The AssetManagement

Review

Law Business Research

Third Edition

Editor

Paul Dickson

The Asset Management Review

The Asset Management Review Reproduced with permission from Law Business Research Ltd.

This article was first published in The Asset Management Review - Edition 3(published in September 2014 – editor Paul Dickson).

For further information please emailNick.Barette@lbresearch.com

The Asset Management

Review

Third Edition

EditorPaul Dickson

Law Business Research Ltd

THE MERGERS AND ACQUISITIONS REVIEW

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THE TECHNOLOGY, MEDIA AND TELECOMMUNICATIONS REVIEW

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THE REAL ESTATE LAW REVIEW

THE PRIVATE EQUITY REVIEW

THE ENERGY REGULATION AND MARKETS REVIEW

THE INTELLECTUAL PROPERTY REVIEW

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i

The publisher acknowledges and thanks the following law firms for their learned assistance throughout the preparation of this book:

ACKNOWLEDGEMENTS

ADVOKATFIRMAET BA-HR DA

AL TAMIMI & COMPANY

ANDERSON MŌRI & TOMOTSUNE

ARTHUR COX

BARBOSA, MÜSSNICH & ARAGÃO

BONELLI EREDE PAPPALARDO

CAPITAL LEGAL SERVICES LLC

CASTRÉN & SNELLMAN ATTORNEYS LTD

CMS REICH-ROHRWIG HAINZ

CONYERS DILL & PEARMAN LIMITED

DE BRAUW BLACKSTONE WESTBROEK NV

DE PARDIEU BROCAS MAFFEI

ELVINGER, HOSS & PRUSSEN

ENSAFRICA

FANGDA PARTNERS

GANADO ADVOCATES

HENGELER MUELLER

J SAGAR ASSOCIATES, ADVOCATES & SOLICITORS

Acknowledgements

ii

KIM & CHANG

KING & SPALDING LLP IN ASSOCIATION WITH THE LAW OFFICE OF MOHAMMAD AL AMMAR

LENZ & STAEHELIN

MANNHEIMER SWARTLING ADVOKATBYRÅ AB

MAPLES AND CALDER

ROPES & GRAY LLP

SLAUGHTER AND MAY

STIBBE

STIKEMAN ELLIOTT LLP

TSMP LAW CORPORATION

UDO UDOMA & BELO-OSAGIE

URÍA MENÉNDEZ

iii

Editor’s Preface ..................................................................................................viiPaul Dickson

Chapter 1 EUROPEAN OVERVIEW .........................................................1Michael Sholem

Chapter 2 AUSTRIA ..................................................................................39Martin Zuffer and Roman Hager

Chapter 3 BELGIUM ................................................................................54Jan Peeters, Fran Ravelingien, Wim Panis and Giovanni Smet

Chapter 4 BERMUDA ...............................................................................69Anthony Whaley and Elizabeth Denman

Chapter 5 BRAZIL.....................................................................................82Anna Carolina Malta and Carla Vilmar da Motta Veiga

Chapter 6 CANADA ................................................................................100Alix d’Anglejan-Chatillon and Jeffrey Elliott

Chapter 7 CAYMAN ISLANDS ..............................................................116Jon Fowler, Anna Goubault and Krista-Lynn Wight

Chapter 8 CHINA ...................................................................................130Richard Guo and Zhen Chen

Chapter 9 FINLAND...............................................................................145Janne Lauha, Leena Romppainen, Hannu Huotilainen

Chapter 10 FRANCE .................................................................................159Arnaud Pince

CONTENTS

iv

Contents

Chapter 11 GERMANY .............................................................................173Thomas Paul and Christian Schmies

Chapter 12 HONG KONG .......................................................................186Jason Webber, Peter Lake and Ben Heron

Chapter 13 INDIA .....................................................................................203Dina Wadia, Jay Gandhi and Swati Mandava

Chapter 14 IRELAND ...............................................................................217Kevin Murphy, David O’Shea, Jonathan Sheehan, Sarah McCague, Elizabeth Bothwell and Jennifer McCarthy

Chapter 15 ITALY ......................................................................................230Giuseppe Rumi, Daniela Runggaldier, Riccardo Ubaldini and Michele Dimonte

Chapter 16 JAPAN .....................................................................................246Naoyuki Kabata and Takahiko Yamada

Chapter 17 KOREA ...................................................................................266Jean Lee, Chisoo Kim and Soobin Ahn

Chapter 18 LUXEMBOURG ....................................................................277Jacques Elvinger, Joachim Kuske and Olivier Gaston-Braud

Chapter 19 MALTA ...................................................................................295André Zerafa and Stephanie Farrugia

Chapter 20 NETHERLANDS ...................................................................307Joost Steenhuis and Lotte Boon

Chapter 21 NIGERIA ................................................................................319Dan Agbor, Folake Elias-Adebowale and Christine Sijuwade

Chapter 22 NORWAY ...............................................................................332Peter Hammerich and Markus Heistad

v

Contents

Chapter 23 PORTUGAL ...........................................................................347Carlos Costa Andrade, Marta Pontes, Miguel Stokes, Diogo Tavares and Gerard Everaert

Chapter 24 QATAR ...................................................................................360Rafiq Jaffer and Dina Al-Wahabi

Chapter 25 RUSSIA ...................................................................................369Pavel Karpunin, Anastasia Fomicheva and Dmitry Churin

Chapter 26 SAUDI ARABIA .....................................................................383Nabil A Issa and James Stull

Chapter 27 SINGAPORE ..........................................................................394Stefanie Yuen Thio and Dayne Ho

