Založení a regulace alternativních investičních fondů (ZISIF)
The World of Investment Funds in the Czech Republic: Understanding the Basic Rules of the Game
This Act is not merely a national regulation; it represents a complex framework that fully implements key European directives, in particular AIFMD (on alternative investment fund managers) and UCITS (on undertakings for collective investment).
It is precisely this link with European law that ensures a high standard of investor protection, but at the same time places significant demands on anyone wishing to do business in this sector.
Understanding this complexity is the first step to success. Before embarking on any planning, it is essential to understand the basic roles that make up the ecosystem of any regulated fund.
These roles are not just formal positions, but create a system of checks and balances designed to protect the assets entrusted by investors. The very existence of these separate functions suggests that setting up a licensed fund is not a simple task, but requires building a professional and costly infrastructure.
Who's Who in the World of Funds? An Easy-to-Understand Explanation of Key Roles
For the proper functioning of the fund and to ensure regulatory compliance, it is crucial to distinguish between three basic entities. Each has its own specific and irreplaceable role.
The manager is the brain of the entire operation. According to Section 5 of the ZISIF, their main activity is the management of the fund's assets, which includes making investment decisions in accordance with the established strategy and actively managing the risks associated with these investments.
This is the role with the highest level of responsibility, as the success or failure of the fund depends precisely on the manager's decisions. The law stipulates that each investment fund may have only one manager, which underlines their central position.
The administrator represents the operational heart of the fund. Their tasks are defined in Section 38 of the ZISIF and include a wide range of technical and support activities without which the fund could not function.
Key responsibilities of the administrator include keeping the fund's accounts, valuing assets and liabilities, calculating the current value of unit certificates or investment shares, ensuring reporting to the CNB and, last but not least, performing compliance and internal audit.
While in the past these activities were often linked to the role of the manager, the ZISIF allows them to be delegated to a specialized external administrator.
The depositary acts as an independent guardian of the fund's assets and is a key element of investor protection. This role is usually performed by a bank or a securities trader. The depositary not only maintains the fund's cash accounts and has custody of its assets, but above all performs monitoring activities. It checks whether the manager and the administrator act in accordance with the law, the fund's statute, and the depositary agreement. It verifies, for example, the correctness of the calculation of the value of shares, the settlement of transactions, or the use of the fund's income.
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Strategic Crossroads: Two Main Paths for Your Capital
If you plan to manage capital from investors, the ZISIF basically offers you two fundamentally different paths. Your choice at this strategic crossroads will have a major impact on the speed of launch, costs, regulatory burden, but also on the future potential of your project.
The first option is the fast and flexible path of registering a manager under Section 15 of the ZISIF. This regime, often informally referred to as a "mini-fund", is less demanding in terms of administration and costs, but is associated with significant limitations, especially regarding the targeting of investors and the volume of assets under management.
The second option is to obtain a full license from the Czech National Bank. This path is significantly more demanding, longer, and more expensive. It requires meeting strict personnel, capital, and organizational requirements. The reward, however, is a robust, highly credible structure that allows for virtually unlimited growth, public offering (to qualified investors), and international expansion.
At ARROWS, our Czech legal team helps clients daily, from startups to established corporations, with choosing the optimal structure. Our legal analysis will take into account not only your current intent but also your future ambitions, thereby protecting you from costly mistakes right at the beginning.
Flexible Start: What is a "Mini-Fund" or a "Venture Capital Entity" under Section 15 of the ZISIF?
For many starting managers, developers, or investment teams, asset management under Section 15 of the ZISIF represents an attractive entry gate to the world of collective investment. It is not an investment fund in the true sense of the word, as defined in Section 92 of the ZISIF, but a specific, lightly regulated regime of "asset management comparable to management". Its main advantage is that the manager is not subject to direct and ongoing supervision by the CNB, which dramatically reduces the regulatory burden, administration, and associated costs.
This path is ideal for smaller projects, testing a new investment strategy, or for managing assets within a close circle of investors, such as business partners, friends, or family ("friends & family"). Many successful managers also use the Section 15 regime as a first, starting phase, after which, in case of success and growth, they transition to a fully regulated and licensed structure.
