Private placement rules and law in Slovakia

Under the Slovak law on collective investment, i.e. Act. No 203/2011 Coll. on Collective Investment (the “ACI”), a private placement shall mean any communication, offering or recommendation addressed, in advance, to a specified number of investors, with the aim to collect funds for the purpose of collective investment, which is realised without any use of means of publication.

In contrast, public placement means any communication, offering or recommendation, which aims to collect funds for the purpose of collective investment made by a person/entity for its own benefit or for the benefit of other persons/entities through any means of publication.

Collective investment under the Slovak law is defined as the business activity of raising funds from investors with the objective to invest in compliance with determined investment policy for the benefit of entities whose funds have been raised.

Collective investment may be conducted only through established local collective investment undertakings, or by the raising of funds through the offer of securities of foreign collective investment undertakings.

The private placement provisions are relevant in relation to the following funds:

AIFs (local):

• Standard/Special common funds
• Local subjects of collective investments which are legal entities

Foreign AIFs:

• European AIFs
• non-European AIFs.

European AIFs mean funds licensed or registered under the law of an EU Member State or which have a seat or headquarters in an EU Member State.

Non-European AIFs are those which are not licensed or registered under the law of an EU Member State or have a seat/ headquarters outside an EU Member State. It can be self-administered or administered by a foreign management company.

The assets of the AIF, whether local or foreign, have to be registered separately from the assets of the management company, as well as from the assets of the different subjects of collective investment.

Distribution of the interests in local subjects of collective investments which are legal entities is only possible to professional investors.

Distribution of interests in AIFs is possible for professional investor or qualified investors whose investment is at least EUR 50,000, provided that:

• a number of qualified investors investing into one AIF does not exceed 50;
• a share of qualified investors on net asset value of the AIF does not exceed 30%; and
• a share of qualified investors on total asset value of AIFs managed by the manager with the exception from the mandatory AIFM license (i.e. fulfilling certain maximum portfolio limits of the managed AIFs; in practice, these are funds with assets of up to EUR 500 million) does not exceed 30%.

These conditions must be met cumulatively.

Professional investors are defined as:

• securities dealers, foreign securities dealers, financial institutions, commodity and commodity derivatives traders, and entities authorised to operate in the financial markets by a competent authority or whose activity is separately regulated by generally binding legal regulations
• large undertakings
• state, regional or municipal authorities, state or regional authorities of other countries, the Debt and Liquidity Management Agency, public authorities of other countries that are charged with or intervene in the management of public debt, the National Bank of Slovakia (the ''NBS''), other central banks, the International Monetary Fund, the European Central Bank, the European Investment Bank, and other similar international organisations
• other legal persons not mentioned whose main activity is to invest in financial instruments
• a person who meets certain conditions and applies to be treated as a professional investor.

EEA AIFMs may commence pre-marketing AIFs which are not yet established or established but not notified to the NBS, to potential professional investors in Slovakia, provided that the NBS receives a pre-marketing notification letter within two weeks of starting such pre-marketing activity in writing or in an electronic form. 

There are certain dos and don´ts in respect to the information provided to potential professional investors within the context of the pre-marketing. In particular, they should not enable such investors to commit to acquiring units or shares of the pre-marketed AIF, represent any subscription form or similar document, whether in draft or final form, or represent any corporate documents, prospectus or marketing materials in final form. The draft prospectus or marketing materials may not contain information enabling the investors to adopt investment decision and must clearly state that they do not represent an offer or call for purchase or subscription of AIF and the information contained therein cannot be relied upon, as they are not complete and can change.

For a period of 18 months after the start of the pre-marketing of the AIF, any subscription of AIF is considered as distribution and subject to the respective notification obligations with the NBS (eventually through the home regulator as applicable).

In case of nonprofessional investors, an unrequested personal contact falls under the definition of the means of publication.

As a result, the reverse solicitation could apply only in a very narrow number of cases and if truly a potential investor approaches on its own initiative, even indirectly unaffected by premarketing or other media, communication/IT systems available to public. 

Non-compliance with mandatory provisions on placement regimes might cause the placement agreement to become invalid and / or potential claims for damages by investors.

The NBS can impose various sanctions such as requiring remediation, suspending the distribution of interests or imposing penalties.

Certain options are excluded from the scope of the collective investment regime:

• Social Insurance Agency or similar foreign social security institutions or (foreign) institutions for social and occupational retirement provision;
• holding companies;
• Slovak or foreign state bodies or Slovak or foreign region or municipality;
• NBS, European Central Bank, central banks of other EU states, similar institutions or supranational institutions, in the event that such institutions or organisations perform activities of collective investment and in so far as they act in the public interest;
• employee participation schemes or employee savings schemes or similar foreign institutions;
• securitisation special purpose entities;

The NBS has recently issued the guidelines on the interpretation of certain terms and conditions of collective investment which have to be observed. These guidelines reflect the ESMA guidelines and position (e.g. in respect to family undertakings).