Chapter 28 SOUTH AFRICA ...................................................................404Johan Loubser and Andrea Minnaar

Chapter 29 SPAIN .....................................................................................420Juan Carlos Machuca Siguero and Tomás José Acosta Álvarez

Chapter 30 SWEDEN ...............................................................................440Emil Boström and Jonas Andersson

Chapter 31 SWITZERLAND ....................................................................452Shelby R du Pasquier and Maria Chiriaeva

Chapter 32 UNITED KINGDOM ...........................................................466Paul Dickson

Chapter 33 UNITED STATES ..................................................................506Jason E Brown, Leigh R Fraser and John M Loder

Appendix 1 ABOUT THE AUTHORS .....................................................523

Appendix 2 CONTRIBUTING LAW FIRMS' CONTACT DETAILS .....547

vii

EDITOR’S PREFACE

Following several challenging years in the wake of the damage wrought by the global financial crisis, in 2013 markets showed signs that the tentative economic recovery is beginning to take hold. The asset management industry has seen some of the positive effects, with global funds under management at an all-time high. In the private equity sector, 2013 saw the highest aggregate amount of capital raised since 2008 and a record number of private equity buyout deals. With the global population becoming larger, older and richer, as well as government initiatives (such as the UK’s automatic enrolment of employees into employer-sponsored pension schemes) potentially increasing funds under management even further, Bank of England Chief Economist Andrew Haldane’s suggestion that we are entering an ‘age of asset management’ seems well justified.

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, including, in Europe, the revised Markets in Financial Instruments package and the Alternative Investment Fund Managers Directive. Further scrutiny on a global level also appears likely. The Financial Stability Board and the International Organization of Securities Commissions recently consulted on proposed methodologies to identify global systemically important nonbank, non-insurer financial institutions (including investment funds). Industry stakeholders agree that regulatory change – in particular the volume, scope and complexity of new requirements – continues to be one of asset management’s greatest challenges.

It is not only regulators who have placed additional demands on the financial services industry in the wake of the financial crisis; a perceived loss of trust has led investors to demand greater transparency around investments and risk management from those managing their funds. Investors and regulators are also demanding greater clarity on fees and commissions charged by fund managers for services provided.

This continues to be a period of change and uncertainty for the asset management industry, as funds and managers act to comply with new regulatory and investor requirements and adapt to the changing geopolitical landscape. There does appear,

Editor’s Preface

viii

however, to be some cause for optimism. Confidence has begun to return across a number of areas and more positive assessments of the global economic outlook, reflected in a strong performance in equity markets over the period, raise the prospect of increased investment and returns. Although the challenges of regulatory scrutiny and difficult market conditions remain, there have also been signs of a return of risk appetite. 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.

This third edition of The Asset Management Review includes coverage of a number of additional jurisdictions, reflecting the global importance of the industry and this practice area. The publication of this edition 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 the third edition into being.

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

Paul DicksonSlaughter and MayLondonSeptember 2014

54

Chapter 3

BELGIUM

Jan Peeters, Fran Ravelingien, Wim Panis and Giovanni Smet 1

I OVERVIEW OF RECENT ACTIVITY

The Belgian Asset Managers Association (BEAMA) promotes and develops asset management in Belgium and the defence of its members’ interests, whose activities consist of collective management, portfolio management of institutional and retail clients and investment advice. BEAMA is essentially organised around the following three asset management business lines: undertakings for collective investment (UCIs), institutional investors and private clients. BEAMA is also a founding member of the Federation of the Financial Sector Federation and of the European Fund and Asset Management Association.

According to BEAMA, in 2013 the total number of assets under management (AUM) in Belgium increased by 6.5 per cent, amounting to €228.82 billion by the end of the year (in 2012, these assets had increased by 3 per cent).

Out of this €228.82 billion amount, 18.7 per cent (€42.88 billion) was managed for foreign clients. In 2012, this amounted to 20.7 per cent, in 2011 to 22.1 per cent and in 2010 still to 30.2 per cent. Clearly, the percentage of AUM for Belgian clients has continued to gain importance in recent years.

UCIs are the largest category among assets in collective management. At the end of 2013, asset managers were managing out of Belgium €83.78 billion of UCIs for both Belgian and foreign clients.

Institutional clients still constitute the most important category of clients for asset managers. The category of the retail clients increased slightly, while the category of private banking clients and other non-institutional clients increased strongly, respectively

1 Jan Peeters is managing partner, Fran Ravelingien is an associate, Wim Panis is a partner and Giovanni Smet is an associate at Stibbe.

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by 12.2 and 24.4 per cent. When aggregated, the categories of retail clients and private banking clients even exceed the category of institutional clients.

Assets under discretionary portfolio management represent €78.72 billion in total, of which €62.95 billion (80 per cent) is managed for institutional investors.2

II GENERAL INTRODUCTION TO THE REGULATORY FRAMEWORK

Asset management comprises, inter alia: collective portfolio management, individual portfolio management for institutional and retail investors, and investment advice.

Asset management in Belgium generally entails the provision of investment services.

Pursuant to the Law of 6 April 1995 on the legal status and the supervision of investment firms (the Law of 1995), investment advice means the provision of personal recommendations to a client, either upon its request or at the initiative of the investment firm, in respect of one or more transactions relating to financial instruments. Individual portfolio management is defined in the Law of 1995 as managing portfolios in accordance with mandates given by clients on a discretionary client-by-client basis where such portfolios include one or more financial instruments. Pursuant to the Law of 1995, only Belgian credit institutions or investment firms (licensed by the supervisory authority)3 and EEA credit institutions or investment firms (licensed in another EEA Member State and active in Belgium under a European passport within the framework of free provision of services or by creating a branch may, as a general rule and as part of their normal business activities, professionally render or offer these investment services to third parties, perform one or more investment activities in Belgium, or both.

