Author: | Published: 3 Oct 1999
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The Act of 1991 introduced a definition of collective investments which were realized in the form of trust funds constituting the joint estate of participants. There were no regulations concerning forms of collective investment other than trust funds forming open-ended companies. In particular, national investment funds, which were created as an element of the mass privatization programme, could not be included in this category although many elements of a typical closed-end fund were used.

The lack of regulation concerning the functioning of closed-end investment funds constituted a barrier for the development of the Polish capital market. The comprehensive regulation of entities which are only involved in the investing of money entrusted to them was introduced by the new Act on Investment Funds of 1997. The above regulation together with the Act on the Organization and Functioning of Pension Funds (in force since 1998) determined the present institution of collective investment.

The companies of trust funds, created under the former regulations, have three years to adjust to new provisions of the Act of 1997. After this period permits granted to them under former regulations will expire.

Adopted structures

The main aim of the legislator when adopting the concept of the fund as a legal entity was the need to introduce the separation of assets of the fund and own assets of the company managing it. Accordingly, the investment fund is a legal entity rather than just an estate, as was the case with trust funds. Pursuant to the Act, the investment funds company — a joint stock company — is a body of the investment fund.

The solutions adopted in the Act, and specifically the creation of an investment funds company and an investment fund as two separate legal entities owning separate assets, helped to depart from the former solutions according to which one legal entity (the company) disposed of its own assets and the assets contributed by the participants in the fund. The former solution raised many doubts concerning the issues related to the liability, including tax liability, claims and ownership rights.

The investment funds may be as follows:

  • open-ended fund;
  • special open-ended fund;
  • closed-end fund; and
  • mixed fund.

The criterion according to which different types of funds were distinguished was the number of participation units. This number may vary or remain constant and it is always established in relation to a given period and depends on the manner of participation units created.

The distinction between open and closed funds is based on their discretion or imposed limitations in the creation of participation units. However, participants may change all the time regardless of the type of fund.

The law provides for a possibility of the selection of the fund's participants within particular types of funds. Moreover, the Polish legislator adopted a solution which allows to exclude the possibility of acquiring participation units in a special fund by certain categories of entities; the managing company is authorized to determine the manner of limiting accessibility to certain categories of participants.

The Polish legislator foresaw a specific type of investment funds by introducing the mixed type. Although this type is based mainly on the closed fund, it combines both the elements of a closed fund (issue of investment certificates) and an open fund (redemption of participation units as a result of purchasing investment certificates causing the number of certificates to vary).

Principal organizational requirements

Investment funds were created as institutions of public confidence and thus their activities are subject to comprehensive regulation. The Act of 1997 provides for double regulation in the case of institutions of collective investment — a permit is required for the establishment of the investment funds company, as well as for the establishment of the fund itself.

The following requirements have to be satisfied to create an investment fund:

  • creation of the statutes of the fund by the investment funds company (in the form of a notary deed);
  • conclusion of an agreement with a depository bank by the company;
  • collection of permit from the Polish Securities and Exchange Commission;
  • collection of payments to the fund;
  • registration of the investment fund at the Regional Court in Warsaw.

The minimum share capital of the company is PLN3,000,000 ($750,000) and if the company manages more than one fund this amount is increased by PLN1,000,000 for each subsequent fund. The required amount of the capital is decreased in comparison with the previous regulation.

The Act on Investment Funds introduced an obligation to maintain the level of the company's equity at least 50% of the minimum share capital. If the amount of the company's equity is not supplemented to reach the required amount, the permit to create the company by the Securities and Exchange Commission could be withdrawn.

It is mandatory to document the source of cash with which the share capital of the company is paid and it is prohibited to cover the share capital of the company with the borrowed funds.

Moreover, a permit from the Securities and Exchange Commission is also required for acquisition of shares in the company which will result in exceeding 20%, 30% or 50% of the total number of votes at the general shareholders' meeting.

The applicable regulations also provide for stringent limitations concerning the investment of the company's own funds. The company cannot acquire or subscribe for shares or other securities. The above limitation does not apply in the case of securities issued by the State Treasury or the National Bank of Poland, the shares of a settlement agent and other companies settling transactions in the capital market. Payments to the fund must amount to at least PLN4,000,000. It is necessary to announce a subscription offer (even in a situation where the investment funds company decides in advance to cover this capital from its own funds thus investing in the created fund), which has to remain binding for at least seven days and for not more than four months from the date of issuance of the permit for the creation of the fund.

Investment policy

The investment objectives of an investment fund may exclusively be:

  • protecting the real value of the fund's assets;
  • gaining the fund's income from investing its assets; and
  • increasing the value of those assets as a result of the increase of the value of the investments.

The statute of the investment fund defines the rules of its investment policy, in particular: the types of securities which are the subject of the fund's investments, the criteria for selecting investments, the methods of diversification of investments and other investment limitations, as well as the admissible amount of credits and loans contracted by the fund.

Moreover, an information prospectus of the open fund should contain all the information necessary to evaluate the investment risk. The Act of 1997 introduced some rules concerning investment policy of the fund. Except for investments in securities, investments in receivables which fall due within less than one year are possible if such receivables are transferable (their market value may be determined not less frequently than on the dates of valuation of the fund's assets). It is also possible to invest in participation units of other open funds — up to the amount of 5% of the value of the fund's assets.

The fund may keep part of its assets in bank accounts only in order to satisfy its current liabilities. It is also possible to invest in derivatives, but only in order to reduce the investment risk, taking into account the objective of the investment fund.

The open fund cannot grant loans or issue guarantees or assume an obligation to transfer the rights which, at the time of conclusion of an agreement, were not yet acquired by the fund.

The Act also introduced the minimum value of assets of the fund, which cannot be less than PLN2,500,000. The decrease in the value of the fund below such an amount may constitute a basis for taking a decision on its liquidation.

In result of the enactment of the Act of 1997, the regulation of the Polish market of investment funds has received a comprehensive legal basis. Moreover, the adopted solutions constitute an element of the process of harmonisation of the Polish law with the EU requirements. Therefore, the expectations of the Polish legislator that the provisions of the 1997 Act will not only influence the formation of the Polish investment funds market, but will also enable investors to accomplish their varying investment objectives, may be considered to be justified.

Contact Details:

Wierzbowski & Co

ul. Nowogrodzka 68

02 014 Warsaw


Tel: +48 (22) 523 4111

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