1. Summary of private placement provisions for fund interests (if applicable)
  2. Pre-marketing in EEA member states
  3. Other forms of possible placement options for fund interests outside fund regulations
  4. Consequences of non-compliance with placement regimes for fund interests
  5. Private placement rules for non fund investments available

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

Estonia has fully implemented AIFMD with a new Investment Funds Act (“IFA”) taking effect on 10 January 2017.

There is no express definition of “private placement” in Estonian law. Instead, IFA provides for a list of exemptions under which a fund offer is not deemed to be a public. For the purpose of IFA, an offer of units or shares of a fund (fund offer) is deemed to be the information provided to persons in any form, any manner and by any means about the opportunities to acquire or subscribe for fund units or shares which is precise enough with regard to the terms and conditions of the offer as well as the units or shares offered in order to allow the person to decide on the acquisition of or subscription for these shares or units.

Article 10(4) of the IFA states that a fund offer is not deemed to be a public offer if meets at least one of the following exemptions: 

  • the offer complies with the provisions of Articles 1 (4)(a)-(d) of the Regulation (EU) 2017/1129 of the European Parliament and of the Council (EL) on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC (the “Prospectus Regulation”);
  • the offer is submitted upon management of a securities portfolio or guaranteeing of an offer or issue of securities for the purposes of securities portfolio management or § 44 clause 6 of the Estonian Securities Market Act (i.e. services related to the guarantee of the offer or issue of securities)) to a fund manager, investment firm or credit institution;
  • an offer of interests in a fund with a total consideration of less than 2,500,000 euros per all the contracting states in total calculated in a one-year period of the offer of the securities.

Please note that marketing of AIFs in Estonia, licensing and passporting requirements apply even if the offering of the AIFM is not deemed to be public based on Article 10(4) of the IFA.

2. Pre-marketing in EEA member states

An EEA AIF can be pre-marketed in Estonia by an EEA AIFM to professional investors and an AIFM must ensure the documentation of pre-marketing. In the course of pre-marketing it is prohibited to submit to professional investors: 1) information and documents which are so detailed that decisions on the acquisition of units or shares can be made on the basis of them; 2) documents or drafts which allow the subscription of units or shares and 3) the articles of association, partnership agreement, fund rules or prospectus of the fund, which has not yet been established or founded, in the final form thereof. If any such drafts or documents are submitted then it must be clearly indicated that it does not constitute as an offer or an invitation to subscribe for the units or shares and that the provided information is not conclusive.

An AIFM must ensure that a professional investor does not acquire the units or shares in the course of pre-marketing. If within 18 months of the pre-marketing of an AIF a professional investor subscribes for the units or shares that are referred to in the information provided in the pre-marketing then the procedure for notifying of the commencement of the offer of an AIF provided for in the IFA will be applied.

An AIFM must submit to the EFSA via its home State competent authority a notice of pre-marketing in a form reproducible in writing within two weeks after the commencement of pre-marketing. The notice must include: 1) the period of pre-marketing; 2) an overview of the investment strategy and 3) a list of pre-marketed AIFs or their sub-funds.

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

The only case where licensing requirements may not apply is when Estonian investors approach on their own exclusive initiative a non-Estonian AIF or a non-Estonian fund manager (Reverse Solicitation). Please note that Reverse Solicitation as an exemption from licencing requirements is expressly stated in law only in regard to third-country investment firms. Nonetheless, based on oral discussions, the EFSA generally also considers Reverse Solicitation as grounds for offering AIFs in Estonia to be tolerated marked practice (provided that it occurs sporadically and does not become a business model for building an investor base in Estonia). However, please note that Reverse Solicitation does not affect the application of prospectus requirements and exemptions thereto. Likewise, the applicability of an exemption from prospectus requirements does not affect the application of licensing requirements.

The EFSA will, in any event, assess on a case-by-case basis whether the conditions for Reverse Solicitation or an exemption from prospectus requirements are fulfilled. For more details, please contact local legal counsel.

The IFA regulates all types of investment funds (investment funds are defined as a legal entity or pool of assets which involves the capital of a number of investors with the view of investing it in accordance with a defined investment policy for the benefit of the investors in question and in their common interests). Pursuant to IFA, a fund can be established as a common fund or founded as a public limited company, a limited partnership or a defined-benefit occupational pension fund. With amendments to the IFA that have transposed the AIFMD, the list of available types of investment funds has been supplemented to include AIFs (although AIFs are not defined in the IFA as a separate fund class, but rather the legislation applicable to AIFs has been transposed through the rules and regulations concerning AIFMs) by reference to funds that are defined as another (not previously regulated) pool of assets or person established for collective investment, including an investment fund founded in a foreign state. The general exemptions of AIFMs stipulated in Paragraph 3 of Article 2 of the AIFMD have also been implemented in Estonia (with some additional requirements).

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

An offer of securities in a manner not compliant with Estonian law may lead to:

  • claims for damages by investors that have subscribed to the offer of securities; and
  • regulatory sanctions (including the imposition of administrative penalties of up to EUR 5m and also ban on further distribution activities of the fund); and
  • criminal liability (including a fine of up to EUR 40m and/or the risk of imprisonment for the directors of the fund manager or marketing entity).

5. Private placement rules for non fund investments available

Any instruments covered by the Prospectus Regulation and referred to in Estonian the Securities Markets Act may benefit from the private placement exemption, in particular:

  • a share or other similar tradeable right;
  • a bond, convertible security or other tradeable debt obligation issued which is not a money market instrument;
  • a subscription right or other tradeable right granting the right to acquire securities specified in the previous two points;
  • a money market instrument (except with a maturity of less than 12 months);
  • a derivative security or a derivative contract;
  • a tradeable depositary receipt; or

The offer of the above non fund investments is exempt from the obligation to publish a prospectus if it falls under any of the exemptions stipulated in Article 1(4) of Prospectus Regulation.