Collective portfolio management entails managing portfolios of undertakings for collective investment in transferable securities (UCITS) or alternative investment funds (AIFs).

Pursuant to the implementation of Directive 2011/61/EU on Alternative Investment Fund Managers (AIFMD) into Belgian law, UCITS and undertakings for investment in receivables (i.e., Belgian dedicated securitisation vehicles) continue to be governed by the Law of 3 August 2012 on certain forms of collective management of investment portfolios (the UCITS Law), whereas AIFs (including UCIs, the assets of which are invested other than in transferable securities) are governed by the Law of 19 April 2014 on alternative investment funds and their managers (the AIFM Law).4

Investment management services of collective portfolio management of UCITS or AIFs can only be conducted by an authorised alternative investment fund manager

2 BEAMA Annual Report 2013–2014.3 The Belgian supervisory authority of credit institutions and stockbroking firms is the National

Bank of Belgium (the NBB), whereas the Financial Services and Markets Authority (FSMA) is the supervisory authority of portfolio management and investment advice companies.

4 The AIFM Law implements the AIFMD into Belgian law and its main provisions entered into force on 27 June 2014.

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(AIFM) or a UCITS management company (UCITS ManCo). Subject to receiving an extension of the relevant existing licence from their competent authorities, a UCITS ManCo can manage AIFs (but in doing so must comply with the AIFM Law) and an AIFM can manage UCITS (but in doing so must comply with the UCITS Law).

Furthermore, the UCITS ManCo or AIFM licence can be extended to also provide the following investment services (in addition to performing the function of collective portfolio management and – in case of an AIFM – risk management): a individual portfolio management; b investment advice; c safekeeping and administration of units in collective investment undertakings;

and d the reception and transmission of orders in relation to the units in collective

investment undertaking involved (UCITS ManCo5) or in relation to financial instruments (AIFMs).6

Investment management services of portfolio management of UCITS or AIFs can also be delegated to an investment firm, an authorised AIFM or a UCITS ManCo licensed as a portfolio investment manager.7

Following the entry into force of the AIFM Law, the UCITS Law now only applies to any public offering in Belgium of a UCITS, i.e. an open-ended undertaking with the sole object of collective investment in transferable securities or in other liquid financial assets of capital raised from the public and complying with the conditions laid down in Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to the collective investment in transferable securities (the UCITS Directive). However, public offerings of units of an open-end AIF are governed by the public offering rules in the AIFM Law, whereas public offerings of securities other than units of an open-end AIF and public offerings of closed-end AIFs are governed by the public offering rules in the Law of 16 June 2006 on the public offering of investment instruments and the admission to trading of investment instruments on a regulated market (the Prospectus Law).

In the case of a public offering of a UCITS, certain obligations must be taken into account, such as the publication of a prospectus, advertising materials and a key investor information document approved by the Financial Services and Markets

5 Under the Law of 3 August 2012, the definition of marketing units in a collective investment undertaking also comprises the reception and transmission of orders in relation to the units of the collective investment undertaking involved. This seems to suggest that an authorised UCITS ManCo need not extend its licence to also render the investment service of the reception and transmission of orders, whereas an authorised AIFM does.

6 When providing the aforementioned investment services, AIFMs and UCITS ManCos must comply with the organisational and conduct of business rules under the MiFID.

7 An AIFM cannot delegate its responsibilities to the extent that it is left a letter-box entity, as this creates the risk that the delegatee is recharacterised as being the AIFM.

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Authority (FSMA). The public offering of a UCITS also triggers an obligation to register the UCITS with the FSMA.

Pursuant to the AIFM Law, AIFMs must, for each AIF that they manage and for each AIF that they market in Belgium, as a general rule make certain information available to AIF investors before they invest in the AIF.8 In addition thereto, the marketing of an AIF to the public in Belgium will also trigger the obligation to register the AIF with the FSMA. Furthermore, if the marketing of AIFs in Belgium amounts to a public offering, certain obligations must be taken into account, such as the publication of a prospectus, advertising materials and a key investor information document approved by the FSMA.

The marketing of AIFs and UCITS (including investment advice, the reception and transmission of orders, and the placing of financial instruments) can be operated directly or indirectly by an investment firm, a UCITS ManCo and an AIFM, subject to their holding the proper licence.

III COMMON ASSET MANAGEMENT STRUCTURES

The current regulatory framework of collective asset management structures dates back to the regulatory overhaul that occurred with the enactment of the Law of 4 December 1990. The aforementioned Law was subsequently amended in 2004 and 2012 to reflect the changes in the European UCITS regulations. In 2014, the regulatory framework of collective asset management structures was further complemented by the AIFM Law which introduced the concept of AIFs and their managers and implemented the AIFMD into Belgian law. Nevertheless, the basic set-up as to common asset management structures remains largely unchanged.

Both fund and corporate structures are regulated. They can (irrespective of legal form) take a closed-ended or open-ended form, so there may be four basic forms: a funds with variable participation rights; b funds with fixed participation rights; c companies with a fixed capital (SICAFs); and d companies with variable capital (SICAVs).

When they are closed-ended, there is an obligation to have a listing, and any capital increase requires that the preference rights of existing shareholders be respected. When they are open-ended, entry and exit takes place directly against the fund by reference to the net asset value, and there is no obligation to have a listing.

