Private placement rules and law in Austria

1. Summary of private placement provisions for fund interests (if applicable) 

The Austrian Alternative Investment Fund Managers Act (Alternatives Investmentfonds Manager Gesetz “AIFMG”) allows EU AIFs and Non EU AIFs to be placed in accordance with a dedicated set of rules, which do not provide for a private placement exemption. 

The AIFMG does not impose an obligation to draw up a prospectus. However, it requires the submission of comprehensive information to investors and the supervisory authorities. In addition, the Austrian Capital Market Act provides the requirements for public offerings of investments which also apply to AIFs. 

A substantial part of the AIFMG contains provisions for the marketing of AIFs. The provisions set out complex rules and distinguish between (i) the place of marketing, (ii) whether the AIFM is licenced in Austria or in another EU Member State or is a Non EU AIFM, and (iii) whether the AIF is an EU AIF or a Non EU AIF. In general, an AIFM which is licenced in Austria is entitled to market EU AIFs to professional investors in Austria and in other EU Member States. 

Provided that an AIFM is an EEA licenced AIFM, it is permitted to pre-marketing activities. These pre-marketing activities must be aimed to potential professional investors, and they require that the Austrian regulator is informed within two weeks after the start of the first pre-marketing activity. If investors subscribe for units within a period of 18 months from the commencement of pre-marketing, the relevant distribution notification procedure must be completed. It is not permitted to aim pre-marketing activities to private investors. 

The marketing of AIFs to private investors and qualified private investors is possible only under certain conditions. A “qualified private investor” is a person who owns free deposits and securities of more than EUR 250,000, commits to invest at least EUR 10,000 into an AIF and who is in a position to make its own investment decisions and understands the risks associated with the investment, which he shall confirmed in a separate document from the investment commitment agreement. 

The following AIFs are eligible for marketing to private investors and qualified private investors: 

  1. Real Estate Funds according to the Real Estate Fund Act provided that the AIFM holds a licence pursuant to Section 1 para 1 cf 13a Austrian Banking Act (Bankwesengesetz, – “BWG”); 
  2. Special Funds, Other Funds and Pension Investment Funds according to the Investment Fund Act (Investmentfondsgesetz “InvFG”), provided that the AIFM holds a licence pursuant to Section 1 para 1 cf 13 BWG and Section 6 para 2 InvFG. 
  3. AIF in Real Estate provided that the AIFM holds a licence according to the AIFMG; 
  4. Managed Futures Fund subject to the conditions of Section 48 para 7 and 8 AIFMG provided that the AIFM holds a licence according to the AIFMG; 
  5. Private Equity Umbrella Funds according to Section 48 para 8a and 8b AIFMG provided that the AIFM holds a licence according to the AIFMG; 
  6. AIFs investing in interests of companies according to Section 48 para 8c and 8d AIFMG provided that the AIFM holds a licence according to the AIFMG;  
  7. Medium-Sized Financing Companies according to Section 48 para 8e and 8f AIFMG provided that the AIFM holds a licence according to the AIFMG; and 
  8. exclusively to qualified private investors, AIFs which are authorised to be marketed to professional investors and provided that they do not employ leverage exceeding 30%. 

Pursuant to Section 48 para 1a AIFMG the private investor and the qualified private investors investing in AIFs have to confirm in writing that they have sufficient knowledge about the investment and the risks contained therein, when investing in an AIF from d) to g). The AIFM needs to be sufficiently convinced that the private investor and the qualified private investor are able to assess the risk and the adequacy of the obligation related to the investment. 

2. Other forms of possible placement options for fund interests outside fund regulations 

As the scope of the AIFMG is very wide it covers a wide range of funds, and hence, regulates the distribution of all kinds of AIFs. Only such investment undertakings which do not qualify as AIFs are not subject to those rules, such as operational companies or certain trust structures. 

Furthermore, the AIFMG is explicitly not applicable to: 

  1. holding companies; 
  2. institutions providing occupational retirement provisions; 
  3. supranational institutions such as the European Central Bank, the European Investment Bank, the European Investment Fund, the European Development Finance Institutions and bilateral development banks, the World Bank, the International Monetary Fund, and other supranational institutions and similar international organisations, in the event that such institutions or organisations manage AIFs and in so far as those AIFs act in the public interest; 
  4. national central banks; 
  5. national, regional and local governments and bodies or other institutions managing funds supporting social security and pension systems; 
  6. employee participation schemes or employee savings schemes; and 
  7. securitisation special purpose entities. 

In addition, the AIFMG does not apply to AIFMs managing one or more AIFs whose only investors are the AIFM or the parent companies or the subsidiaries of the AIFM or other subsidiaries of those parent companies, unless one of these investors is itself an AIF. 

The AIFMG defines distribution, on the initiative of the AIFM or on its behalf, as the direct or indirect offering or placement of shares in an AIF managed by the AIFM to investors whose place of residence or place of incorporation is in an EU State. 

Although the reverse solicitation exemption is acknowledged in Austria both with respect to investment services and with respect to AIFs. In case of AIFs, the scope of the exemption is rather narrow and it should in particular be documented thoroughly how the contact was established and the circumstances which demonstrate that the initiative for the investment origins from the investor. Consequences of non compliance with placement regimes for fund interests 

3. Consequences of non-compliance with placement regimes for fund interests 

The distribution of fund interests in breach of the marketing regime of AIFMG could constitute an administrative offence with possible penalties of up to EUR 100,000. Other administrative and criminal sanctions are contained in different Austrian acts (e.g. Real Estate Fund Act), whose applicability is dependent on the respective type of fund interest offered. 

4. Private placement rules for non-fund investments available 

The Austrian Capital Market Act regulates the offering of investments and governs exemptions for the offering of those instruments without the requirement of publishing a prospectus. 

There are various exemptions from the obligation to draw up and publish a prospectus. The following refer to private placements: 

  1. offers of investments solely addressed to professional investors; 
  2. offers whereby investors may only acquire investments for a minimum amount or minimum denomination of EUR 100,000; or 
  3. offers of investments addressed to fewer than 150 investors (natural or legal persons) per EEA State that are not qualified investors. 

Further, any instruments covered by the Prospectus Regulation may benefit from the private placement exemption, in particular securities and structures whose securities fall within the ambit of the Prospectus Regulation.