The Italian Fixed Capital Investment Company in the EU Legal Framework

EU Directive 2011/61/EU concerning Alternative Investment Fund Managers (henceforth referred to as Aifmd) has been implemented in Italy by Legislative Decree no. 44 of 4^th March 2014. The same decree also established the basic rules of the SICAF, an investment vehicle with legal personality, already foreseen in EEC Directive 85/611/CEE of 20^th December 1985.

The SICAF rules allow the setting up of a joint stock company with fixed capital with the object of being an Undertaking for Collective Investment (UCI) within general Italian company law, rather than the non-variable capital model of the Sicav (Investment Company with Variable Capital).

The model for a Fixed Capital Investment Company is already provided for in laws of some European states identifying and exploring new specific solutions to the relevant business sector. For example, alongside the Sociétés d’investissement à capital fixe introduced in 2009, France has recently introduced (by Law no. 2015-990 of 6^th August 2015) the Société de libre partenariat (Article L214-162-1 et seq. of the Monetary and Financial Code). Another example is to be found in Luxembourg where, on the transposition of Aifmd (Law of 12^th July 2013), the Société en commandite spéciale has been introduced, characterised by the fact that no legal personality is recognised.

Unlike the closed-ended collective portfolio management systems under the contract model, there is no distinction between the role of those who manage investors’ capital (such as partners of a Società di gestione del risparmio, id est an asset management company) and those who provide the equity capital under management (the investors). Such a distinction between these two “types” of shareholders originates from the general requirement to distinguish (the “independence”) between those who manage and those who invest (see Article 1, par. 1, k), of the Consolidated Law on Finance (TUF) and Heading I, chapter II, section II, part 1 of the Regulation on collective portfolio management; see also the European Securities and Markets Authority (ESMA), Guidelines on key concepts of the AIFMD, 13 August 2013, 2013/611, VI, 12, c), which states that “the unitholders or shareholders of the undertaking – as a collective group – have no day-to-day discretion or control”.

However, there are no specific rules about the appointment of Directors. Assuming that the “investor shareholders” hold the majority of the share capital, questions may be raised as to whether their representatives can make up the majority of the Board, or whether they can be only a minority, preferably by nominating directors with high professional competence and independence, even considering the “independence of mind” required for each member of the government body of an Alternative Investment Fund Manager by Article 21, par. 1, c), of the Commission Delegated Regulation (EU) no. 231/2013. These last directors should solicit the Chairman of the Board in such a way as to ensure that all the necessary information is made available and to guarantee that all decision-making procedures are correctly conducted, thus fulfilling the role of “watchdog” to promote and protect the interests of investors. In any event, investors maintain the right to vote in the General Meeting, including voting on the decisions to be made concerning investment policies.

The importance of the independence requirement becomes more evident if we consider the French regulation of the SICAF (Article L214-129 of the Monetary and Financial Code) according to which the management of the capital must be entrusted to an independent asset management company (société gestion de portefeuille) (Article L523-9 of the Monetary and Financial Code), which must be indicated in the bylaws of the company. This signifies that the Board of Directors of the SICAF has only the authority to define the investment strategies to be adopted, according to Article L214-128 of the Monetary and Financial Code, and to do those activities that are not related to the management of the raised capital.

However, the independence requirement probably does not involve a "structural" distinction between shareholders. Anyway, it solicits attention to the treatment of conflicts of interest. Indeed, the problem of conflicts of interest can be seen particularly in European alternative investment funds rules, as demonstrated by Article 14 of the Aifmd regulation, as well as Articles 30 to 37 of the Delegated Regulation (EU) no. 231/2013.

In addition, it is possible to use of preference shares, firstly, precisely because of the importance of the right to vote in the appointment of the Board of Directors. In particular, consideration must be given to those shares that do not give the holder a right to vote in the selection of members of the Board (i.e. non-voting preference shares). Secondly, to allow investors a way out (through withdrawal or purchasing own shares of the company), if the company remains operative beyond the established terms of a specific investment policy that, generally, under the collective portfolio management contractual model is set at approximately ten years. There is an obvious differentiation here with respect to the long-term prospects that characterise the holding companies, and also those funds with a specific focus on sectors characterised by their very nature by a long-term profitability time-scale, such as investments in infrastructure (see EU Regulation 2015/760 related to Eltif, id est European long-term investment funds).

In fact, the duration of the SICAF could be longer than that provided in the specific investment policy, in particular, thanks to the setting up of segments, each of which represents an independent capital.

The contents of this article are purely informative and are not in any way to be considered a professional opinion.

For further information, contact: Luigi Ardizzone.