The Asset Management ReviewThe Asset Management

Review

Law Business Research

Fourth Edition

Editor

Paul Dickson

The Asset Management Review

The Asset Management ReviewReproduced with permission from Law Business Research Ltd.

This article was first published in The Asset Management Review - Edition 4(published in September 2015 – editor Paul Dickson)

For further information please emailNick.Barette@lbresearch.com

The Asset Management

Review

Fourth Edition

EditorPaul Dickson

Law Business Research Ltd

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Acknowledgements

ii

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iii

Editor's Preface ..................................................................................................viiPaul Dickson

Chapter 1 EUROPEAN OVERVIEW ........................................................ 1Edward Burrows

Chapter 2 AUSTRALIA ............................................................................ 40Lucinda McCann, Nikki Bentley and Vinod Kumar

Chapter 3 BELGIUM ............................................................................... 55Thierry Tilquin, Tom Van Dyck, Greet Bontinck and Steven Peeters

Chapter 4 BERMUDA .............................................................................. 68Sarah Demerling and Sally Penrose

Chapter 5 BRAZIL ................................................................................... 81Fernando J Prado Ferreira and José Paulo Pimentel Duarte

Chapter 6 BRITISH VIRGIN ISLANDS ................................................ 95Jeffrey Kirk and David Mathews

Chapter 7 CANADA ............................................................................... 104Alix d’Anglejan-Chatillon and Jeffrey Elliott

Chapter 8 CAYMAN ISLANDS ............................................................. 121Nicholas Butcher, Anna Goubault and Krista-Lynn Wight

Chapter 9 CHINA .................................................................................. 136Richard Guo and Zhen Chen

CONTENTS

iv

Contents

Chapter 10 FINLAND.............................................................................. 152Janne Lauha, Leena Romppainen and Hannu Huotilainen

Chapter 11 FRANCE ................................................................................ 166Arnaud Pince

Chapter 12 GERMANY ............................................................................ 180Thomas Paul and Christian Schmies

Chapter 13 HONG KONG ...................................................................... 193Jason Webber, Peter Lake and Ben Heron

Chapter 14 INDIA .................................................................................... 211Ashwath Rau, Ganesh Rao and Aditya Jha

Chapter 15 IRELAND .............................................................................. 224Kevin Murphy, Elizabeth Bothwell, David O’Shea, David Kilty and Sarah McCague

Chapter 16 ISLE OF MAN ...................................................................... 238Simon Harding and Katherine Johnson

Chapter 17 ITALY ..................................................................................... 250Giuseppe Rumi, Daniela Runggaldier, Riccardo Ubaldini and Michele Dimonte

Chapter 18 JAPAN .................................................................................... 267Yasuzo Takeno and Fumiharu Hiromoto

Chapter 19 LUXEMBOURG ................................................................... 286Jacques Elvinger, Olivier Gaston-Braud and Joachim Kuske

Chapter 20 NETHERLANDS .................................................................. 304Lotte Boon and Joost Steenhuis

Chapter 21 NIGERIA ............................................................................... 316Dan Agbor, Folake Elias-Adebowale and Christine Sijuwade

v

Contents

Chapter 22 NORWAY .............................................................................. 331Peter Hammerich and Markus Heistad

Chapter 23 PORTUGAL .......................................................................... 347Carlos Costa Andrade, Marta Pontes, Diogo Tavares, Hélder Santos Correia and Gerard Everaert

Chapter 24 RUSSIA .................................................................................. 361Pavel Karpunin, Dmitry Churin and Anastasia Fomicheva

Chapter 25 SAUDI ARABIA .................................................................... 376Nabil A Issa and James Stull

Chapter 26 SINGAPORE ......................................................................... 388Stefanie Yuen Thio and Yvonne Lee

Chapter 27 SOUTH AFRICA .................................................................. 399Johan Loubser and Magda Snyckers

Chapter 28 SPAIN .................................................................................... 416Juan Carlos Machuca Siguero and Joaquín García-Cazorla Taboada

Chapter 29 SWEDEN .............................................................................. 438Emil Boström and Jonas Andersson

Chapter 30 SWITZERLAND ................................................................... 451Shelby R du Pasquier and Maria Chiriaeva

Chapter 31 UNITED ARAB EMIRATES................................................. 467James Stull and Macky O’Sullivan

Chapter 32 UNITED KINGDOM .......................................................... 476Paul Dickson

Chapter 33 UNITED STATES ................................................................. 517Jason E Brown, Leigh R Fraser and John M Loder

Appendix 1 ABOUT THE AUTHORS .................................................... 535

Appendix 2 CONTRIBUTING LAW FIRMS’ CONTACT DETAILS ... 559

Contents

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vii

EDITOR’S PREFACE

Following several challenging years in the wake of the global financial crisis of 2007–2008, recent years have seen a more sustained economic recovery take hold. However, despite significant improvements in the global economic landscape, 2014 was marked by significant geopolitical events, which have taken their toll on financial markets outside the US and Japan. In the UK, both the Scottish referendum and predictions of a close general election outcome in May 2015 created an uncertain political environment. At a European level, markets have been faced with continuing tensions in Eastern Europe, as well as the ongoing sovereign debt issues, with the Greek crisis featuring heavily in news headlines over the past 12 months. The collapse of oil prices, the spread of the Ebola virus in West Africa and the ongoing conflict in the Middle East have also had a significant impact on the global economy.

