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Buy a CIF or create

read time: 5 min

12.05.2022

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If you are planning to implement an investment project with the help of a CIF, you will find useful information on how to set up a corporate investment fund in your business group.

There are two ways to become a corporate fund owner:

BUY A READY CIF
or
CREATE A NEW CIF
We offer to understand the pros and cons of both options.

1) BUY A READY CIF (this is a corporate fund that was created for sale and did not operate)

A corporate investment fund is a joint-stock company, and the acquisition of ownership of it occurs through the acquisition of rights to a block of shares on the secondary market with the involvement of an investment firm with a license. The buyer must take care in advance to have a securities account in the depository institution.

In order to enter into an agreement to buy and sell CIF securities, the buyer must be identified and verified by an investment firm in accordance with applicable law governing the prevention and combating of money laundering, terrorist financing and terrorist financing. proliferation of weapons of mass destruction.

The process of purchasing a ready-made CIF is fast and takes 1-2 days. Within 5 days from the date of purchase of CIF shares, changes are made and information on the ultimate beneficial owners in the public register is updated.

The main advantages of ACQUIRING A READY CORPORATE FUND are:

  • to purchase a CIF you do not need to “freeze” operating funds for the formation of authorized capital;
  • after the purchase of the corporate fund (immediately after the amendments to the Unified State Register of Legal Entities,
  • Individual Entrepreneurs and Public Associations) it is possible to invest funds within the formed authorized capital;
  • minimum time spent by the new owner on organizational procedures when registering changes.

Disadvantages of ACQUISITION OF READY CORPORATE FUND:

  • to buy a ready-made CIF is more expensive than to use the service of creating a corporate fund;
  • during the acquisition of the fund there may be a risk of concentration, which requires the approval of the Antimonopoly Committee of Ukraine;
  • spending extra time to change the statutory documents of the CIF and its name (if necessary).

2) CREATE A NEW CIF (passing the procedure of registration of a corporate investment fund from scratch):

A corporate investment fund is an investment entity. The procedure for creating a corporate fund is clearly regulated by regulations of the National Commission on Securities and Stock Market. The term of creation of a corporate fund is from several months.

The founder of the corporate fund must confirm the possibility of forming the initial authorized capital of the investment fund. The authorized capital is formed by depositing funds in a temporary bank account. The opportunity to invest these funds appears only after such a fund is included in the CII Register and the corporate fund receives the status of a financial institution.

Therefore, the disadvantages of the CREATE CIF option include the following:

  • the founder of the CIF must prove the ability to form the initial authorized capital of the corporate fund;
  • it is necessary to “freeze” the funds contributed to the authorized capital at the time of registration of the CIF (currently UAH 8,125,000.00);
  • the business owner will spend more time signing and notarizing documents (compared to the option of purchasing a ready-made CIF).

Of course, creating a corporate fund will cost the future owner less than buying an already registered corporate fund.

The procedure for creating an investment fund allows the founder to immediately choose its name for the CIF, establish the main areas of investment of the corporate fund, the order of placement and redemption of securities, the distribution of profits and dividends (for closed-end fund) and restrictions on asset management . In case of acquisition of an already registered fund, it will be necessary to carry out investment activities according to the rules and procedure determined by the previous owners of such a fund until the registration of new versions of the Corporate Fund Charter, regulations and prospectus of CIF shares.

The establishment of a corporate fund does not require the permission of the AMCU to gain control over the newly created investment fund.

Therefore, the main advantages of the option of CREATING A CORPORATE INVESTMENT FUND:

  • the cost of the CIF creation service is lower than the cost of the finished CIF;
  • there is no risk of issues from the Antimonopoly Committee of Ukraine, as the CIF is immediately created within the business group;
  • individually developed documents for the features of the investment project;
  • it is possible to choose your name for a corporate investment fund.

To summarize: if a corporate investment fund is needed for the implementation of urgent investment projects and there is no time to go through the full procedure for the creation – it is better to buy a ready-made CIF, otherwise it will be more expedient to use the service to create a CIF.