Key Limitations – What You Must Strictly Comply With
The lower level of regulation is offset by strict limitations, the violation of which can lead to draconian sanctions. It is absolutely crucial to know these rules and strictly comply with them.
The first and most important limitation is the ban on public offering. A manager under Section 15 must not collect funds from the public. In practice, this means that an investor typically must invest at least EUR 125,000 and undergo a suitability assessment; a maximum of 20 investors may fail to meet this condition (Section 15(4) and (6) of the ZISIF). The number of investors who meet the conditions is not limited. Any forms of public marketing, such as online campaigns, advertising, or massive outreach, are strictly prohibited.
The second limit is the total value of assets under management, the so-called threshold. This must not exceed EUR 500 million if the manager does not use leverage (debt financing) and investors cannot redeem funds within 5 years. In other cases, the limit is EUR 100 million (Section 16 of the ZISIF).
New Rules from 2024 – The End of the "Wild West"
In the past, the Section 15 regime was abused by some entities for fraudulent schemes that harmed many retail investors. In response to these negative experiences, the legislator significantly tightened the rules with effect from July 1, 2024. This step can be seen as an effort by the regulator to clearly separate serious managers from questionable projects and strengthen investor protection.
The most visible change is the obligation for all managers in this regime to include the phrase "osoba rizikového kapitálu" (venture capital entity) in the company name.
At the same time, it is prohibited to use the term "fund", its translations, or derivatives. The aim is for the investor to know at first glance that this is an investment with a higher level of risk that is not subject to CNB supervision. This change is not just cosmetic; it forces founders to make a strategic decision on whether their project and target group of investors are compatible with a designation that explicitly communicates risk.
Other tightening measures include the introduction of an administrative registration fee of CZK 10,000 and, above all, new, stricter sanctions. The amendment introduced Section 15a of the ZISIF, which gives the CNB the power, in the event of a serious or repeated breach of obligations, to remove the manager from the list, which is associated with a ten-year ban on re-registration.
Registration Process with the CNB
Setting up a "venture capital entity" does not require a complex licensing procedure, but only entry into the list maintained by the CNB. This process is significantly faster compared to licensing. If the application is complete and error-free, the CNB usually makes the entry within five business days of its submission.
The application is submitted exclusively electronically, for example, via a data box. However, a key part of the application and its preparation is the related documentation, which the CNB does not review for truthfulness, but its existence is a condition for entry. This includes in particular:
Proof of business authorization: Typically an extract from the Trade Register for the management of own assets.
List of managed entities: Identification of the asset structures that will be managed.
Detailed investment strategy: Describes which assets will be invested in, what the geographical or sectoral focuses are, and how leverage will be used.
Contractual documentation for investors: An asset management agreement that defines the rights and obligations of both parties.
Changes in legislation show that even the "simple" path under Section 15 requires careful preparation. At ARROWS, our Prague-based legal team will not only prepare all documentation for you on a turnkey basis – from establishing a management s.r.o. to drafting a bulletproof investment strategy and contracts with investors – but we will also ensure that your operations are fully in line with the new, stricter rules, protecting you from sanctions.
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Fully Regulated Fund (SICAV): The Path for Big Ambitions and Maximum Trust
For larger investment projects that target significant capital from professional investors or plan international expansion, a fully regulated structure represents the only meaningful choice. Most often, this is a fund for qualified investors (FKI), which is intended exclusively for professionals from the financial sector and wealthy investors who meet the strict legal conditions defined in Section 272 of the ZISIF. Typically, this is an investor whose investment reaches at least EUR 125,000 and who confirms in writing that they are aware of the risks.
Unlike standard retail funds, FKIs have much more flexible investment limits and can invest in a wide range of alternative assets, such as real estate, private equity, receivables, works of art, or renewable resources. This flexibility is one of the main attractions for sophisticated investors.
Why is SICAV the Most Popular Form?
Although an FKI can have various legal forms (e.g., s.r.o. or a limited partnership), in practice, the form of a joint-stock company with variable capital, known by the French abbreviation SICAV (Société d'Investissement à Capital Variable), absolutely dominates. Its popularity stems from a unique combination of flexibility and robustness.
