The Finnish government recently proposed changes to the regulation of the subscription and purchase of shares in real estate funds aimed at creating a more secure and better regulated means of investing in real property. The new legislation would apply to public limited liability companies (referred to in the proposal as 'real estate funds') through which the public can participate in a fund primarily investing in real estate and shares in real estate companies.
According to the proposal the minimum share capital of a listed real estate fund would be Fmk20 million (US$3 million), which amount would have to be reached within 18 months from the establishment of the fund.
In comparison with limited liability companies operating in the real estate investment business, the proposed real estate funds would be subject to stricter disclosure requirements with respect to share capital, investment policies, risk management, profit distribution, corporate management and so on.
Unlike other listed companies subject to the provisions of the Securities Markets Act, a real estate fund would be required to have its real estate investment policy approved by the Financial Supervision.
The government further suggests that real estate funds should apply for official listing within one year from the start of their real estate investment business to facilitate the adequate supervision of the funds and the evaluation of their shares.
It is also proposed that funds should be exempted from a 4% asset transfer tax where real property is acquired by the fund within 12 months of the new legislation entering into force, which is expected on January 1 1998.