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What is an ASI?
An ASI, or alternative investment company, is a collective investment institution whose object of business is to collect assets from many investors in order to invest them in accordance with a specific investment policy. An ASI can also serve as an investment vehicle due to the fact that an ASI is exempt from CIT if the income is earned from the sale of shares or stocks.
FAQ
What are the ASI managerial models?
There are two models: internally managed (ASI only) and externally managed (ZASI). In the first case, the entire ASI structure is closed within one company, which at the same time is the manager (applies to capital companies). On the other hand, in a ZASI, the ASI and the managing entity are separated, which requires the participation of at least two companies (applies to limited partnerships and limited joint-stock partnerships).
What are the forms of activity of a ZASI?
In the case of an external managing entity, the business may be operated as a limited partnership whose sole general partner is the ZASI (a capital company) or a limited joint-stock partnership whose general partner is the ZASI.
Can an ASI replace a limited partnership?
No. An ASI – as the name suggests – may only conduct investment activities. This means that the investment function cannot be combined with operating a business, and all payments made by investors must be used for investment activities.
When can you run a business on the basis of an entry in the ZASI register?
This is possible when the total value of assets does not exceed EUR 100 million (a small ASI). In the case of ASIs that do not use financial leverage and their units may be redeemed after at least 5 years from the date of purchase, the value of the assets may not exceed EUR 500 million.
When should you operate on the basis of an authorisation?
The authorisation of the UKNF should be applied for when the value of assets exceeds the amounts indicated in the point above. The ASI manager is also subject to the supervision of the UKNF, which may be carried out by submitting periodic reports.
What are the fees for an entry in the ASI register?
For an entry in the register, the ASI manager is obliged to pay a one-off fee of EUR 2,000. An annual fee of EUR 750 must also be paid to cover the costs of capital market supervision.
How long does the ASI establishment process take?
The ASI registration process takes 3 to 5 months and is a two-stage process. The first stage takes place before the UKNF and lasts up to 3 months, while the second stage takes place before the National Court Register and lasts about 1 month.
Who is an ASI for?
An ASI is a fund that should be of concern for investors interested in shares in commercial law companies. An ASI is also an interesting proposition for entities with a diversified investment portfolio that could be combined under the supervision of one manager.
Elements of the ASI entry application
In the application for entry of an ASI, it is required to indicate the ASI investment policy and investment strategy. These documents specify the types of securities and other property rights being the object of ASI deposits, criteria for selecting ASI deposits, and rules for diversification of an ASI.
ASI reporting obligations
ASI managers operating on the basis of an entry in the register of ASI managers are obliged to provide the UKNF with periodic reports and current information regarding their business and the financial situation of the ASI. An ASIsubmits annual financial statements to the UKNF.
ASI – an alternative investment company
The provisions that introduced the regulations regarding ASIs to the Act on Investment Funds have been in force since 2019. Despite this, there are only about 350 entities in the ASI registry of managers. If we compare it with the several thousand investment funds entered in the RFi, we can still see great potential in the use of an ASI in conducting investment activities and in the use of an ASI as an investment vehicle.
Formal conditions for establishing an ASI
An ASI is a type of an alternative investment fund and is subject to the provisions of the Act on Investment Funds and Management of Alternative Investment Funds. In order to establish an ASI, in the vast majority of cases, it is enough to enter it into the register of ASI managers. In certain situations, it will be required to obtain an authorisation to operate this type of business. Both the procedure of entering in the register of ASI managers and the obtaining the authorisation take place before the Polish Financial Supervision Authority (UKNF).
When should I obtain an authorisation?
When the total value of assets of investment portfolios that the ASI intends to manage does not exceed the equivalent of EUR 100 million, a business can be operated on the basis of an entry in the register of ASI managers. If an ASI does not use financial leverage and its participation units can be redeemed after at least five years, then the threshold is higher and amounts to as much as EUR 500 million.
Let us assume, however, that only the largest entities operating on the fund market are able to collect EUR 100 million; therefore, in most cases it will be better to choose a less formalised form of business based on an entry in the register of ASI managers.