Whatever their legal form, and whether open or closed-ended, structures must choose one of the investment categories set forth either in Article 7 of the UCITS Law (a UCITS) or in Article 183 of the AIFM Law (an AIF). Depending on their form, they can be publicly offered, offered only to institutional investors or privately offered.

8 Such information includes, amongst other things, a description of the investment strategy and objectives of the AIF, the identity of the AIFM, the AIF’s depositary, auditor and any other service providers, all fees, the latest net asset value of the AIF or the latest market price of the units or shares of the AIF, etc.

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Finally, structures can choose to be self-managed or delegate their management to a management company (which must hold a licence as a UCITS ManCo or as an AIFM).

The regulatory framework was initially set up with the intention that it would apply only to public offerings of securities (whether or not UCITS-compliant), whereas private offerings of securities in collective investment schemes (irrespective of their legal form) remained unregulated. Following the entry into force of the AIFM Law, private offerings of securities in collective investment schemes are also regulated (subject only to the exemptions provided for in the AIFM Law as derived from the AIFMD). Publicly offered forms of collective investments are granted an advantageous tax treatment. Over time, securitisation vehicles (whether raising their funding publicly or privately) became regulated along the lines of the same regulatory framework, thereby allowing them to benefit from the same or similar tax advantages.

Other forms of collective investments, even though not publicly offered, had subsequently been introduced into the UCITS Law, allowing them to also benefit from these tax advantages, especially institutional collective investment schemes. The latter are typically opt-in formats where, subject to optionally registering as such, the entity can enjoy certain of these benefits. They must ensure that the public distribution of interests is restricted, notwithstanding the fact that they can eventually be exchange-traded.

The following forms of collective investments that can be offered are currently regulated under Belgian law:

Asset class Open ended Closed endedDirective 2009/65/EC Public: Royal Decree (RD) 12

November 2012Not applicable

Securities and cash Public: RD 12 November 2012Institutional: RD 7 December 2007

Public: RD 12 November 2012

Options and forwards on securities, foreign currency or stock exchange indices

Not yet implemented Not yet implemented

Real estate Not applicable Public: RD 7 December 2010 Institutional: RD 7 December 2010

High-risk capital Not applicable Not yet implemented

Receivables owned by third parties and assigned to the vehicle by agreement

Not applicable Institutional: RD 15 September 2006Public: RD 29 November 1993

Securities issued by unlisted companies Not applicable Public: RD 18 April 1997Private: RD 23 May 2007

Other classes of investments approved by RD Not yet implemented Not yet implemented

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IV MAIN SOURCES OF INVESTMENT

In 2013, the net assets of Belgian and foreign UCIs amounted to €117.53 (in 2012 the net assets amounted to €106.55 billion). The table below outlines the amount of net assets per investment strategy in 2013:9

Type of UCI Billion € %Bonds – UCIs 29.23 24.87

In € 10.93 9.30

In other currencies 18.30 15.57

Monetary UCIs 1.76 1.49

In € 0.95 0.81

In other currencies 0.81 0.69

Equity – UCIs 35.70 30.37

Belgium 1.15 0.98

€ country 6.06 5.15

Europe 10.86 9.24

US 4.10 3.49

Asia 2.25 1.92

Other shares 11.27 9.59

UCIs with capital guarantee 10.79 9.18

a linked to equity 8.70 7.41

b linked to interest rates, loans and currencies 2.09 1.78

In € 1.98 1.68

In other currencies 0.11 0.09

Mixed UCIs 31.64 26.92

Pension funds 14.33 12.19

Constant proportion portfolio insurance funds 2.48 2.11

Real estate UCIs 8.16 6.95

Other 0.25 0.21

Total 117.53 100

V KEY TRENDS

i AIFM Law

The AIFM Law implements the AIFMD into Belgian law and its key provisions entered into force on 27 June 2014.

The AIFM Law introduces a new regulatory framework for AIFMs governed by either Belgian law or the laws of an EEA or non-EEA Member State that are managing AIFs governed by Belgian law or marketing EEA or non-EEA AIFs in Belgium. An AIF is a collective investment undertaking which raises capital from a number of investors

9 BEAMA Annual Report 2013–2014, p. 12.

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with a view to investing it in accordance with a defined investment policy for the benefit of those investors and which does not require authorisation pursuant to the UCITS Directive 2009/65/EC.

Certain types of funds are excluded from the AIFM Law’s scope of application. These include UCITS, holding companies, institutions for occupational retirement provision, securitisation special purpose entities, supranational institutions, national central banks, social security vehicles, employee participation schemes or employee savings schemes, family-office vehicles, joint ventures, and insurance contracts.

The AIFM Law also amends substantially the UCITS Law so that this legislation now only governs UCITS and, as a separate category of investment vehicle, the undertakings for investment in receivables (i.e., Belgian dedicated securitisation vehicles). The regulatory provisions in the UCITS Law in respect of certain ad hoc structures, such as open-ended institutional investment companies, public private equity funds and private private equity funds, were removed from the UCITS Law and (largely unaltered) copied into the AIFM Law.

The new AIFM Law was accompanied by the Law complementing the AIFM Law, in respect of recourse against decisions of the supervisory authority.

ii EMIR Implementing Law

The European legal framework in respect of OTC derivatives, central counterparties and trade repositories consists of Regulation (EU) No. 648/2012 (EMIR), nine regulatory and implementing technical standards to complement the obligations defined under EMIR adopted in 201210 and various delegated regulations adopted in 2013 and 2014.