Nevertheless, the importance of the asset management industry continues to grow. Nowhere is this truer than in the context of pensions, as the global population becomes larger, older and richer, and government initiatives to encourage independent pension provision continue. By way of example in the UK, changes to the rules governing what retirees can do with their pension benefits look set to open up a new section of the market to discretionary managers and product providers.

The activities of the financial services industry remain squarely in the public and regulatory eye, and the consequences of this focus are manifest in ongoing regulatory attention around the globe. Regulators are continuing to seek to address perceived systemic risks and preserve market stability through regulation. In Europe, major changes to the regulatory landscape were introduced by the Alternative Investment Fund Managers Directive, which has applied in full since July 2014, and this trend is set to continue in other areas of the asset management industry with the implementation of changes to the UCITS regime and the revised Markets in Financial Instruments package. In the UK, the Financial Conduct Authority has announced plans for a market study on the asset management industry and the charges it levies on investors.

Editor’s Preface

viii

It is not only regulators who continue to place additional demands on the financial services industry in the wake of the financial crisis; the need to rebuild trust has led investors to call for greater transparency around investments and risk management from those managing their funds. Investors and regulators’ demands for greater clarity on fees and commissions charged by fund managers for services provided also remain a constant presence.

This continues to be a period of change and uncertainty for the asset management industry, as funds and managers act to comply with regulatory developments and investor requirements and adapt to the changing geopolitical landscape. Despite the challenges outlined above, confidence has begun to return across a number of areas, buoyed by increasingly positive assessments of the global economic outlook, which raises the prospect of increased investment and returns. Although the challenges of regulatory scrutiny and difficult market conditions remain, a return of risk appetite has also evidenced itself. The industry is not in the clear but, prone as it is to innovation and ingenuity, it seems well placed to navigate this challenging and rapidly shifting environment.

The publication of the fourth edition of The Asset Management Review is a significant achievement, which would not have been possible without the involvement of the many lawyers and law firms who have contributed their time, knowledge and experience to the book. I would also like to thank Gideon Roberton and his team at Law Business Research for all their efforts in bringing this edition into being.

The world of asset management is increasingly complex, but it is hoped that the fourth edition of The Asset Management Review will a useful and practical companion as we face the challenges and opportunities of the coming year.

Paul DicksonSlaughter and MayLondonSeptember 2015

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Chapter 3

BELGIUM

Thierry Tilquin, Tom Van Dyck, Greet Bontinck and Steven Peeters1

I OVERVIEW OF RECENT ACTIVITY

As a result of the implementation of the Alternative Investment Fund Managers Directive (AIFMD), Belgian fund laws have been substantially restructured and reshaped. Currently, there are two important fund laws: the Law of 14 April 2014 on alternative investment funds and their managers (AIFMD Law), which covers alternative investment funds (AIFs) and the AIFMs, and the Law of 3 August 2012 on undertakings for collective investment in transferable securities and securitisation vehicles (UCITS Law), which covers UCITS and collective investment undertakings investing in receivables. In addition to these two laws, a number of other recent regulations have significantly impacted the way that funds can be distributed in Belgium. These include:a the Belgian moratorium on the commercialisation of particularly complex products

to non-professional clients (which prohibits or limits the commercialisation of certain funds by distributors that have acceded to the moratorium);

b the Royal Decree of 25 April 2014 on certain information requirements when commercialising financial products to non-professional clients (which adopts a ‘transversal’ approach towards financial products); and

c a ban on certain ‘exotic’ funds (such as funds that have virtual currency as the underlying commodity).

To the extent that funds are distributed via an insurance wrapper, such funds must comply with the new Article 20 of the Law of 4 April 2014 on insurances. Finally, fund distributions must comply with the consumer protection rules of Book VI of the Code of Economic Law.

1 Thierry Tilquin and Tom Van Dyck are partners and Greet Bontinck and Steven Peeters are associates at Liedekerke Wolters Waelbroeck Kirkpatrick.