When choosing to run a business on the basis of an entry in the register of ASI managers, we do not have to: appoint persons to the management board of the company having at least three years of work experience in a managerial or independent position in financial market institutions or other entities conducting activities in the field of investing assets in accordance with a specific investment policy or in the field of investment strategies applied by an alternative investment company or holding the position of a member of the governing body, general partner or partner managing the affairs of these institutions or entities during this period, or investment advisors. However, the condition for obtaining an entry in the register of ASI managers is that the members of the company’s bodies are persons who have not been punished for an intentional crime or a tax offence. When submitting an application for entry in the register of ASI managers, it is required to submit a certificate of clean criminal record of members of the company’s bodies, which must not be older than one month back from the date of submitting the application to the UKNF. A list of members of the ASI bodies must be attached to the application for entry in the register of ASImanagers.
If we decide to operate a business on the basis of an entry in the register of ASI managers, the UKNF does not verify the amount of equity, experience in conducting investment activities, economic situation or the future financial capabilities of the applicant. There are also no requirements regarding the minimum initial capital of an ASI, apart from those indicated in the Code of Commercial Companies. We also do not have the very costly obligation to conclude an agreement with a custodian bank.
Investment policy and investment strategy
An ASI should submit at least two documents to the UKNF, i.e. an investment policy and an investment strategy.
An investment policy defines the types of securities and other property rights being the object of the ASI’s deposits, criteria for deposit selection, rules for deposit diversification and other investment restrictions, e.g. the permissible amount of credits and loans taken by the ASI.
An investment strategy defines the main categories of assets in which the ASI may invest, industrial, geographic or other market sectors or specific classes of assets that are the object of the ASI investment strategy, a description of the ASI’s policy on making loans and using financial leverage.
ASIs in practice
An ASI may operate its business only as a commercial law company. If it is an internally managed ASI, then it may operate as a limited liability company or a joint-stock company.
An ASI may also operate in the form of a limited partnership or a limited joint-stock partnership; then the ASImanager is a company that is a general partner in these companies and it is a type of externally managed ASI.
If we are planning to create an ASI only for private purposes and treat it as a private investment vehicle, it will be sufficient to establish an internally managed ASI. However, if we would like to collect assets from investors in order to manage them, an externally managed ASI seems to be the more appropriate form. Then we are dealing with a structure similar to an Investment Fund Company (TFI), where TFI creates and manages investment funds. Only in the case of an externally managed ASI is the role of the TFI is taken over by the ASI general partner. Thanks to this, we can collect remuneration for ASI management, for example.
The purpose of such an entity should be to invest the collected assets in the interest of investors. In other words, three conditions must be distinguished that a given company must meet in order to apply for the status of an ASI, namely:
- raising capital from investors;
- investing the raised capital in accordance with a specific investment policy;
- investing the raised capital in the interest of specific investors.
This means that the sole object of an ASI’s activity is collecting assets from many investors and it cannot conduct other activities, which is to ensure that all payments made by the company’s investors will be used only for its investment activities. In the case of ASI managers, their activity may only consist in managing the ASI.
ASI Tax preferences
The Corporate Income Tax (CIT) Act provides for an objective exemption for a part of income earned by an ASI.
Pursuant to Art. 17 (1) point 58a) of the CIT Act, only income from the sale of shares or stocks is exempt, provided that the alternative investment company that sells the shares (stocks), before the date of sale, held directly and continuously for a period of 2 (two) years not less than 10% of the shares (stocks) in the capital of the company whose shares (stocks) are sold.
In addition, the exemption does not apply to income (revenue) earned from the sale of shares (stocks) in a company if at least 50% of the value of the company’s assets, directly or indirectly, are real estate located in the territory of the Republic of Poland or rights to such real estate.
In the case of alternative investment companies in the form of capital companies, it is also possible for an ASI to benefit from the dividend exemption pursuant to Art. 22 (4) of the CIT Act, provided that the conditions provided for this exemption are met (holding at least 10% of shares in the company for a continuous period of 2 years).
An ASI, as a financial enterprise, is also not subject to the provisions of Art. 15c of the CIT Act (i.e. on thin capitalisation), in the context of recognising debt financing costs as tax deductible costs. Thus, an ASI may include all costs (i.e. interest, commissions) related to obtaining debt financing as tax deductible costs without the need to respect statutory limits, which is a significant business facilitation.
