That is, if the revolution happens at all.
The Investment Funds Act is the Ministry’s response to the 2012 Alternative Investment Fund Managers Directive (AIFMD), which de facto forces all as-yet unregulated venture capital managers to domicile EU AIFs in a Member State. The Czech Investment Funds Act seeks to make the Czech Republic a venture capital hotspot and should attract foreign investors to domicile their funds in the Czech Republic. The professional public speculates that roughly EUR
300 billion worth of capital could be invested here over the next five years. Stop Sign Up Ahead
That is, unless the new Civil Code is postponed, which is now being debated. If that happens a substantial portion of the Czech Investment Funds Act would be rendered useless because a number of its provisions depend on the Civil Code. Not only would it not be possible to employ the new investment schemes governed by the Act, but its provisions allowing the establishment of open-ended collective investment schemes (SICAVs) and venture capital investment companies (SICARs) would not apply since the rules cannot work on their own. Moreover, it will not be possible to set up trusts corresponding to Anglo-American trusts. While the Czech Investment Funds Act broadly regulates all these investment schemes, it will be ineffectual without the new Civil Code and associated laws.
If the effectiveness of the new Civil Code is postponed, the Ministry of Finance’s plan to attract venture capital will be defeated. Even if postponed for less than a year, Czech law would be unable to offer standard investment schemes to foreign investors, which would make domiciling in the Czech Republic impossible as the Czech Republic would miss the deadline for implementing the AIFMD and it would be very difficult to make up for lost time. In addition, a one-year postponement, i.e. basically until the next election season, would very likely mean that the entire Czech private law recodification procedure would be abandoned altogether since it lacks broad support among all political parties. Consequently, long, useless chunks of the Czech Investment Funds Act would form sad remnants of the dream to make the Czech Republic a home for venture capital and other investment schemes.
Postponing the new Civil Code would increase foreign capital’s distrust in the Czech legal environment and in the stability of the Czech Republic and result in capital flowing to other countries instead. Thus, the Czech capital market should be concerned about the fate of the new Civil Code, which is likely to be decided in the coming days.