Whereas the provisions of EMIR are directly applicable in all EU member states without having to be implemented into national legislation, the Law of 25 April 2014 amending various financial legislation in view of Regulation 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (the EMIR Implementing Law) adapts the current Belgian regulatory and supervisory framework to EMIR’s provisions. In addition to (technical) amendments throughout various financial laws, the EMIR Implementing Law applies the Belgian ‘twin peaks’ supervisory architecture to OTC derivatives, central counterparties (CCPs), and trade repositories.

The EMIR Implementing Law designates the National Bank of Belgium (NBB) as the competent authority for the authorisation and prudential oversight of CCPs established in Belgium. The detection of systemic risks and the supervision of clearing, reporting, and risk mitigation requirements under Title II of EMIR are also within the remit of the NBB.

The FSMA, inter alia, supervises CCPs’ compliance with conduct-of-business rules and manages conflicts of interests within the CCPs.

10 The FSMA and the NBB issued a joint Communication on 17 July 2013 informing the institutions that fall under their respective supervision of the obligations arising from the entry into force of Delegated Regulation of 19 December 2012 supplementing EMIR.

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iii Law on Financial Planning

The Law of 25 April 2014 on the legal status and the supervision of the independent financial planners and regarding the rendering of advice on financial planning by regulated entities and on the modification of the Belgian Companies Code and the law of 2 August 2002 regarding the supervision of the financial sector and financial services (the Law on Financial Planning) and its implementing Decree of 8 July 2014 introduce a new regulatory framework for independent financial planners and regulates the rendering of advice on financial planning. It is applicable to natural or legal persons of which the ordinary professional activity consists of the rendering, on Belgian territory, of advice on financial planning to non-professional clients, even supplementary or additionally.

The term ‘advice on financial planning’ shall be taken to mean advice on the optimisation, particularly in respect of structuring, of planning in time, protection, legal organisation or transfer of the assets of a client, pursuant to the needs and objectives that such client specifies. The provision of investment services as well as the rendering of any advice on transactions in particular financial products are explicitly excluded from the definition of advice on financial planning.

The Law on Financial Planning introduces a new category of financial service provider which was up to now unregulated, as a result of which advice on financial planning can only be rendered either by persons licensed as independent financial planners, or – by operation of law – by a regulated entity including credit institutions, investment firms, insurance undertakings, institutions for occupational retirement provision, insurance intermediaries, intermediaries in banking and investment services, UCITS ManCos and AIFMs.

The Law on Financial Planning will enter into force on 1 November 2014.

VI SECTORAL REGULATION

i Insurance

Insurance companies may offer Branch 23 products (i.e., investment funds linked to life insurance products). These products are governed by the Royal Decree of 14 November 2003 relating to life insurance activities, and are subject to information obligations, such as the obligation for the insurance company to draw up management regulations for each investment fund as well as a yearly and half-yearly report. Branch 23 products are regarded as insurance products, for which no prospectus requirements apply.

However, pursuant to the Law of 30 July 2013 regarding the strengthening of the protection of customers of financial products and services and of the powers of the FSMA (the Financial Products and Services Law), insurance companies and insurance intermediaries became subject to compliance with conduct of business rules that are very similar to the MiFID rules, irrespective of the nature of the product or service they are offering to customers and the supervisory powers of the FSMA were further strengthened. Two Royal Decrees of 21 February 2014 in pursuance of the new law provide for further implementing rules regarding, amongst other things, conduct of business and conflicts of interest for the insurance sector. The Financial Products and Services Law is part of an overhaul of the supervisory and regulatory framework regarding insurances. In respect of such overhaul, the Law of 4 April 2014 regarding insurances (the Insurance Law)

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was enacted in order to codify and further amend the existing insurance legislation. Furthermore, the Insurance Act provides for, among other things, new rules regarding Branch 23 products. To the extent the insurance taker is a non-professional client and the obligation is located in Belgium, the insurance performances can only be linked to certain assets and investment funds enumerated in a list in the Insurance Law.

ii Pensions

The Law of 27 October 2006 governing supervision of institutions for occupational retirement provision sets out the legal structure, organisation and working practices of pension funds in Belgium.

A pension fund established in Belgium has the legal status of an organisation for financing pensions (OFP), an ad hoc separate legal entity designed specifically to enable a flexible governance structure and organisation. An OFP is responsible only for its funding and obligations. It is unrelated to the contributing enterprises. This protects the accrued pension benefits and pension rights of pension scheme members against the insolvency of their employer.

The legal framework is built on the principles of flexibility and contractual freedom: parties that establish an OFP may structure these matters to fit their own requirements, provided that they adhere to the basic two-tier structure: a general meeting and a board. The general meeting is made up of the contributing enterprises whose pension schemes are managed by the OFP and will be responsible for the overall supervision and oversight and may be assigned wide-ranging powers (as laid down in the articles of association). The board, meanwhile, determines the general policy of the OFP and is responsible for its operational activities. Supervisory powers rest with the FSMA. However, not later than 31 December 2015 (or on an earlier date to be determined by Royal Decree), the FSMA will transfer all of its supervisory powers in respect of OFPs to the NBB, as a result of which the NBB will then become the competent authority for the supervision on OFPs and overall compliance with OFP regulation.

In combination with an attractive tax regime, the intention of the Belgian legislator is to create a framework that will allow Belgium to be an ideal location to establish pan-European pension funds.

iii Real property

Asset management of real estate was historically structured through real estate certificates relating to one particular underlying real estate asset or through real estate investment funds relating to a portfolio of real estate assets. When the regulatory framework for asset management was overhauled in 1990 with the introduction of the SICAF and SICAV structures (and their tax advantages), a specific REIT regime was put in place (with corresponding tax advantages) for real estate investment funds (the SICAFI regime).

