Draft Law on Alternative Investment Fund has been presented

The Ministry of Finance of the Republic of Serbia (“the Ministry“) has adopted the Draft Law on Alternative Investment Funds (“Draft Law”). The drafting process included a public debate organized from March 29 to April 17, in which all interested parties could participate, sending suggestions to the previously published Draft Law by the Ministry.

The Draft Law defines Alternative Investment Funds as investment funds for which an operating license is not required in the sense of the law regulating the establishment and operation of open-ended investment funds with a public offer. The Draft Law envisages existence of an open and closed type of Alternative Investment Funds, ie fund that does not have the status of a legal person and a fund established in the form of a stock company or a limited liability company. By passing this law, the current closed and private investment funds will be separated from the current Law on Investment Funds, it will be terminologically assimilated, and in accordance with European regulations, which means more precisely regulated. One of the objectives of harmonization with European regulations is to make alternative investment funds more attractive to foreign investors. What is novelty in the Draft Law is that it will be possible to establish an Alternative Investment Fund that has the status of a legal entity with internal management, which will not be obliged to have the management company, but to which will still be applied provisions of this Law that apply to the management company.

In the explanation about the Draft Law the Ministry stated that there are many reasons for adopting the Law, but that two reasons can be distinguished in particular: improvement and development of the capital market, which will consequently contribute to the development of the economy of the Republic of Serbia, but also to the Republics of Serbia process of joining the European Union. The first law regulating investment funds in the Republic of Serbia was adopted in 2006, which was complementary to the current market conditions of the Republic of Serbia, but due to the emergence of a major economic crisis, it was necessary to change it in order to alleviate the negative effects of the crisis. The economic crisis caused a drastic fall in stock prices on the Belgrade Stock Exchange, which affected the participants and diminished confidence in investment funds as a form of investment, which resulted in the withdrawal of members’ investments, and the consequence was investment funds having an insignificant effect on the capital market. By adopting the Draft Law the Ministry believes that these consequences would be eliminated and that investment funds would be more attractive to foreign investors.