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Over the past year, the Belgian asset management industry has tried to grasp the impact (and interplay) of these new laws. Another focus point has been the obtaining of the required AIFMD authorisations or registrations with the competent authority, the Financial Services and Markets Authority (FSMA). As of 1 July 2015, six Belgian entities have been registered with the FSMA as AIFMs governed by Belgian law, while 19 funds have been authorised as a self-managed sub-threshold AIFMs and 16 entities licensed as sub-threshold-AIFMs governed by Belgian law. Moreover, 70 (nine French, three Luxembourg, one Dutch, one Maltese and 56 British) AIFMs governed by the law of another Member State of the European Economic Area (EEA) have notified the FSMA of their intention to carry out activities in Belgium under the freedom to provide services, while three EU AIFMs are active in Belgium via the establishment of a branch.

II GENERAL INTRODUCTION TO THE REGULATORY FRAMEWORK

The regulatory framework governing Belgian asset management activities consists of the UCITS Law, the AIFMD Law and the Royal Decree of 12 November 2012 on certain public undertakings for collective investment (UCI Royal Decree).

i The UCITS Law

The UCITS Law implements the UCITS Directive2 in Belgium, and also introduces a framework of provisions applicable to securitisation vehicles.

First, the UCITS Law contains rules applicable to Belgian UCITS3 and foreign UCITS fulfilling the conditions of the UCITS Directive of which the shares are publicly offered in Belgium.4 As such, the UCITS Law is not applicable to foreign UCITS of which the shares are offered within the context of a private placement. In derogation from the UCITS Directive, the UCITS Law further distinguishes between Belgian UCITS of which the shares are offered within the framework of a public offering; and Belgian UCITS of which the shares are offered within the framework of a private placement. Publicly offered UCITS are subject to a list of additional requirements, such as registration with the FSMA. Moreover, all communications, advertisements and other documents that are related to a public offering of the shares in a UCITS5 must be pre-approved by the FSMA and must be complete, accurate and consistent with the prospectus.

Second, the UCITS Law imposes a set of obligations and rules applicable to the management companies of UCITS. In this regard, the applicable rules differ between

2 Directive 2009/65/EU.3 Part 2, Book 2 of the UCITS Law (Articles 6–115).4 Part 2, Book 3 of the UCITS Law (Articles 148–159).5 The obligation of pre-approval by the FSMA applies to publicly offered Belgian UCITS,

as well as to foreign UCITS fulfilling the conditions of the UCITS Directive, of which the shares are publicly offered in Belgium.

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management companies of Belgian UCITS,6 and management companies of UCITS operating in Belgium under the freedom to provide services or via a branch, which are governed by the law of another Member State of the EEA:7

a management companies of Belgian UCITS must comply with a list of licensing requirements to obtain a licence from the FSMA (including minimum capital requirements, governance, organisational requirements, etc.);

b EEA management companies intending to operate in Belgium through a branch must notify the FSMA of the registration of the branch concerned in their home Member State; and

c EEA management companies intending to operate in Belgium under the freedom to provide services must notify the information mentioned in Article 18 of the UCITS Directive to the competent authorities of their home Member State.

Third, the UCITS Law governs the rules applicable to institutional securitisation vehicles. In accordance with Article 271/3 of the UCITS Law, securitisation vehicles are defined as ‘investment undertakings with the exclusive goal of investing in receivables held by third parties, which are transferred to the investment undertaking in accordance with the provisions of the UCITS Law’. Part III-bis of the UCITS Law imposes a set of rules and obligations, including the obligation to register the securitisation vehicle on a list held by the Federal Public Service Finance, and provisions relating to the required organisational form of the securitisation vehicle, and the requirement to manage the vehicle in accordance with the principle of risk spreading in the interest of the security holders.

ii The AIFMD Law

The AIFMD Law is a complete and accurate transposition of the AIFMD,8 introducing a regulatory framework for AIFs and their managers. In addition, the Belgian legislator has moved all provisions of the UCITS Law, which were applicable to AIFs whose units are publicly offered and to AIFMs of such public AIFs, to the AIFMD Law.

Part I of the AIFMD Law9 contains introductory provisions, including the AIFMD Law’s scope of application. In accordance with Article 6 of the AIFMD Law, its provisions apply to AIFs governed by Belgian law and foreign AIFs that are marketed in Belgium.10

6 Part 3, Book 2 of the UCITS Law (Articles 188–255).7 Part 3, Book 3 of the UCITS Law (Articles 256–271).8 Directive 2011/61/EU of 8 June 2011 on Alternative Investment Fund Managers.9 Articles 1–9 of the AIFMD Law.10 When determining whether ‘marketing in Belgium’ takes place, it is of no significance

whether the AIF belongs to the open-ended or closed-ended type; or whether the AIF is constituted under the law of contract, under trust law, under statute or has any other legal form.

