Introduction of "investment funds" and "SIKAVs"

Date 27 jun. 2012
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31 May 2012, the Danish Parliament passed a bill to amend the Investment Associations and Special-Purpose Associations as well as other Collective Investment Schemes etc. Act (hereafter IAA), thus making it possible to establish Danish investment funds (funds) and investment companies with flexible capital (in Danish: SIKAVs) as an alternative to investment associations.

Ahead, the adoption of the bill will enable Danish collective investment schemes (including UCITS) to not only establish themselves as investment associations, but also as one of the new types of entity. The rules regarding investor protection, authorisation, placement etc. are maintained and in future, the current rules will be identical for all three types of investment entities (UCITS entities).


The most significant elements of the bill

Before 1 July 2012, the only way to establish UCITS as associations in Denmark was in the form of investment associations.

The most significant elements of the bill consist of the introduction of new rules enabling the establishment of investment funds and SIKAVs.  

The new kind of UCITS are encompassed by the UCITS Directive’s rules on investor protection, including duties of disclosure, rules on the handling of conflicts of interest, annual reviews and auditing, issue and redemption of shares, liquidations, mergers, and demergers, among others.

Furthermore, the bill stipulates that the Danish Financial Supervisory Authority must authorize the SIKAVs and investment funds as well as any changes to their rules or articles of association, among others.

Thus, the rules regarding SIKAVs and investment funds will in many aspects resemble the rules regarding investment associations. The bill puts the SIKAVs and investment funds on an equal footing with investment associations as regards monopoly and duty to operate.


The legal entities and their characteristics

Despite the fact that in most aspects, investment funds and SIKAVs are equal to investment associations, the different legal entities and their characteristics have led to proposed necessary adjustments to the underlying rules.


Below is a brief description of the SIKAVs’ and the investment funds’ legal forms and characteristics.


SIKAVs are investment companies with flexible capital which can be raised or reduced continuously in connection with the issue and redemption of shares.  The bill, however, does not introduce rules for companies with flexible capital in general, but only for those companies with flexible capital encompassed by the UCITS Directive which are consequently encompassed also by the IAA.

The SIKAVs offer limited liability to the investors.

The company’s board must choose an investment management company or management company to handle administration. The investors’ decisions regarding the company are made at the general meeting.

The act’s fundamental requirement to the SIKAVs is that they have a capital that varies depending on the completed issue and redemption of shares. Furthermore, the law requires that the SIKAVs have a minimum company capital.

It will be possible to organise the SIKAVs with one or more departments, seeing as each department is only liable for its own engagements and part of the shared costs.

Investment funds

The Investment funds will be separate economic, but not legal, entities. The capital in the investment fund is owned collectively by the investors.

The investment funds may only be established and managed by investment management companies or management companies. Therefore, it will be the management company or the investment management company that make the decisions regarding the investment fund.

Investment funds may be organised with one or more departments, each based on a certain part of the assets according to the fund’s rules thereon. The departments in the investment funds may assume liabilities equal to the departments in the SIKAVs. However, it is the investment management company or the management company who assume liabilities on behalf of the investment fund, as the investment fund has no management or employees. Where legislation imposes obligations on the investment funds or their departments, the duty to fulfil these obligations will lie with the investment management company or the management company who are obligated to fulfil the obligations on behalf of the investment fund.

Consequences of the bill

The bill enters into force on 1 July 2012 and as of that date, it will give the Danish investment management companies the possibility to offer shares in SIKAVs and investment funds to investors in Denmark and in other EU and EEC countries. The amendment to the act is expected to increase competition between the Danish investment management companies.

Furthermore, it is expected that the amendment to the act will increase flexibility in the way the Danish UCITS/collective investment schemes are organised while, at the same time, maintaining the existing rules on, e.g., investor protection.

If you have any questions or require additional information on the above, please contact Partner David Moalem (, Junior Associate Maria Thomsen ( or Junior Associate Ted Rosenbaum ( The above does not constitute legal counseling and Moalem Weitemeyer Bendtsen does not warrant the accuracy of the information.

With the above text, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of a reader’s use of the above as a basis for decisions or considerations.