Recently, Germany’s government has released a statement saying that the investment market in the country is developing at a staggering pace. Pursuant to the report published by the Federal Statistics Office, the amount of foreign investment in the German economy in the last year alone stood at over thirty billion euros. The same report said that foreign investors’ most prefered way of opening a business in Germany was through establishing a PEF.
Creating a PEF in the State of Germany
A KG (or an LLP) is the most common form of a fund in the state of Germany. Normally, establishing a fund in the state of Germany begins with signing a limited partnership agreement (LPA). To ensure investors’ limited, a KG & its partners will be registered in Germany’s commercial register. Registration usually takes 2-4 weeks.
Requirements for Setting up a PEF in the State of Germany
Founding a KG requires its founders to permanently reside in the state of Germany & comply with the requirements for accounting. Funds’ managers usually act as managing partners & also perform corporate & administrative tasks.
3rd Party Investors’ Liability
As far as investors’ liability is concerned, their relation to a partnership is limited to their capital obligations. Liability of funds’ 3rd party lenders is limited to the amount of liabilities registered in the commercial register.
Fund Managers’ Duties
All those planning on obtaining a PEF manager license in Germany should keep in mind that managers must abide by the AFMD’s rules. This means that they’re required to ensure that investors’ interests are maintained at all times. In addition, the manager should avoid interest conflicts whenever possible.
The FFSA, Germany’s number one financial regulator, is responsible for making sure that PEF regulation in the state of Germany is complied with. It is also entrusted with overseeing funds’ managers.
Licensing PEFs in Germany involves abiding by the requirement that there’s enough start-up capital, directors & stakeholders have good reputation & the fund is properly organized.
Requirements for Funds’ Managers
There are no eligibility or capital requirements for registered managers, which is why they must only meet capital requirements as per the Company Law. Fully licensed managers are required to have an initial capital of at least one hundred twenty five thousand euros.
Establishing a partnership in the state of Germany requires compliance with the Law on Investment Taxation. Funds not involved in any business activities & structured as partnerships aren’t liable to taxation in the state of Germany.
Under German legislation, only semi-professional & professional investors can buy funds in the state of Germany, and only if funds are managed by registered managers.
Licenses & Registrations
Individuals holding financial instruments are required to obtain an MiFID license in as per the German Law on Banking. If the said individuals are engaged in the sale of shares of funds managed by AIFM-licensed managers, they only have to have a simple license.
Germany's AML Law is based on the EU’s AML Directive. Under the latest amendments to the Directive, funds’ managers are required to disclose information about investors’ identities & beneficial owners. Funds’ documentation must be preserved.
Germany plays an important role in the PE market. A stable economy and long-term economic growth are the main two reasons why investors find this region attractive. If you are interested in registering a company in the state of Germany or establishing a German investment fund, please contact IQ Decision UK.