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Moreover, the AIFMD Law applies to the following AIFMs:a AIFMs governed by Belgian law, managing one or more AIFs11 (Belgian

AIFMs);b AIFMs governed by the law of another EEA Member State (EU AIFMs),12

managing Belgian AIFs; andc AIFMs with their registered office in a third country (non-EU AIFMs) that are:

• managing one or more EU-AIFs for which Belgium is the EU Member State of reference; or

• marketing one or more Belgian AIFs for which Belgium is not the Member State of reference.

Further, Part II of the AIFMD Law transposes the Directive’s provisions applicable to AIFMs, and imposes obligations relating to authorisation and passporting, organisation, (risk) management and reporting to AIFMs governed by Belgian law13 on one hand, and foreign AIFMs (both EU AIFMs14 and non-EU AIFMs15) on the other hand. Moreover, it provides a ‘light regime’ for smaller sub-threshold AIFMs,16 which are only required to register with the FSMA and are not subject to the other requirements of the AIFMD Law unless they choose to opt in. The Belgian legislator has decided not to make use of the possibility provided in the Directive to impose stricter rules on these sub-threshold AIFs unless these are publicly offered.

Part III of the AIFMD Law contains the non-harmonised provisions applicable to AIFs, which originated from the UCITS Law. In this part of the AIFMD Law, a distinction is made between publicly offered AIFs,17 and non-public AIFs governed by

11 This is irrespective of whether such AIFs are authorised or registered in a EU Member State or not.

12 The AIFMD Law’s use of the terms ‘European Economic Area’ and ‘European Union’ is not cohesive: Article 3, 22° of the AIFMD Law defines the manager of an EU AIFM as ‘a manager of an AIF with its registered office in a member state of the European Economic Area’.

13 Articles 10–112 of the AIFMD Law.14 Articles 114–133 of the AIFMD Law.15 Articles 134–179 of the AIFMD Law. In accordance with Article 493 AIFMD Law, these

Articles will only enter into force on the date determined in the European Commission’s delegated act, which will be adopted by 22 October 2015 at the latest. Until the date of entry into force, the system of private placements provided in Articles 497–499 AIFMD Law applies. With regard to public offerings, the provisions of Articles 503 and 504 AIFMD Law apply.

16 AIFMs managing AIFs with total assets under their management of a value of less than €100 million; or AIFMs managing AIFs with total assets under their management of a value of less than €500 million (if the AIFs portfolios are unlevered and no redemption rights exist during a period of five years following the date of initial investment in each AIF).

17 Part III, Book 1 of the AIFMD Law (Articles 180–280).

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Belgian law that have opted for the status of an institutional18 or private19 AIF.20 The obligations imposed by the AIFMD Law differ depending on whether the shares of the AIF concerned are offered within the framework of a public offer or a private placement.

An offer will be deemed to be public if: a the AIF, or any persons acting for its account or capable of placing its shares,

make any communication to persons in any form and by any means, presenting sufficient information on the terms of the offer and the shares that are offered so as to enable an investor to decide to purchase or subscribe to these shares. Any person who receives, directly or indirectly, a remuneration or advantage in the framework of the offer is presumed to be acting for the account of the AIF or any persons capable of placing its shares; or

b the shares are admitted to trading on a publicly accessible Belgian multilateral trading facility or a Belgian regulated market.21

However, there will be (by definition) no public offer if one or more of the following conditions apply:a the shares are exclusively offered to professional investors;b the shares are offered to less than 150 physical or legal persons who are not

professional investors;c the shares require a minimum investment of €250,000 per investor and per class

of securities if the AIF is open-ended;d the shares require a minimum investment of €100,000 per investor and per class

of securities if the AIF is closed-ended;e the nominal value of each share exceeds €100,000; and/orf the total value of the offer in the EEA, as calculated over a period of 12 months,

does not exceed €100,000.22

The AIFMD Law imposes a number of additional obligations on publicly offered AIFs, including:a organisational requirements; b the obligation to submit a registration file to the FSMA before the start of any

activities in Belgium in order to be registered on a list of publicly offered AIFs;23

18 AIFs raising capital solely from eligible investors acting on their own behalf and whose securities may only be acquired by such investors.

19 AIFs raising capital solely from eligible investors acting on their own behalf and whose securities may only be acquired by such investors.

20 Part III, Book 2 of the AIFMD Law (Articles 281–305).21 Article 3, 27° of the AIFMD Law.22 Article 5, Section 1.23 As such, the passport provided in Part II of the AIFMD Law does not apply to AIFs of which

the shares are publicly offered in Belgium.

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c the restriction to only invest in assets that belong to one of the six admitted categories of investments;24 and

d a requirement to distribute a number of pieces of offer documentation25 in at least one of the national Belgian languages.

The qualification as a public offer also impacts the AIFM. Part IV of the AIFMD Law, which contains the non-harmonised provisions on AIFMs, imposes a list of additional obligations on AIFMs managing publicly offered AIFs. These obligations include licensing and organisational requirements.

