3 questions to smart minds

AIFM Directive

For this 3 questions to T. Jesch

Kaye Scho­ler
Photo: T. Jesch | Kaye Scholer
7. Decem­ber 2010

The Euro­pean AIFM Direc­tive will incre­asingly occupy us in the coming years

For this 3 ques­ti­ons to Attor­ney Kaye Scho­ler, Frank­furt a. M.

1. Does the Alter­na­tive Invest­ment Funds Mana­ger (AIFM) Direc­tive affect the private equity indus­try at all?

“Defi­ni­tely. Mana­gers of private equity funds as well as private equity funds of funds fall within the scope of the AIFM Direc­tive. In any case, if they are used over the fund gene­ra­ti­ons (i) more than EUR 100 million with borro­wed capi­tal or (ii) Manage EUR 500 million with no leverage and no right to redeem shares within the first five years. Howe­ver, in private equity constel­la­ti­ons, ‘with the use of outside capi­tal’ — and this is important — does not refer to acqui­si­tion finan­cing at the level of the target company. What this means in posi­tive terms still needs to be worked out in more detail. Family offices and holding compa­nies, for exam­ple, are not included in the scope of appli­ca­tion. Even if one falls outside the scope, howe­ver, it will be important to closely moni­tor the extent to which the AIFM crite­ria become accepted as a seal of appr­oval and, on the other hand, this crea­tes a sub-segment of PE funds that may no longer be so easy to place with insti­tu­tio­nal investors.”

2. What is the legal nature of an EU direc­tive such as the AIFM Directive?

“Unlike EU regu­la­ti­ons, EU direc­ti­ves are not directly legally effec­tive and binding. They must first be imple­men­ted by natio­nal laws, which is also expec­ted in Germany in the second quar­ter of 2013. In case of doubt, howe­ver, exis­ting natio­nal legal norms must be inter­pre­ted in confor­mity with Euro­pean law — i.e., where rele­vant, alre­ady in compli­ance with the requi­re­ments of the AIFM Directive.”

3. What is the further timing?

“By the end of 2011, the so-called Level 2 measu­res are to be adopted first: The “tech­ni­cal” imple­men­ting measu­res, which are refer­red to in almost 100 places in the text of the direc­tive. A discus­sion draft of the German imple­men­ta­tion law should then be available in mid-2012. Having said all that, one thing is certain: fund mana­gers who are about to embark on a fund­rai­sing effort should fami­lia­rize them­sel­ves with the core content of the policy now.”

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