REITs (SICAFIs) may only invest in real estate, but the latter concept has been extended to include (Article 2, 20 of the Royal Decree regarding REITs):a immoveable goods as defined in Article 517 and following of the Civil Code, and

the rights in rem on immoveable goods; b option rights on real estate; c shares in affiliated companies investing in real estate;

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d real estate certificates; e shares of another collective investment undertaking investing in real estate; and f rights resulting from agreements pursuant to which one or more immoveable

goods is leased to the REIT.

As a consequence of the AIFMD implementation, closed-end real estate investment funds (SICAFIs), became subject to the AIFM Law. As an alternative, the Law of 12 May 2014 on regulated real estate companies (the REITs Law) introduces a new category of Regulated Real Estate Company (SIR/GVV) which will not fall under the scope of the AIFM Law.

For the purposes of the REITs Law an SIR/GVV is: (1) a company incorporated for an unlimited duration; (2) whose business activity is exclusively the placing of real properties at the disposal of users (i.e., for their purposes of these users’ raising, renovating, developing, acquiring, selling, managing and exploiting of real properties) and, as the case may be and within the limits set forth in the REITs Law, the holding of real estate certificates, shares or units in real estate investment companies or funds; and (3) is licensed as such by the FSMA.

Pursuant to the REITs Law, the existing closed-end real estate investment funds will have the option of converting itself into an SIR/GVV within four months after the REITs Law enters into force, as a result of which they will avoid falling under the scope of the AIFM Law while maintaining the benefit of the existing tax regime for SICAFIs. It is important to note in this respect that the REITs Law gives an exit right for shareholders who vote against the adoption of the new SIR/GVV status during the shareholders’ meeting whereby such shareholders can request the real estate investment company to buy back up to €100,000 of its shares.11

The expectation is that all existing SICAFIs will convert to the status of SIR/GVV. The regulatory regime of the SICAFIs will formally continue to exist, however the expectation is that it will become obsolete over time.

iv Hedge funds

Hedge funds remain a largely unregulated area under Belgian law. To the extent no implementing decrees have been issued with respect to the

investment category high-risk capital, no direct offering of hedge fund type investments can be made to the public in Belgium. When a hedge fund-type product was repackaged as a debt-type instrument and offered into Belgium out of Luxembourg, the Belgian regulator even refused to allow the offering to go ahead. Funds that are investing in financial instruments and other cash have, however, been allowed (within limits) to invest in hedge funds since 2004, allowing some form of indirect offering (Article 84 of the Royal Decree of 12 November 2012).

11 The date of entry into force of the REITs Law will be set by royal decree (which is yet to be published).

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The entry into force of the AIFM Law did not bring about huge changes in this respect. The expectation is that the FSMA will not allow direct retail offerings, and whether offerings to institutional investors will be very successful remains unclear.

v Private equity

Private equity has not been formally regulated as a separate asset class under Belgian law. There are, however, formats for collective investments of the opt-in type that have been designed to cater for the needs of private equity: the public and private private equity funds. Both are characterised by their choice of securities issued by unlisted companies as their investment class.

Only one public private equity fund has been created to date (Quest for Growth). Following the entry into force of the AIFM Law, it is formally being treated as an AIF but is otherwise able to continue to operate under its current regulatory framework.

The regime initially provided for private private equity funds was considered too restrictive, and only a few were created. Following the regime’s amendment in 2007, there has been an increase in the number of private private equity funds created.

It remains to be seen whether the new Regulations on European Venture Capital12 and Social Entrepreneurship13 initiatives will enjoy widespread development among Belgian private equity operators, even if they would fall below the €100 million thresholds provided for in the AIFMD. It may well be that medium-sized players will opt into the AIFMD, or prefer to avoid any regulatory supervision and therefore not opt into the new initiatives.

Regarding one of the particularities of the Belgian private equity market, attention should be paid to the Arkimedes regime put in place in the Flanders region (and the Caisse d’Investissement Wallon regime in Wallonia). Under the Arkimedes regime (one public fund and one private, fully government-controlled fund), funds are invested in dedicated funds on a fifty-fifty basis (half of the funds being co-invested by the private sector) with a view to investing in small and medium-sized enterprises. It is expected that this structure will remain AIFMD-exempt due to the size of the enterprises in question.

VII TAX LAW

The Belgian tax treatment of a Belgian investment vehicle depends on whether it is vested with legal personality (e.g., investment company rather than investment fund).

Another determining factor is whether an investment company (i.e., an investment vehicle with legal personality) has been recognised as a public or institutional investment company within the meaning of the UCITS Law, or whether it qualifies as a SIR/GVV within the meaning of the REITs Law. If not, the tax treatment of the investors in the company fully corresponds to the tax treatment of the shareholders of an ordinary Belgian company.

12 Regulation (EU) No. 346/2013 of 17 April 2013 on European venture capital funds.13 Regulation (EU) No. 345/2013 of 17 April 2013 on European social entrepreneurship funds.

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i Tax treatment of Belgian-recognised investment companies and SIRs/GVVs

Tax treatment at investment company levelPublic or institutional investment companies, as referred to in the UCITS Law, as well as SIRs/GVVs as referred to in the REITs Law, are subject to corporate income tax at the ordinary rate of 33.99 per cent, but their taxable income is determined in a manner that differs from the manner in which the taxable profits of ordinary Belgian companies is computed. Their taxable income essentially consists of disallowed expenses (other than capital losses and write-offs on shares), and received abnormal or gratuitous advantages. In practice, Belgian-recognised investment companies often pay very little or no corporate income tax.

