SMP

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Germany

The following explanations do not apply to German registered sub-threshold AIFMs.
They are already allowed to market AIFs managed by themselves on the basis of their registration.

Marketing

Yes, the German Capital Investment Act ("KAGB") provides for a simplified marketing regime for EU sub-threshold AIFMs.

Pursuant to Sec. 293 (1) KAGB marketing is the direct or indirect offering or placing of units or shares of an investment fund. The definition of marketing requires an "active" approach, i.e. an offering of placement at the initiative of the AIFM or on behalf of the AIFM.

First, the EU sub-threshold AIFM must be registered in its home jurisdiction (the "Home Jurisdiction") pursuant to the national laws of the Home Jurisdiction transposing Art. 3 AIFMD.

Second, the Home Jurisdiction must not impose higher restrictions on the marketing by German sub-threshold AIFMs than the KAGB (i.e. § 2 (4), § 44 (1) no. 1 KAGB) does in relation to sub-threshold AIFMs from the Home Jurisdiction (so-called reciprocity requirement).

Third, the following documents must be submitted by the EU sub-threshold AIFM to the German Financial Supervisory Authority ("BaFin"):

  • A confirmation of the Home Jurisdiction's competent authority, issued in a language which is customary in the realm of international finance, relating to the EU sub-threshold AIFM's registration pursuant to the laws of the Home Jurisdiction transposing Art. 3 AIFMD;
  • An undertaking by the EU sub-threshold AIFM that such AIFM will provide BaFin with information on and evidence of all changes to circumstances disclosed in its registration application;
  • Proof of payment regarding the registration fee. Marketing may commence upon submission of the marketing application. However, please note that it is customary to ask and wait for a confirmation by BaFin. BaFin charges a one-time registration fee of Eur 1.545,00.

Pre-Marketing

Yes.

There is, unfortunately, no clear guidance available by the German regulator as to the exact scope of pre-marketing. We understand that pre-marketing should not cross the line to marketing as long as no investor has been admitted to the fund and only incomplete draft fund documents are distributed or available in Germany. The documents should clearly set out that they are only preliminary and in draft format and subject to change.

In addition, it should be communicated to investors that a subscription is currently not possible and no offers for a subscription are currently sought and that the documents are still subject to change (e.g. in a presentation/correspondence disclaimer). It is also advisable to keep the fund's name and fund economics in square brackets and indicate (e.g. by way of footnote) that this has not been finally determined.

Reverse Solicitation

The exact scope of reverse solicitation is not clear in Germany. The definition of marketing requires an "active" approach, i.e. an offering of placement at the initiative of the AIFM or on behalf of the AIFM.
Therefore, reverse solicitation can only be relied upon if the AIFM has not approached the investor in Germany (e.g. by providing teasers and discussing the general investment strategy on its own initiative) unless the offer or placement of the specific fund has been genuinely initiated by the investor.

The AIFM may only respond to unsolicited requests. We recommend keeping evidence that the investor ap-proached the AIFM without any prior solicitation or communication by the AIFM* and ask for a written and signed confirmation by the investor. Please note that such a confirmation does not guarantee that BaFin will consider the individual case to be one of reverse solicitation. Depending on the number of cases such confirmation is used in and in light of all circumstances, BaFin may in certain cases suspect a rather systematic approach towards reverse solicitation by the AIFM.

*Where an investor approaches the AIFM with questions on a specific fund product following a previous communication with the AIFM, such previous communication would likely "taint" any reverse solicitation claims even if such previous communication involved no references to a specific fund product (e.g. name, plan to launch a new fund, intended investment strategy of new/next fund), but only references to the AIFM (e.g. team and track record).


Important Note

The information in our toolbox provides managers of private equity or venture capital funds with an initial overview of certain framework conditions in the respective country. It does not provide advice on the law of any country, neither does it substitute such advice. The above information reflects the legal situation as of February 10, 2020. Before marketing a fund into the respective country, it is at all times necessary to seek expert advice. Our team is happy to assist you with all questions at any time.

Content provided by: Schnittker Möllmann Partners (SMP)