A key feature of a SICAV is the ability to create separate sub-funds. This means that within a single legal entity, you can manage several completely separate portfolios with different investment strategies. The assets and liabilities of one sub-fund are strictly separated legally and accounting-wise from the others, which protects investors of one sub-fund from problems in another and allows for effective diversification.
The SICAV structure also elegantly solves the separation of management from investment using two types of shares. The managers and founders of the fund hold founder shares, which are associated with voting rights and allow them to manage the fund. Investors, on the other hand, acquire investment shares, which do not have voting rights but establish the right to a share in profits and to redemption at the current value.
Main Advantages of Full Regulation
The decision to opt for a fully licensed fund brings three major strategic advantages that are unattainable for a "venture capital entity".
Maximum credibility: The fund is subject to full supervision by the CNB, its assets are monitored by an independent depositary, and its accounts are verified by an auditor. This triple control mechanism provides investors, especially institutional ones, with the highest possible level of certainty and trust, which is crucial for successful fundraising.
Significant tax advantage: If an FKI meets the legal conditions (e.g., it invests more than 90% of its asset value in financial assets defined by law or its shares are traded on a regulated market), it becomes a so-called basic investment fund. Its profit is then taxed at an exceptionally favorable income tax rate of only 5%, unlike the standard rate for corporations.
Possibility of public offering (to qualified investors): Unlike the strict prohibition under the Section 15 regime, investments in an FKI can also be offered publicly. The condition is that only a person meeting the criteria of a qualified investor can ultimately become an investor, which must be explicitly pointed out in the offer.
Self-Managed vs. Externally Managed Fund – A Key Strategic Decision
Within the SICAV structure, you face another crucial decision: build your own regulatory infrastructure, or "rent" it?
A self-managed SICAV applies to the CNB itself for a management and, if applicable, administration license. It thus becomes a fully-fledged investment company. This path requires building a robust internal team (at least two leading persons with demonstrable experience and trustworthiness), meeting capital requirements (initial capital of at least EUR 300,000, or EUR 50,000 for a sub-threshold self-managed fund, Section 29 of the ZISIF), and successfully passing a highly demanding licensing procedure.
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It is a choice for large, established players who want to have everything under their own control.
An externally managed SICAV, on the other hand, does not have its own license. Instead, it enters into an agreement with an existing, licensed investment company that provides management and administration services for it. The fund itself then only needs a simple registration with the CNB, not a full license. This model, sometimes referred to as "Fund-as-a-Service", dramatically lowers entry barriers, is faster and cheaper (the minimum registered capital of the fund can be as low as CZK 1; however, the fund capital of a fund for qualified investors must reach EUR 1,250,000 within 12 months of its establishment, Section 280 of the ZISIF).
It is an ideal solution for asset managers who want to focus on their investment expertise and do not want to build their own regulatory apparatus.
Our portfolio of more than 150 joint-stock companies and 250 s.r.o. companies gives us a unique insight into the needs of growing businesses. We will help you not only establish a SICAV but also find a suitable external investment company for the externally managed model. In addition, thanks to our extensive network of clients, we can connect you with interesting business and investment opportunities.
Most Common Mistakes When Establishing a Fund
Establishing a fund is like building the foundations of a house – any mistake will come back to you later with multiplied costs. Our Czech legal team has identified key strategic mistakes that you can avoid with our help.
