Merger of UCITS and Master-Feeder structure
UCITS IV introduces a framework for amalgamating assets, either through the cross-border merger of UCITS irrespective of their legal form or by allowing master-feeder structures. However, some issues arise which need to be evaluated on a case-by-case basis, in particular regarding tax impacts at UCITS' and investors' levels.
Main challenges:
- Definition of target set-up (fund range, local management company(ies), distribution, etc.);
- Taxation (investors’ level / portfolio’s level) and VAT issues;
- Migration of funds (marketing and distribution issues, accounting and tax reporting, contractual arrangements, risk management process, corporate governance, etc.).
Management Company Passport
UCITS IV introduces a framework for amalgamating assets through the cross-border merger of UCITS irrespective of their legal form or by allowing master-feeder structures. However, some issues have arisen which need to be evaluated on a case-by-case basis in particular as regards tax impacts at UCITS' and investors' levels.
Today, the UCITS IV management company passport permits the remote establishment and cross border management of UCITS funds and the centralisation of their asset management, administration and risk management operations.
As from March 2019 because of the Brexit, this passport will no longer be valid in relation to the UK. As such, it will no longer be possible for UK Management Companies to act as management companies for UCITS funds. Similarly, the same consequences could apply to EU based UCITS Management Companies, whom would be unable to act as management company for UK funds equivalent to UCITS.
Main challenges for cross-border promoters of UCITS:
- Definition of target corporate set-up, country of location and delegation arrangements (delegation rules remaining at the discretion of each Member State);
- Taxation (personal and corporate tax) and VAT issues;
- Migration of fund operations (staffing, contractual arrangements, risk management process, corporate governance, cooperation between the country of domicile of the UCITS and the management company, etc.;
- Non-EU distribution issues;
- Management of non-UCITS funds and impacts of the AIFM Directive;
- For players imported by the Brexit, it is now urgent to address these challenges.