ITALY Law and Practice Contributed by: Emidio Cacciapuoti, Giorgio Bobba and Davide Massiglia, ADVANT Nctm
• carries out the instructions of the AIFM, unless they conflict with Italian law, the man - agement rules of the AIF or the prescriptions of the supervisory authorities; and • if the liquidity is not deposited with the depositary, monitors the liquidity flows of the fund. The depositary is responsible to the AIFM and the AIF’s investors for any prejudice they may suffer as a consequence of the breach of its obli - gations. In the event of loss of financial instru - ments in custody, unless the depositary can prove that the default was caused by accident or by force majeure, it must be held to return, without undue delay, financial instruments of the same kind or a sum for a corresponding amount, and will be held liable for any other loss suf- fered by the AIF or the investors due to failure to respect its obligations, whether intentional or due to negligence. In such cases, the provi - sions of Articles 100 and 101 of EU Regulation 231/2013 will apply. Activities related to the valuation of the AIF’s assets may be carried out internally (by an inde - pendent person in the case of a fully licensed AIFM – ie, someone not involved in any manage - ment activity of the AIF’s assets) or externally by a service provider, pursuant to the principles established by EU Regulation 231/2013 and the Regulations on collective asset management adopted by the Bank of Italy on 19 January 2015. The valuation policies and procedures adopted by the AIFM are subject to review at least annu - ally. Within the valuation process, specific con - trols and checks are carried out by the internal control functions with respect to their respective areas of competence. The net asset value of the AIF is equal to the current value at the reference date of the valuation of the assets of which they
consist, net of any liabilities. Investors have the right to obtain a copy of the document setting out the valuation criteria from the AIFM, free of charge. 2.5 Fund Finance Borrowing for AIFs is accessible on market- standard conditions, even though not many financial institutions have developed a dedicated desk to fund finance. Restrictions on borrowing are usually regulated in the relevant constitution - al document of the AIF, and may include the term of duration and the maximum assets compared to total assets of the AIF, and are reflected in the relevant financing agreement, provided that the AIFMD leverage regulation applies. A revolving credit facility for a maximum single duration of six or 12 months is the most com - mon instrument used by AIFs, specifically to manage short-term liquidity needs or to ration - alise the timing of capital calls. Lenders usually take forms of security, the magnitude of which depends on the amount of the financing and the relevant complexity. The most common form of security is a pledge on the cash available on the AIF’s bank accounts. Financing agreements reg - ulating fund finance usually provide for specific remedies upon the occurrence of an event of default, such as the ability of the lender, subject to certain conditions, to issue drawdown notic - es to investors on behalf of the AIFM, in order to ask investors to pay – out of their undrawn commitments – the balance of the outstanding financing. 2.6 Tax Regime Direct Taxes Under Italian tax law, alternative funds estab - lished in Italy are deemed to be resident therein for income tax purposes, regardless of their legal
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