To the extent that the offering of the shares in an AIF is qualified as a private placement, no other requirements are imposed by the AIFMD Law. However, within the category of non-public AIFs, Part III of the AIFMD does provide specific provisions for institutional AIFs and private AIFs, mainly relating to the internal management of the AIF and a similar restriction of admitted investment categories.

The notification procedures for UCITS in Belgium are laid down in FSMA Circulars 2013–0426 and 2014–05.27

iii The UCI Royal Decree

The UCI Royal Decree, which has been amended pursuant to the adoption of the AIFMD Law, provides detailed rules applicable to publicly offered Belgian undertakings for collective investment (UCIs), relating to the licensing requirements, the key investor information document (KIID), advertisements, master-feeder constructions and periodic reporting requirements. Moreover, the UCI Royal Decree also contains provisions applicable to UCIs governed by the law of an EEA Member State.

III COMMON ASSET MANAGEMENT STRUCTURES

The Belgian market traditionally is an open market, with mostly foreign UCITS and AIFs being marketed to Belgian retail and professional investors. Those funds can be either open-ended or closed-ended.

24 In accordance with Article 183 AIFMD Law, the admitted categories of investments are financial instruments and liquid assets; options and forwards, currencies and exchange index contracts; real estate; high-risk capital; financial instruments issued by non-listed companies; and any other permitted categories of investments (as specified in the relevant Royal Decree).

25 The following documents must be distributed the prospectus; the KIID; the annual and semi-annual reports; the fund rules or instruments of incorporation; and all communications and notifications to the shareholders.

26 FSMA Circular 2013–04 of 14 February 2013 relating to the notification procedure for undertakings for collective investment governed by Belgian law and fulfilling the conditions of Directive 2009/65/EU.

27 FSMA Circular 2013–05 of 14 February 2013 relating to the notification procedure for undertakings for collective investment governed by the law of another Member State of the European Economic Area and fulfilling the conditions of Directive 2009/65/EU.

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IV MAIN SOURCES OF INVESTMENT

During the course of 2014, the net assets of UCIs that are publicly traded on the Belgian market have increased by 20.5 per cent, amounting to €141.58 billion on 31 December 2014.28

The table below shows the total amount of net assets per investment strategy in 2013 and 2014.29

Net assets of Belgian and foreign UCIs (in € billion)

2013 2014

Billion € % Billion € %

Bond UCIs 29.23 24.87 33.07 23.36

In € 10.93 9.30 11.06 7.82

In other currencies

18.30 15.57 22.01 15.54

Monetary UCIs 1.76 1.49 2.16 1.52

In € 0.95 0.81 1.14 0.80

In other currencies

0.81 0.69 1.02 0.72

Equity UCIs 35.70 30.37 44.47 31.41

Belgium 1.15 0.98 1.18 0.83

€ countries 6.06 5.15 6.27 4.43

Europe 10.86 9.24 13.31 9.40

US 4.10 3.49 5.84 4.13

Asia 2.25 1.92 2.67 1.88

Other shares 11.27 9.59 15.21 10.74

UCIs with capital guarantee 10.79 9.18 11.90 8.41

a linked to equity 8.70 7.41 9.51 6.71

b linked to interest rates, loans and currencies

2.09 1.78 2.40 1.69

In € 1.98 1.68 2.35 1.66

In other currencies

0.11 0.09 0.05 0.03

Mixed UCIs 31.64 26.92 39.61 27.98

Pension funds 14.33 12.19 15.61 11.02

CCPI funds 2.48 2.11 1.57 1.11

Real estate UCIs 8.16 6.95 10.17 7.18

Other 0.25 0.21 0.20 0.14

Total 117.53 100.00 141.58 100.00

28 Belgian Asset Managers Association (BEAMA) Annual Report 2014, 10.29 BEAMA Annual Report 2014, 12.

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The amount of assets of bond UCIs has increased by €3.84 billion (+13.1 per cent) during the course of 2014. This upward trend can be explained by the rising share prices of the underlying assets, while the increase in the amount of net assets invested in monetary UCIs by 22.8 per cent was mainly caused by a high amount of subscriptions. For the same reason, the net assets of equity UCIs and mixed UCIs have risen by 24.6 per cent and 25.2 per cent, respectively. Finally, the net assets of UCIs with capital guarantee (+10.3 per cent), pension funds (+8.9 per cent) and real estate UCIs (+24.5 per cent) have also increased significantly.

