SWITZERLAND Law and Practice Contributed by: Jürg Frick, Luca Dal Molin, Philippe Gobet and Carla Bertossa, Homburger
ing Act if conducted on a commercial basis. There - fore, funds involved in loan origination must assess whether their activities fall within the scope of banking regulations and, if so, obtain the necessary licence. Like all AIFs, funds that engage in lending activities, regardless of their type, must go through the FINMA approval/authorisation process, with the exception of L-QIFs. 2.6 Non-Traditional Assets The CISA specifically lists that AIFs structured as “other funds for alternative investments” may invest in precious metals, real estate, commodities, deriva - tives, units in other collective investment schemes and other assets and rights. This list is indicative and not exhaustive. Due to the non-exhaustive nature of the list, almost all tangible assets can serve as investment objects. In particular, antiques, works of art, vintage cars, coins, exclusive wines, whisky or similar items may be included. Furthermore, investments in litigation fund - ing as well as consumer loans and loan portfolios are generally permissible. However, an AIF is, of course, not allowed to invest in illegal assets and must adhere to certain general, non-fund-driven restrictions set out in various Swiss laws with regard to specific assets (eg, restrictions on purchasing residential real estate in Switzerland). In this context, it is noteworthy that in Switzerland can - nabis is generally a prohibited narcotic drug under the Swiss Narcotics Act. Investments in cannabis prod - ucts with less than 1% THC and cannabinoids used for medical purposes are possible due to exemptions from the Swiss Narcotics Act. In addition, cryptocurrencies such as Bitcoin or Ethereum are eligible investments for AIFs. In 2021, FINMA approved the first Swiss crypto fund named “Crypto Market Index Fund”. In principle, AIFs may therefore invest in non-tradi - tional assets. However, as with any AIF, FINMA must grant its approval in the individual case. The newly introduced L-QIFs, on the other hand, do not need the prior approval or authorisation of FINMA, and Swiss
fund regulation (ie, CISA) does not restrict the permis - sible investments of an L-QIF at all. 2.7 Use of Subsidiaries for Investment Purposes It is common to use newly established subsidiaries to establish acquisition structures. For acquisitions in Switzerland, such subsidiaries could be established in Switzerland or abroad – eg, in Luxembourg. The rea - sons are, among others, the establishment of struc - turally subordinated financing structures, avoidance of Swiss withholding taxes being triggered or, against the background of secured financings, to establish a structure that allows for a single point of enforcement. 2.8 Local/Presence Requirements for Funds Swiss AIFs must have their head office in Switzerland and be effectively managed from Switzerland. This means that the ultimate supervision and key manage - ment decisions must be carried out within the country. However, investment decisions may be delegated to third parties (in and outside of Switzerland) under cer - tain conditions (see 3.7 Outsourcing of Investment Functions/Business Operations ). The members of the executive board of Swiss fund management companies or Swiss managers of col - lective assets must be resident in a place from which they can effectively manage the fund or its assets. In view of the above requirement that the AIF must be administered and effectively managed from Switzer - land, this essentially means that these persons must have their place of residence in Switzerland or in a neighbouring area. The fund management company and the general partners of an LPCI must be incorpo - rated as a Swiss company limited by shares (see also 3.8 Local Substance Requirements ). Furthermore, AIFs and their managers must be organ - ised in such a way that they can ensure proper man - agement and comply with their legal obligations. This includes local business premises and qualified local staff. For fund management companies, the law pro - vides that they must (as a rule) have at least three full-time positions with authority to sign.
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