Risk to Address and Potential Problems | How ARROWS Helps |
Incorrectly chosen legal structure (Section 15 vs. SICAV) Problem: Limitations in raising capital, reputational damage, high costs of subsequent transformation. | Legal opinion and strategic analysis: We will assess your business plan, target group of investors, and long-term goals. We will recommend a structure that is optimal for you not only today but also in five years. |
Inadequately defined investment strategy Problem: Rejection of the application by the CNB, disputes with investors regarding deviation from the strategy, inability to effectively manage risks. | Preparation and review of key documentation: We will draft a detailed and legally bulletproof investment strategy and fund statute for you, which will meet the CNB requirements and clearly define the boundaries for you and your investors. |
Errors in the statute and contractual documentation Problem: Unclear rules for profit distribution, investor exit, calculation of fees. Leads to disputes and loss of trust. | Preparation of complete contractual documentation: We will prepare contracts with investors, the statute, and other documents that will precisely and clearly regulate all relationships and prevent future conflicts. |
Underestimating personnel and capital requirements (for licensed funds) Problem: Failure in the licensing procedure due to insufficient credibility or expertise of management or non-transparent origin of capital. | Preparation for the licensing procedure: We will help you assemble a team, prepare documents demonstrating the professional competence and credibility of leading persons, and document the origin of capital in accordance with CNB requirements. |
Failure to meet new requirements for name and transparency (under Section 15) Problem: Sanctions from the CNB, forced name change, investor distrust due to non-transparent communication about risks. | Ensuring full compliance with the ZISIF amendment: We will ensure that your company and all documentation are in line with the latest legislation from the very beginning, including the correct name and information obligations. |
Unclearly set asset valuation mechanism (NAV) Problem: Disputes with investors over the value of their share, audit problems, non-compliance with regulatory requirements (e.g., IFRS). | Legal consultation and setting up processes: In cooperation with auditors and tax advisors, we will help you set up transparent and methodically correct processes for asset valuation and net asset value (NAV) calculation. |
Licensing Procedure with the CNB: How to Prepare for a Marathon?
While the registration of a "venture capital entity" is a relatively quick administrative task, obtaining a license for a self-managed investment fund is a real marathon. It is crucial to realize that this is not a mere formality, but an in-depth and detailed audit of your complete investment plan, team, and internal processes. The entire process from the preparation of documentation to the final decision of the CNB can easily take more than one year.
The licensing procedure itself can be divided into three main phases:
Preparatory phase: This is the most important stage where the foundations of success are laid. It includes a detailed analysis of the business plan, assembling a qualified and credible management team, and, above all, preparing extensive and flawless documentation.
Submission of the application and communication with the CNB: After the formal submission of the application, an intensive dialogue with the regulator begins. The CNB typically raises additional questions, requests clarifications, and demands additions or modifications to the submitted documents. The speed and quality of your responses fundamentally affect the duration of the entire procedure.
Decision: After successfully resolving all comments and meeting all legal conditions, the CNB will issue a decision granting the authorization to operate.
Key Documents and CNB Requirements
The scope of the required documentation is substantial and requires absolute precision. The most important documents include:
Official application form for authorization to operate: A standardized document available on the CNB website.
Detailed business plan: Must contain not only the investment strategy but also realistic financial projections, target market analysis, and an activity development plan.
Proof of the origin of the initial capital: It is necessary to transparently and unquestionably prove the legal origin of the funds forming the fund's registered capital.
Documents regarding leading persons: The CNB places enormous emphasis on who will manage the fund. Proof of professional competence (education, experience) and credibility (integrity, absence of offenses in the financial market) of at least two leading persons is required.
Comprehensive set of internal regulations: This is the backbone of the fund's management and control system. It includes dozens of documents, such as the risk management system, compliance rules, internal AML policy system, rules of conduct with investors, remuneration system, and many others.
What Does the CNB Focus On and Where Are the Most Common Mistakes Made?
From our practice, we know that the CNB focuses on several critical areas when assessing applications. The most common cause of delays or even rejection of the application is underestimating these points:
Realism and feasibility of the business plan: The plan must be supported by realistic assumptions, not just optimistic wishes.
Consistency of documentation: All submitted documents must be in mutual agreement. Any discrepancy raises doubts.
Actual expertise of management: Formal compliance with requirements is not enough. The CNB examines whether management has real, relevant, and demonstrable experience in investment and risk management.
Robustness and functionality of the management and control system: Internal regulations must not be just "paper". They must form a functional whole capable of effectively managing risks in practice and ensuring regulatory compliance.
The licensing procedure is our daily practice. We know what the CNB asks before they even ask. We will prepare the complete application and all annexes for you, set up internal processes, and represent you in communication with the regulator. In addition, we can organize professional training with a certificate for your management, which will strengthen your position in the licensing procedure.
Post-Establishment Obligations: What Do You Need to Keep an Eye On?
Obtaining a license or registration with the CNB is far from the end of the work – on the contrary, it is just the beginning. The operation of an investment fund is associated with a whole range of ongoing obligations, the systematic fulfillment of which is absolutely essential for maintaining a good reputation and the authorization to operate itself. Neglecting these obligations is the most common cause of sanctions by the regulator.