Although no detailed figures are available yet, it has been confirmed that the upward trend is continuing in 2015, with net assets of Belgian and foreign UCIs amounting to €147.47 billion at 31 March 2015.30

V KEY TRENDS

We see three key trends impacting and reshaping the Belgian asset management industry (which, given the large number of foreign funds active in Belgium, is to a large extent a distribution industry):a there is a clear trend towards simplicity – fuelled in part by a number of regulatory

initiatives undertaken by the FSMA – with many complex fund structures either being simplified or restricted to professional investors only;

b another trend to note is the recent extension of a number of consumer laws to fund regulation. This impacts the way funds are designed and distributed (as certain terms and conditions in the prospectus may be considered as unfair);

c a third trend concerns the increased compliance and enforcement risks. Belgium has recently introduced a class action that may in certain events apply to fund mis-selling. Furthermore, since the end of 2013, increased civil sanctions (including a number of automatic nullities) apply in cases of violation of fund regulations.

VI SECTORAL REGULATION

i Insurance

The Law of 4 April 2014 on insurances (Insurance Law), which entered into force on 1 November 2014, consolidates the existing legislation with regard to the offering and conclusion of insurance contracts, insurance mediation and distribution, and supervision. Moreover, the Insurance Law introduces a number of new provisions, while also further clarifying the division of supervisory competences between the FSMA and the National Bank of Belgium.

The Insurance Law has introduced several new provisions with regard to investment funds that form the underlying of unit-linked life insurances. As such, the cash benefits resulting from life insurance agreements of which the investment risks are directly or indirectly borne by the policy holder, may only be linked to certain types of

30 BEAMA press release of 3 July 2015.

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assets of which the risk can be adequately assessed by the insurer.31 Moreover, important new restrictions have been introduced as to which types of assets the insurance benefits may be linked directly or indirectly, to the extent that the policyholder is a retail client and the place of engagement is Belgium.32 The following assets may be linked:a shares in Belgian or foreign UCITS registered in Belgium with the FSMA and,

generally speaking, shares in Belgian or EEA UCITS governed by the UCITS Directive;

b assets that are part of the allowed investment categories for UCITS governed by Belgian law, to the extent that the provisions of the UCITS Directive relating to investment policy and general obligations are complied with; and

c assets that are part of the allowed investment categories open for public collective investment undertakings governed by Belgian law, to the extent that the funds’ investment policies do not differ from the policies applicable to Belgian undertakings. In this respect, the securities and financial assets:• must be liquid; and • must be listed or traded on a regulated or secondary market in the EEA (and

under certain conditions, on the markets of a non-EEA Member State), shares of other UCITS (maximum 10 per cent) or financial derivatives (under certain conditions).

Other new provisions relate to the use of electronic transcripts (Article 14), mandatory insurances governed by Belgian law (Articles 25 to 27), messages, advertising and other documents relating to insurance agreements (Article 28), informational obligations (Articles 29 to 38), and segmentation relating to client acceptance, pricing and the extent of coverage (Articles 42 to 46).

The existing insurance contracts had to be adapted to the provisions of the Insurance Law by 1 May 2015 at the latest.

ii Real property

A new real estate company structure, the SIR/GVV, was introduced in Belgium by the Law of 12 May 2014 on Regulated Real Estate Companies (REITs Law). The introduction of the SIR/GVV now provides the opportunity for real estate companies with a commercial activity to opt for a legal framework outside the scope of the AIFMD Law.

The SIR/GVV structure targets real estate companies engaged in commercial activities, such as the construction, rebuilding, renovating, developing, acquiring, selling, managing and operating of real estate, while the Sicafi/Vastgoedbevak structure is reserved for companies possessing the characteristics of an AIF (investment undertakings that raise capital from a number of investors with a view to investing it in accordance with a defined investment policy for the benefit of those investors).

In order to be considered a SIR/GVV, a licence from the FSMA is required. Further, the company must be established for an indefinite period, and the company’s

31 Article 19 of the Insurance Law.32 Article 20 of the Insurance Law.

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commercial activity must exclusively consist of the placing of real estate, directly or through a company in which it participates, at the disposal of its users;33 and, within certain limits, as the case may be, the holding of shares in public real estate investment companies and of real estate certificates. The company must also pursue a strategy of possessing the acquired real estate in the long term.

The REITs Law distinguishes between public SIR/GVVs (of which the shares are admitted to trading on a regulated market and that raise capital in Belgium or abroad by means of a public offer of shares) and institutional SIR/GVVs (which are under the exclusive or joint control of a public SIR/GVV and that exclusively raise capital from eligible investors acting for their own account, and whose shares may only be acquired by such investors). Further, the Law contains a framework of rules with regard to:a capital requirements (the minimum required share capital is €1.2 million); b modifications of the articles of association (a quorum of 50 per cent of the shares

and 80 per cent of the votes is required); c the management structure; d exit rights; e administrative, accounting, financial and technical aspects; f the appointment of an independent real estate expert:g diversification of the company’s assets; and h remuneration of directors and management, which rules are similar to the rules

that previously applied to the Sicafi/Vastgoedbevak before the entering into force of the AIFMD Law.

