Act on investment companies and investment funds: transfer of assets and liabilities as mutual fund conversion

At the beginning of August, the Ministry of Finance submitted to the government a draft amendment to the Act on Investment Companies and Investment Funds, explicitly stipulating the possibility of mergers (acquisitions) between capital companies (joint stock or limited liability companies) and mutual funds.

Summary information about the draft amendment was presented in the Update’s September issue. 

The amendment explicitly allows for the transfer of a capital company’s assets and liabilities to a mutual fund if the acquiring mutual fund is the sole shareholder/member of the capital company, which is thereby being dissolved and transfers its assets and liabilities to the assets and liabilities of the investment fund. The transfer must not violate the statutes of the acquiring mutual fund or harm the interests of the unitholders of the acquiring mutual fund.

The decision to transfer assets and liabilities shall be made by the statutory body of the manager of the acquiring mutual funds after having obtained a statement from the depositary of the acquiring fund, unless such a decision is within the powers of the meeting of unitholders of the acquiring mutual fund.

In its statement, the depositary of the acquiring mutual fund shall state whether the transfer of assets and liabilities would violate the statutes of the mutual fund.

Draft terms of transfer of assets and liabilities

The draft terms of the transfer of assets and liabilities shall be prepared by the fund’s administrator and the dissolving capital company. Under the proposed amendment, they must contain the designation of the acquiring mutual fund, its manager, administrator, and depositary; the designation of the capital company being dissolved; the reasons for the transfer of assets and liabilities; the likely impacts of the transfer of assets and liabilities on the interests of the unitholders of the acquiring mutual fund; and the decisive date of the transfer of assets and liabilities. The draft terms must have the form of a notarial deed.

For conversions of collective investment funds (‘retail investment funds’ under the Act), the draft amendment requires a CNB permit to ensure greater protection for investors. On the other hand, no permit shall be required for a conversion of qualifying investors funds or for the transfer of assets and liabilities of a real estate company to an acquiring collective investment fund that invests in real estate or shares in a real estate company.

Draft terms of transfer of assets and liabilities

The amendment explicitly stipulates that if the conditions for the admissibility of the transfer of assets and liabilities to a mutual fund are not met, such a legal act shall be null and void, i.e., as if it had never happened. It is therefore necessary to carefully assess whether all legal requirements have been met when transferring assets and liabilities. We will be happy to assist you in setting up the conversion process and preparing related documentation.