company with its registered office in Poland can be a manager of an AIC. Such a company must have the Commission’s permission to carry out activities as the AIC’s manager. However, a manager from the EU who operates in Poland may take over the management of an AIC from an external entity. Article 8b (4) of the Investment Funds Act regulates that.
The activities of the AIC management, both external and internal one, are regulated by the Act. Depending on the value of the assets comprising the investment portfolios, the AIC’s management requires either the permission of the Financial Supervision Authority (art. 70a, et seq. of the Act) or entry into the Register of AIC’s managers kept by this Authority (art. 70zb of the Act).
According to Article 70e(1) of the Act, the subject of the AIC Manager’s activities may only be the management of the AIC. It includes introducing the company to the market, as well as managing the union’s AIFs. Consequently, it includes introducing these AIFs to the market. The AIC Manager may not perform the activities described above and other economic activities at the same time. Only in the case of the internal AIC Manager, it is possible to combine the activities of the AIC’s Manager and of the AIC as a business entity.
Alternative Investment Company in Poland – Summary
An Alternative Investment Company is a modern form of collective investment. Compared to traditional investment funds, managing an AIC involves significantly fewer obligations. Yet, it cannot be said that there is no professional activity involved here. There is no doubt that it will be a good solution for people who are considering long-term investment in shares of commercial companies.
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