The REITs Law provides a separate transitional regime for existing Sicafis/Vastgoedbevaks to transfer to the status of SIR/GVV. The FSMA has reported that all existing Sicafis/Vastgoedbevaks have exercised this option.34

VII TAX LAW

This brief description provides an overview of the main principles of the current tax treatment of asset management funds in Belgium, without unravelling the many technical details and exemptions that this tax regime entails.

i Taxation of the asset management funds

The Belgian tax treatment of asset management funds and their investments largely depends on the manner the investment vehicle is structured:a a collective investment fund without legal personality holding its assets on a

contractual basis (contractual fund);

33 In accordance with Article 2, 6° of the REITs Law, the activity of ‘placing real estate at the disposal of its users’ is defined as ‘the granting of rights by the SIR/GVV to the user of an immovable good, in accordance with a lease-, or superficies agreement, usufruct, or in accordance with any other agreement granting a right of use or occupation’.

34 BEAMA Annual Report 2014, 35.

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b a regulated collective investment company with separate legal personality (regulated investment company); or

c a Belgian company not qualifying as a regulated investment company (holding company).

Contractual funds are in principle considered to be tax transparent and are thus not subject to corporate income tax in Belgium. The income received by a contractual fund is, for tax purposes, as a rule considered to be received directly by the investors.

However, an annual subscription tax (subscription tax) on the net outstanding assets of the contractual fund in Belgium will be due by the management company as from the year following registration with the FSMA. The tax rate currently equals 0.0925 per cent, and is decreased to 0.01 per cent with respect to compartments or classes that exclusively attract financing from institutional and professional investors acting for their own account.

A ‘semi-transparent’ tax regime is applicable to regulated investment companies, being, inter alia, open-ended and closed-ended investment companies that have a public or institutional character (as they were defined in the UCITS Law35) and the newly introduced SIR/GVV (see Section V.iii, supra).

Regulated investment companies are formally subject to corporate income tax with a general corporate income tax rate of 33.99 per cent, but their tax base is substantially reduced and is limited to non-deductible business expenses (not including write-downs and capital losses on shares) and received abnormal or gratuitous advantages. Payments made to regulated investment companies generally benefit from withholding tax exemptions in Belgium, and any Belgian withholding tax that would be deducted is creditable and refundable. As a consequence, such investment companies are, as a rule, not taxable in Belgium on income from or capital gains on their investments. An important exception to this rule is the 25 per cent withholding tax due on Belgian source dividends, which constitutes an actual financial cost for the investment company as this withholding tax is not creditable or refundable.

Any source state withholding tax is not creditable or refundable in Belgium. However, from a Belgian perspective, regulated investment companies are considered to qualify as tax residents for the purposes of double taxation conventions, and should thus be eligible to benefit from potential exemptions or reductions from taxation in the source state (which is, however, not undisputed).

Subscription tax is also applicable to regulated investment companies.All income received (including capital gains, dividends and interest) by holding

companies are in principle subject to the general corporate income tax rate of 33.99 per cent. However, 95 per cent of the dividends may be exempt if the conditions of the participation exemption are fulfilled.36 Specific rules apply to capital gains taxation on

35 The references to financial law included in the relevant tax laws have not yet been updated to reflect the changes made by the AIFMD Law.

36 More flexible conditions apply to certain non-regulated investment companies.

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shares (which depend on the tax status of the company in which the investment is made, the compliance with a one-year holding period and the size of the investment company).

Holding companies are, however, not subject to subscription tax.

ii Taxation of investments by foreign investors (without taxable presence in Belgium)

Foreign investors investing in contractual funds are generally considered to have directly invested in the assets of the fund, and their tax position should be determined as if they held the assets without the interposition of the fund. Dividends paid by the fund or capital gains realised at the occasion of the sale of parts in the fund are as such in principle not taxable in Belgium (although conditions apply).

Dividends paid by regulated investment companies to foreign investors are (subject to certain conditions) exempt from Belgian withholding tax, except to the extent the payments come from dividend payments received by the fund from Belgian companies.37 Capital gains realised on the shares of regulated investment companies by foreign investors are, as a rule, not taxable in Belgium.

Dividends received by foreign investors from holding companies are in principle subject to the Belgian withholding tax rate of 25 per cent, unless an exception applies (e.g., participation exemption, reduction or exemption based on double taxation conventions). Capital gains realised by foreign investors do not (under normal circumstances) attract taxation in Belgium.

A specific withholding tax exemption exists with respect to dividends paid by Belgian companies to non-resident pension funds.

In all circumstances, derogating rules apply to funds the asset portfolio of which consists directly or indirectly of at least 25 per cent of debt instruments owned by individuals.

iii VAT

The applicable Belgian VAT rate on services provided by asset managers is 21 per cent. However, a particular exemption for the management of collective investment funds exists.

iv Anti-avoidance measures

The Belgian general anti-abuse rule allows the tax authorities to disregard a legal act or series of legal acts carrying out one and the same transaction, provided that the tax authorities demonstrate that ‘tax abuse’ is at issue, which means (in general terms) that the taxpayer is acting in contradiction to the objectives of a certain tax rule.