Regular Reporting to the CNB
Every manager, whether licensed or only registered under Section 15, has an information obligation towards the CNB. All communication and submission of reports take place exclusively electronically through a specialized application SDAT (Sběr dat). It is crucial to monitor deadlines and submit reports on time and without errors.
The most important reports include:
ROFOS 36-01 and ROFOS 37-01 reports: This is a regular annual report submitted by all alternative fund managers. It contains key information about the manager and each fund managed by them, in particular about the asset composition, the most significant exposures, the investment instruments used, and the number of investors. The deadline for submission is always by January 31 of the following year.
DOFOS 15 report: This new report, mandatory from 2025, is intended specifically for managers under Section 15 of the ZISIF ("venture capital entities"). It serves to report the total number of investors and to document the auditor's report in the event that the manager collects funds from more than 20 investors (Section 15(6) of the ZISIF). The deadline for submission is by June 30 for the previous calendar year.
It is important to remember that even zero activity must be reported. If the fund does not manage any assets, a so-called zero report must be submitted.
AML Obligations (Anti-Money Laundering)
Every investment fund manager is, without exception, an obliged entity under Act No. 253/2008 Coll., on Certain Measures Against the Legalization of Proceeds from Crime and Terrorist Financing (AML Act). Violation of these obligations is among the most serious offenses and is punished very severely, including million-crown fines and the risk of license revocation.
The basic AML obligations include:
Identification and KYC/CDD (investor): Thorough verification of the identity of each investor.
Determining the origin of assets: Actively investigating where the funds that the investor places in the fund come from. Insufficient verification of the source of money is a common reason for sanctions, as shown by the recent cases of the investment company Atris or Fio banka.
Drafting the System of Internal Principles (SVZ): Every manager must have a detailed written document describing their AML procedures. This document is submitted to the Financial Analytical Office (FAÚ).
Designation of a contact person and reporting: Appointment of a person responsible for communication with the FAÚ and the obligation to report any suspicious transactions.
Investor Protection and Risk Management
The cornerstone of the functioning of any fund is the obligation to act with professional diligence (Section 18 of the ZISIF) and always in the best interest of investors (Section 19 of the ZISIF). In practice, this general principle translates into specific obligations, such as maintaining and constantly applying an effective management and control system (Section 20 of the ZISIF). This system must be capable of identifying, measuring, and managing all risks to which the fund is exposed.
Another key area is strict compliance with investment limits and strategy as defined in the fund's statute and relevant legal regulations. Any deviation must be properly justified, addressed, and communicated to the depositary and, if applicable, to the CNB.
Operational compliance is crucial for our clients. Therefore, we provide comprehensive legal support even after the establishment of the fund. We regularly review and update internal guidelines, help with the preparation of reporting, ensure AML audits, and, if necessary, effectively represent you during inspections by the CNB or FAÚ.
Operational and Sanction Risks
Even established funds face constant risks. Ignoring operational obligations is the fastest way to high fines and loss of license. See what risks you face and how ARROWS protects you.
Risk to Address and Potential Problems and Sanctions | How ARROWS Helps |
Delayed or incorrect reporting to the CNB Problem: Fines in the range of tens to hundreds of thousands of CZK, reputational damage. | Legal consultation and monitoring: We monitor legislative changes and deadlines for you. We will help you set up processes and check reports before submission. |
Violation of AML regulations Problem: High fines (millions of CZK), criminal liability, license revocation. | Preparation and review of AML documentation: We will prepare a robust system of internal principles for you. We provide professional training for employees and management with a certificate, which demonstrably reduces the risk of error. |
Exceeding investment limits or deviating from the strategy Problem: Sanctions from the CNB, obligation to compensate investors, lawsuits. | Legal opinions and compliance support: We will assess planned transactions in terms of compliance with the statute and legislation. We will help set up control mechanisms for risk management. |
Unauthorized offering of investments (violation of the ban on public offering under Section 15) Problem: Fine up to CZK 150,000,000, dissolution of the company by court, loss of credibility. | Review of marketing materials and distribution channels: We will ensure that your communication and method of targeting investors are in line with the law and protect you from the most severe sanctions. |
Conflict of interest between the fund, manager, and investors Problem: Harm to investors, lawsuits, regulatory intervention. | Preparation of internal guidelines: We will set up clear rules for managing conflicts of interest, which are a key part of the management and control system required by the CNB. |
Insufficient protection of customer assets Problem: Misuse of funds, fines from the CNB, loss of license. | Representation before administrative authorities and contract review: We will review your contracts with the depositary and other partners. In the event of an inspection, we will effectively represent you and defend your interests. |
Removal from the CNB list (Section 15a of the ZISIF) Problem: Ban on activity for 10 years for a manager who was removed for breach of obligations. | Obtaining necessary licenses and permits: If your ambitions exceed the limits of Section 15, we will guide you through the process of transformation into a fully licensed fund and ensure the continuity of your business. |
International Dimension: How to Expand Abroad with a Fund?