Given their notional taxable basis, Belgian-recognised investment companies and SIRs/GVVs are usually not taxable on interest or dividends received. Apart from Belgian-source dividends, all of these income components are usually eligible for a general exemption from Belgian withholding tax. Nevertheless, if any Belgian withholding tax would have been withheld on inbound interest or dividend payments (which may be the case for, e.g., dividends received by recognised institutional SICAFs and SICAVs or by SIRs/GVVs since the general withholding tax exemption for moveable income paid to investment companies does not (yet) apply to these types of vehicles), the investment vehicle would be able to set off the amount thereof against any corporate income tax liability due by it, and any excess would be refundable. This rule does not, however, apply to Belgian-source dividends. Any Belgian withholding tax retained on that income thus constitutes a tax burden for the receiving investment company.

Belgium considers that, since recognised investment companies (and SIRs/GVVs) are formally subject to Belgian corporate income tax, they qualify for benefits available under tax treaties concluded by Belgium. This view is, however, not shared by all of Belgium’s tax treaty partners.

Tax treatment at investor levelDividend and interest payments made by Belgian-recognised investment companies and SIRs/GVVs are as a rule subject to Belgian withholding tax at a rate of 25 per cent. Reduced rates or full exemptions may be available either under tax treaties concluded by Belgium or Belgian domestic tax law. The following withholding tax exemptions and reductions are particularly relevant to certain types of investment companies:a dividend distributions made by public or institutional recognised investment

companies to non-resident persons or entities that have not allocated the relevant shares to any Belgian professional activity they may have are exempt from Belgian dividend withholding tax. This exemption does not apply to the part of the dividend that stems from dividends that the investment company has itself received from Belgian companies;

b dividends distributed by a public or private private equity fund are exempt from Belgian withholding tax if and to the extent that such dividends stem from capital gains on shares realised by the private equity fund. If the recipient of the dividend is a foreign company, the exemption also applies to the part of the dividend that stems from dividends derived by the fund from shares issued by a foreign company;

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c funds distributed by way of a repurchase of own shares by a Belgian investment company that benefits from a beneficial tax treatment are not subject to any Belgian withholding tax. Exceptions to this rule may apply to, inter alia, investment companies the investment portfolio of which consists of over 25 per cent of interest-bearing assets and which do not annually distribute their investment income; and

d dividend distributions made by residential REITs and residential SIRs/GVVs are eligible for a reduced withholding tax rate of 15 per cent. In this context, residential REITs and residential SIRs/GVVs are defined as recognised REITs and SIRs/GVVs having invested at least 80 per cent of their investment portfolio in EEA-located real property that is exclusively used for housing purposes.

For Belgian-resident physical persons subject to personal income tax, Belgian legal entities subject to legal entities tax, and foreign persons or entities that do not have a Belgian permanent establishment, any Belgian withholding tax retained on dividends distributed or interest paid by a Belgian investment company generally constitutes their final Belgian income tax liability.

Dividends and interest paid by recognised investment companies and SIRs/GVVs are subject to corporate income tax in the hands of Belgian-resident corporate shareholders as recipients, in principle at the ordinary rate of 33.99 per cent. The participation exemption does not apply to dividends distributed by recognised investment companies and SIRs/GVVs, since the latter are deemed not to meet the subject to normal taxation test. Any Belgian withholding tax that would have been retained on the relevant dividend or interest payments can, as a rule, be set off against the Belgian corporate recipients’ income tax liability, and any excess is in principle refundable.

Capital gains on Belgian investment company shares (including, for the avoidance of doubt, shares of SIRs/GVVs) will generally not be subject to any income tax in the hands of Belgian-resident physical persons or Belgian-resident legal entities (other than companies subject to corporate income tax), provided that these gains result from the normal management of the transferor’s private estate and assuming the transferor’s stake has not exceeded a 25 per cent threshold. The same basically applies for non-Belgian residents who do not have a Belgian permanent establishment or any other taxable presence in Belgium.

Capital gains realised on investment company shares (again, including shares of SIRs/GVVs) by Belgian-resident companies (or by Belgian permanent establishments of foreign companies) are fully subject to corporate income tax, in principle at the ordinary rate of 33.99 per cent.

ii Tax treatment of Belgian investment funds

Tax treatment at investment fund levelSince investment funds basically are contractual arrangements that are not vested with legal personality, they are generally treated as transparent for Belgian income tax purposes. This means that income received by an investment fund is not taxed at the level of the fund itself but rather at the level of its shareholders.

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The participation of one or more foreign shareholders in a Belgian investment fund may, however, give rise to these being deemed to have a Belgian establishment for tax purposes (this is determined on a case-by-case basis).

The lack of legal personality of a Belgian investment fund (and the resulting fact that funds are not themselves subject to any Belgian income tax) implies that they can as such not invoke any benefits provided for by the tax treaties concluded by Belgium (save exceptionally, e.g., pursuant to Article 25 of the tax treaty concluded between Belgium and the Netherlands). The respective investors in the fund should, as a rule, be able to do so.

Tax treatment at investor levelGiven the tax-transparent nature of a Belgian investment fund, income received by such fund is taxed directly at the level of the fund’s members in accordance with the tax rules applicable to such members (e.g., personal income tax, legal entities income tax, corporate income tax or non-residents tax).

On the basis of some recent court decisions, as well as of certain advance tax rulings, it may be concluded that the Belgian tax administration currently adheres to the doctrine of full tax transparency, meaning that income paid to a tax-transparent entity is deemed to have been received by the shareholders of said entity at the time it is paid to the former, regardless of whether the relevant income is effectively redistributed to the latter. It nevertheless appears that the administration has in some cases applied the thesis of tax transparency with postponement of taxation, which means that income received by a tax-transparent entity is only taxed at the shareholders’ level if and to the extent it is effectively redistributed to the latter.

