How much initial capital and how many assets must an AIF have, and by when?

Initial capital binds the fund itself only when the fund manages itself. A self-managed investment company or limited partnership must always hold at least €125,000, in cash or in assets that can be turned into cash immediately. It is the fund's own buffer, not investors' money: it is not counted in the fund's assets, and cash must be held in the fund's name with a credit institution in the EU or EEA.

If a self-managed investment company exceeds the AIFM Law thresholds, or opts into that law, it is an AIFM and needs €300,000 instead. An externally managed AIF has no initial capital of its own; the capital rules bind its manager, and an external AIFM, for example, needs €125,000. So €125,000 recurs in this subject: for a self-managed fund, for an external AIFM and, in the marketing rules, as the minimum investment of a well-informed investor.

Every AIF under the main regime, however it is managed, must build up assets of at least €500,000 from investors. It has 12 months from authorisation to do so, and CySEC may, on a written request from the manager or the self-managed fund, grant up to 12 more months where the circumstances justify it. The exam material gives only the €500,000; the time limit and the extension have been in the law since 30 July 2018.

Three counting rules apply. Commitments that investors have signed but not paid do not count; in an umbrella fund each compartment must reach €500,000 by itself; and a self-managed fund cannot use its initial capital towards the minimum. Investors pay in cash or in assets that fit the investment policy and carry no charge, pledge or other encumbrance, and anything other than cash is valued at the moment of payment by an independent valuer meeting Article 73 of Delegated Regulation 231/2013.

If the minimum is not raised in time, CySEC must withdraw a common fund's authorisation, while for an investment company or limited partnership it may do so.

Later falls call for action. If an investment company's assets drop below two thirds of the minimum, or its initial capital below two thirds of €125,000, the board must call a general meeting within 40 days to decide on dissolution; no quorum is needed and a simple majority of those present or represented decides. Below one quarter, one quarter of the votes present or represented is enough. CySEC is told and may itself require dissolution. For a common fund, the external manager may decide to dissolve it once assets fall below two thirds of the minimum; it informs CySEC without delay, and CySEC may require dissolution.