In today's interconnected world, the ability to operate beyond the borders of the Czech Republic is crucial for many investment projects, whether it involves raising capital from foreign investors or investing in foreign assets. However, ambitions for international operation fundamentally influence the choice of fund structure right at the beginning. The simple path under Section 15 of the ZISIF is a purely national solution; the gates to Europe are opened only by a full license.
AIFMD and the "European Passport": The Gate to Europe
The cornerstone of European regulation of alternative funds is the AIFMD (Alternative Investment Fund Managers Directive). Its aim is to create a unified and secure market for the management and marketing of alternative funds across the European Union. A key tool introduced by the AIFMD is the so-called European passport.
This principle allows a manager who obtains a full (so-called above-threshold) management license in one EU member state (for example, in the Czech Republic) to offer their fund to qualified investors in all other member states after completing the notification procedure. This dramatically simplifies cross-border distribution and opens access to a much wider range of potential investors.
The possibility of obtaining a European passport is therefore one of the strongest arguments for choosing a fully licensed structure over the Section 15 regime.
How to Offer a Czech Fund to Investors in the EU? The Notification Process
Using the European passport is not automatic. It is a formalized process, the so-called notification. A manager who wants to offer their Czech fund, for example, in Germany or Poland, must first notify the Czech National Bank of their intention. The CNB then reviews the notification documentation and forwards it to the relevant supervisory authority in the host state (e.g., BaFin in Germany). Only after confirmation of the transmission of the notification can the manager start offering in the given country.
The entire process requires careful preparation of specific documentation in accordance with AIFMD requirements and can be administratively demanding, especially when communicating with various national regulators, each of whom may have their own specific requirements and practices.
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Investing in Foreign Assets and Managing International Structures
Czech investment funds can invest in assets worldwide without major regulatory obstacles. The investment itself in a foreign property, shares of a foreign company, or participation in a foreign project is not problematic from the perspective of the ZISIF.
However, complications arise if the investment strategy requires the creation of more complex international structures, such as establishing subsidiary holding or special purpose vehicles (SPVs) in other countries. In such a case, it is necessary to address not only investment but also complex tax, corporate, and regulatory issues in each individual jurisdiction.
Cross-border operations are our specialty. We will help you with the notification of the fund with the CNB and with setting up a structure with an international element.
The path to a successful investment fund, whether small and flexible or large and international, leads through an impenetrable jungle of regulation. As this guide has shown, the correct legal structure chosen at the very beginning, bulletproof contractual documentation, and constant operational vigilance are the absolute foundation that separates successful projects from those that end with CNB sanctions and investor disappointment.
Whether you are at the very beginning of considering establishing a fund, or you already manage assets and need to navigate the new obligations brought by recent legislation, we are here for you. At ARROWS, we have long specialized in the field of investment funds and capital markets, and we have dozens of successfully completed projects behind us.
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Disclaimer:
The information contained in this article is for general informational purposes only and serves as a basic guide to the issue as of 2025. Although we strive for maximum accuracy, laws and their interpretation evolve over time. We are ARROWS Law Firm, a member of the Czech Bar Association (our supervisory authority), and for the maximum security of our clients, we are insured for professional liability with a limit of CZK 350,000,000. To verify the current wording of the regulations and their application to your specific situation, it is necessary to contact ARROWS Law Firm directly (consultation@arws.cz). We are not liable for any damages arising from the independent use of the information in this article without prior individual legal consultation.