Since dividends and interest received by a Belgian fund have as a rule already been subject to Belgian withholding tax at the time they were paid to the fund, any income paid by the fund to its members will in principle be exempt from Belgian withholding tax, provided that the fund provides details regarding the nature of the income received (e.g., interest, dividends, capital gains).

Specific rules apply to, for example, investment companies whose investment portfolio consists of over 25 per cent of interest-bearing assets and that do not annually distribute their investment income.

iii Anti-avoidance measures to target offshore investors

Belgian companies must annually report all payments they have directly or indirectly made to tax-haven persons or entities in qualifying tax havens, provided that these payments exceed €100,000 for the relevant tax year. Non-compliance with this rule is sanctioned by the relevant payments not being tax deductible.

Furthermore, Belgian tax law contains certain rules according to which payments to entities that benefit from a beneficial tax regime are only tax deductible if it can be demonstrated that the relevant payments are: (1) made by virtue of genuine and bona fide business transactions; and (2) transfers of certain types of assets to entities that are either not subject to income tax or that are subject to an income tax regime that is substantially more beneficial than the ordinary Belgian income tax regime, are not opposable with regard to the Belgian tax administration, unless the (Belgian) transferor can demonstrate

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that the transfer is inspired by genuine financial or economic motives or that it has received an actual countervalue for the transfer generating an amount of income at ‘arm’s length’ that is effectively subject to Belgian income tax.

The Income Tax Code contains a general anti-abuse provision aimed at tackling all forms of tax abuse and that, depending on the concrete circumstance of each individual case, may also be called upon to target certain types of offshore investment structures.

VIII OUTLOOK

The AIFMD has now been transposed into Belgian law and as a part of the transposition a major overhaul took place of the regulatory regime of REITs to allow them to stay outside of the scope of application of the implementing AIFM Law. Due to the late implementation of AIFMD, it remains to be seen how the market will adapt in practice to the new regulatory regime. The regulators have reinforced their teams to deal with their new powers and most operators active in the market have timely submitted their request to be formally recognised where required as an AIFM or have registered the AIFs which they manage. However, pending, inter alia, the publication of notification forms this will continue to be an area of the law in continuous flux. Whether or not the market will fully realise the consequences of the new restrictions resulting from the new regulatory regime for financial planners similarly remains to be seen.

The development of the Belgian UCI market will not only depend on the national tax systems, but also on numerous international tax measures. Special attention will therefore have to be paid to the implementation of the US Foreign Account Tax Compliance Act and the financial transaction tax. The major concern in this respect is ensuring that Belgian UCIs will not be put at a disadvantage compared with similar structures in other jurisdictions. BEAMA is therefore continuing to seek a fiscal level playing field regarding for the various investment products, as well as between the different European countries.

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Appendix 1

ABOUT THE AUTHORS

JAN PEETERSStibbeJan Peeters’ main areas of practice are mergers and acquisitions (public and private companies), capital market operations (IPOs, public takeover bids and public-to- private transactions), corporate finance and venture capital transactions. In addition, he advises on the regulatory aspects of activities of domestic and foreign credit institutions, investment firms and insurance companies that are active in Belgium.

Mr Peeters is recognised by several legal directories such as Chambers Europe, Legal 500 and IFLR 1000 as a leading lawyer. He is chair of the Banking, Finance and Securities Committee of the Inter-Pacific Bar Association. He holds various publications in his areas of practice.

FRAN RAVELINGIENStibbeFran Ravelingien specialises mainly in finance and capital markets, with particular focus on listed companies’ information obligations, IPOs, public issues of shares, issues of bonds and public takeover bids. She also advises clients on financial services regulatory issues (MiFID, UCITS, investment funds, AIFMD, property investment funds, banking law, payment services regulation, insurance (intermediation) regulation, etc.).

Besides her current career as a lawyer, Ms Ravelingien is a postdoctoral researcher at the Financial Law Institute of the University of Ghent and a guest professor of European banking and capital markets law at the same university, where she obtained a doctoral degree (PhD) in financial law. She has written several publications in her areas of practice.

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WIM PANISStibbeWim Panis specialises in Belgian and international tax law and focuses in particular on indirect taxation (VAT, registration duties, etc.), real estate taxation and the taxability of public authorities. He is experienced in advising clients regarding construction and real estate transactions, tax aspects of public entities and PPPs, software and internet transactions, and tax issues within the energy and utilities sector.

Mr Panis is the author of several articles on VAT, real estate taxation and tax litigation. In 2008, he was awarded the prestigious biennial IFA reward for his article on tax avoidance in VAT matters.

GIOVANNI SMETStibbeGiovanni Smet specialises in tax law, with a particular focus on the tax aspects of mergers and acquisitions, private equity, corporate restructuring and other types of corporate transactions. He has assisted clients in obtaining innovative advance tax rulings applications, for example in relation to the tax treatment of certain types of financial products. He also has an in-depth knowledge of the taxation of financial institutions and investment vehicles, hybrid financing operations and of the tax aspects of debt and equity capital markets transactions.

STIBBECentral PlazaLoksumstraat 25 rue de Loxum1000 BrusselsBelgiumTel: +32 2 533 52 11Fax: +32 2 533 52 12jan.peeters@stibbe.comfran.ravelingien@stibbe.comwim.panis@stibbe.comgiovanni.smet@stibbe.comwww.stibbe.com