Payments that are made directly or indirectly by Belgian companies above a cumulative threshold of €100,000 to non-cooperative jurisdictions and tax havens must be mentioned on a separate form that is joined to the payer’s corporate income tax declaration. The deduction of such payments from the taxable income of the payer is

37 This withholding tax exemption is not applicable to the SIR/GVV, and we cannot exclude further developments regarding this exemption in the near future.

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in principle refused if no such declaration is made or, even if a declaration is made, if the payer does not demonstrate that such payments are framed within real and genuine transactions and that the counterparty is not a wholly artificial arrangement.

v Announced increase of the withholding tax rate

Within the framework of the government’s negotiations on the budget and the tax shift, it was announced in July 2015 that the general withholding tax rate on interest and dividends will rise from 25 to 27 per cent in 2017.

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Appendix 1

ABOUT THE AUTHORS

THIERRY TILQUINLiedekerke Wolters Waelbroeck KirkpatrickThierry Tilquin heads the corporate, banking and finance practice of Liedekerke Wolters Waelbroeck Kirkpatrick. He specialises in corporate law, listed companies law (including corporate governance matters) and funds regulations. He has, since the financial crisis, been involved in many bank and insurance reorganisations and governance assessments in both the public and private sectors in the funds sector. He assisted the REIT sector in the works leading to the SIR Act 2014.

He is recognised as a leading lawyer, is a professor of company law in the fiscal management master’s degree programme at the Solvay Business School, and is the author of a treatise on mergers and demergers and co-author of a treatise on companies (three volumes of which have been published) and handbooks on Belgian SICAFI funds and the new SIR (REITs).

He began practising law in 1981 and has been a partner at Liedekerke Wolters Waelbroeck Kirkpatrick since 1995.

TOM VAN DYCK Liedekerke Wolters Waelbroeck Kirkpatrick Tom Van Dyck specialises in financial services law and capital market operations. Offering clients substantial experience in regulatory issues (including negotiations or litigation) and a sensitivity for the regulator’s view, he advises financial institutions and fund managers on prospectus rules, market abuse, MiFID, fund regulation (UCITS, AIFMD), as well as banking and other financial services regulation. His practice frequently involves negotiations with the Belgian Financial Services and Markets Authority and the National Bank of Belgium. He also regularly advises representative organisations, including the federation of the Belgian financial sector (Febelfin).

He is a member of the Brussels and New York Bars. He holds a PhD in financial law and teaches at the Facultés Universitaires Saint-Louis (FUSL Brussels) as a visiting

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professor. He has authored more than 40 publications, and has provided expert advice to the European Commission (in 2007 and 2008) and the European Parliament (in 2007, 2011 and 2012) on a variety of EU financial law issues.

He graduated in law from the University of Leuven (KU Leuven 1999). He obtained additional diplomas from King’s College London and New York University, where he studied as a Belgian American Education Foundation Fellow. In 2006 and 2007, he was a visiting researcher at Harvard Law School.

He joined Liedekerke Wolters Waelbroeck Kirkpatrick as a partner in 2010.

GREET BONTINCK Liedekerke Wolters Waelbroeck Kirkpatrick Greet Bontinck holds a master’s degree in law from Ghent University (UGent 2013) and took part in an overseas exchange programme at the Santa Clara School of Law (Santa Clara, California) in 2011. She also holds a master’s degree in general management from Vlerick Business School (Vlerick 2014).

She was an associate at Liedekerke Wolters Waelbroeck Kirkpatrick, where she was part of the corporate and finance practice group and focused on all aspects of corporate and financial law. Since August 2015, she has held a research associate position at the Vlerick Business School.

STEVEN PEETERS Liedekerke Wolters Waelbroeck KirkpatrickSteven Peeters is part of the tax group.

He holds a master's degree in law from the University of Leuven (KU Leuven 2009). He also obtained an LLM from Harvard Law School (2011) with a Fulbright grant and a fellowship from the Belgian American Educational Foundation (BAEF). He started his career at the Brussels Bar in 2009 and was admitted to the New York Bar in 2012.

Since 2011, he has been active as an affiliated researcher at the Institute for Tax Law of the KU Leuven. He joined Liedekerke Wolters Waelbroeck Kirkpatrick in 2014.

LIEDEKERKE WOLTERS WAELBROECK KIRKPATRICKboulevard de l’Empereur 3 Keizerslaan1000 BrusselsBelgiumTel: +32 2 551 15 15Fax: +32 2 551 14 14t.tilquin@liedekerke.com t.vandyck@liedekerke.comwww.liedekerke.com