Friday May 15 2020

News Source: Fund Regulation

Focus: General - Fund Regulation

Type: General

Country: France




On 14th May 2020, the Autorité des Marchés Financiers (AMF) announced that further to PACTE Law, it is updating its policy to take into account the impact of legislative and regulatory changes, including recent amendments to the AMF General Regulation, relating to side pockets.

Demergers under Articles L. 214-7-4, L. 214-8-7, L. 214-24-33, L. 214-24-41, L. 214-190-2-1 or L. 214-190-3-1 of the Monetary and Financial Code are intended to address exceptional situations affecting certain assets of collective investment undertakings (CIUs), where their disposal would not be in the interests of unitholders or shareholders. This mechanism consists in separating liquid assets from illiquid assets into two distinct CIUs.

The update of the AMF policy takes the following into account:

  • Law No. 2019-486 of 22 May 2019 on business growth and transformation (the PACTE law) has reversed the mechanism. Liquid assets are transferred to the new collective investment undertaking, which is no longer a specialised professional fund but a CIU of the same kind as the split CIU. Illiquid assets are kept in the split CIU, which becomes the side pocket fund;
  • If the CIU is an AMF-authorised fund, the decree of 10 April 2020 approving amendments to the AMF General Regulation stipulates that the new CIU must be authorised as comparable CIUunder the fast track process;
  • Pursuant to the PACTE law, the split CIU, which has become the side pocket fund, is liquidated as soon as the liquid assets have been transferred to the new CIU.

Simplification of the procedure

For authorised UCITS and AIFs:

Under the new system, in addition to the declaration of the demerger to the AMF, management companies shall send the AMF a request for the authorisation of the new comparable UCITS or AIF and an authorisation request to liquidate the split UCITS or AIF. To avoid sending the AMF three separate forms, the procedure has been simplified by creating a single form that groups together make the declaration of the split, the request for the authorisation of the new comparable UCITS or FIA, and the authorisation request to start liquidation of the split UCITS or FIA.

For declared AIFs:

Likewise, a single form has been provided in the appendix of instruction DOC-2012-06. It includes the declaration of the split, the declaration of the new AIF and the declaration of the liquidation of the split AIF.

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