New Legal Forms of Authorised CIS

Currently the only authorised funds are authorised unit trusts (AUT) or ICVCs (which are OEICs that are authorised). The proposal is to create a new fund vehicle termed an ‘authorised contractual scheme’ (ACS) which will be either an LP or a co-ownership scheme.

An ACS can be set up as a UCITS or a NURS or a QIS, and if a UCITS then will be eligible for the UCITS product passport.

The attraction of an ACS is that, unlike both AUTs and OEICs, it will be tax transparent and so will not be subject to corporation tax or CGT or income tax. Instead the investors will be treated for tax purposes as if they had invested directly in the underlying assets.

For LPs that are an ACS the general partner will be the ‘operator’ and the depositary will be a limited partner – both will need to be authorised and independent of each other.

In practical terms, in applying COLL to ACS means treating them in the majority of cases as AUTs. However there are some differences including box management. It is proposed that the manager of an ACS will be prohibited from running a box and hence units will have to be cancelled or created as and when investors redeem from or subscribe to the scheme.

Some of the terms used in COLL will also change e.g. reference to the manager or trustee of an AUT will be replaced by references to the authorised fund manager (AFM) or depositary of an AUT or ACS.

The proposals will require changes to FSMA and is in the hands of HMT.

Further details can be found in chapter 8, and appendix 8, of CP12/5 “Quarterly consultation (No. 32)”. The consultation period ends 6 May.