Applying for permission to operate a capital management company

Source: BUS Rheinland-Pfalz

The capital management company (KVG), formerly known as an investment company or fund management company, manages certain investment funds.

KVGs have been subject to new regulatory requirements in Germany since July 2013. The meaning of the term was expanded in the German Capital Investment Code (KAGB) and simultaneously defined for open-ended and closed-ended investment funds.

With a few exceptions, all KVGs are subject to licensing.

KVGs that manage funds are not subject to licensing,
- whose thresholds do not exceed EUR 100 million in general or EUR 500 million if these funds have no financing leverage and no redemption rights within the first five years and
- which are exclusively special funds for institutional investors.

Note:
These funds must be registered with the state supervisory authority.

A KVG is either an external KVG or an internal KVG.
An external KVG may only be licensed by BaFin in 3 legal forms:

the AG,
the GmbH or
the GmbH & Co. KG.

The KVG must first have been commissioned by the fund's management board or managing director to manage the fund. If the management decides that no external KVG is to be appointed, the investment fund itself is to be regarded as an internal KVG.

AIF capital management companies are capital management companies that manage or intend to manage at least one alternative investment fund (AIF).
UCITS capital management companies are capital management companies that manage or intend to manage at least one undertaking for collective investment in transferable securities (UCITS).

You must submit the application for permission to operate a capital management company in writing to BaFin.

You must submit an informal written application to BaFin for permission to operate a capital management company.

Send your informal application together with the required documents to BaFin.
BaFin will review your documents. After reviewing your documents, BaFin may contact you in writing by e-mail or post if further documents are required.
If necessary, you will receive information on deadline extensions.
BaFin will issue a notice of authorization or a notice of refusal of authorization and a notice of fees.
BaFin will arrange for the license to be published in the Federal Gazette.

You must submit your application:

Proof of sufficient initial capital
- Proof of initial capital of at least EUR 300,000 for an internal KVG and EUR 125,000 for an external one

Note: Additional capital requirements may arise in special individual cases.

Proof of at least 2 reliable and professionally suitable managing directors
Details of significant shareholdings and close connections
Meaningful business plan
- including projected balance sheets and projected income statements for the next three years as well as a description of the planned internal control procedures and business organization
information on remuneration policy and practice
a list of all outsourcing companies
Information on the investment strategies
submission of the contract for the appointment of the depositary for each investment fund
Articles of Association/Company Agreement.

for processing the application: usually 2 to 8 months

Notes:
The permissible processing period for the license application for an AIF management company is generally 3 months after submission of the complete application. BaFin may extend this period by up to 3 months if it deems this necessary due to the particular circumstances of the individual case. The applicant must be informed of the extension of the deadline.
The permissible processing period for the license application for a UCITS capital management company is six months after submission of the complete application.

Applying for permission to operate a capital management company

Process flow

Requirements

Which documents are required?

What are the fees?

What deadlines do I have to pay attention to?

Processing duration

Legal basis

Applications / forms

Appeal

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