SICAVs – Investment companies with variable capital

Investment companies with variable capital (SICAVs) are companies which don’t have a capital specified in advanced and whose shares are not divided into company shares and investor shares. Only the company’s assets are liable for its liabilities and the sole business object is collective capital investment, under the Article 36 of the Collective Investment Schemes Act (CISA).

SICAVs are established in Switzerland under applicable provisions of the Swiss Code of Obligations for the founding of  limited companies. These companies are exempt from the provisions regulating contributions that are not made in cash, acquisitions not made in cash and special privileges under the Article 37 of the CISA.

In the case of SICAVs, it is mandatory for the company name to contain a description of its legal status or the abbreviation thereof – SICAV. In all other aspects, the provisions of the Swiss Code of Obligations regarding the names of companies limited by shares apply.

The formation of SICAVs must be approved by the Swiss Financial Market Supervisory Authority (FINMA). This type of companies is approved as an institution. FINMA must also approve the constituting documents of a SICAV.

If a SICAV is structured as an umbrella fund that consists of several sub-funds, each sub-fund must be approved separately by FINMA.

Authorization and approval requirements for SICAVs

Before a SICAV can begin it operations it must be approved by FINMA. Furthermore, the constituting documents (articles of association, investment regulations etc.) must also be approved by FINMA. Not only does each sub-fund of a SICAV structured as an umbrella fund obtain separate approval from FINMA, but approval must be obtained prior to the creation of any new sub-fund of an already existing SICAV.

Specific approval and authorization requirements for SICAVs are the following:

1. The SICAV must have assets worth at least 5 million CHF.
2. The company’s name must contain the description of its legal status or the abbreviation SICAV.
3. Company and investors shares that are freely transferable and don’t have a nominal value must be fully paid up in cash.
4. Investment regulations used within the SICAV must be defined.
5. A bank must be designated and act as a custodian.
6. The SICAV must opt for self-management or external management. Self-managed SICAVs can handle their own administration and delegate portfolio management activities under the Article 51 of the Collective Investment Schemes Ordinance (CISO). Externally managed SICAVs can delegate both portfolio management and administration activities.
7. The sole object of the SICAV must be fund and/or sub-fund management.
8. Services provided to third parties are not allowed, according to the Article 29 of the CISA.
9. The SICAV must hold a defined quantity of equity capital.

Institution and product provisions

The articles of association of a SICAV must contain provisions regarding the institution and the product, since they are inevitably linked. The investment regulations of a SICAV must be defined and the contents are based on the provisions established by the fund contracts. This is not mandatory only if the articles of association provide otherwise, in accordance with the Article 62b of the CISO.

Investment regulations must specify the investors, the investment policy, establish investment restrictions, the risk diversification and the risks associated with the SICAV’s investments.

The management of SICAVs

There is an important difference between self-managed SICAVs and externally managed SICAVs.

Externally managed SICAVs may delegate their administration only to an authorized fund manager, as provided under the Article 51 of the CISO.

Self-managed SICAVs are allowed to delegate their portfolio management activities to asset managers of collective investment schemes, which are subjects of recognized supervision.

The application processes for self-managed and extrernally managed SICAVs are identical, unless stated otherwise.

Changes in circumstances of SICAVs

Changes related to the product which involve a modification in the SICAV’s investment regulations must obtain prior approval from FINMA. In addition, if the basis on which FINMA’s authorization was initially granted is altered, permission must be obtained before resuming operations. In order to obtain permission, it is necessary to submit an application to FINMA.

For more information regarding SICAVs in Switzerland, legal requirements and other issues related to this type of investment companies, request advice from our experts in this field.