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EU Top Court Rules Unrestrained Surveillance of Phone Data Unlawful

The European Court of Justice ruled Tuesday that “general and indiscriminate transmission or retention of traffic data and location data” is banned.

The court was ruling on proceedings brought before bodies in the UK, France and Belgium dealing with these privacy and data surveillance issues.

The court found that the directive on privacy and electronic communications precludes “national legislation requiring providers of electronic communications services to carry out the general and indiscriminate transmission of traffic data and location data to the security and intelligence agencies for the purpose of safeguarding national security.”

The directive also precludes “legislative measures requiring providers of electronic communications services [and providers of access to online public communication services and hosting service providers] to carry out the general and indiscriminate retention of traffic data and location data as a preventive measure,” as these retention measures are in serious “interference” with fundamental rights guaranteed by the EU Charter.

However, where a member state is facing is a genuine and serious threat to national security, the directive does not “preclude recourse to an order requiring providers of electronic communications services to retain, generally and indiscriminately, traffic data and location data.” Provided that such an order is limited in time, is strictly necessary and is “subject to effective review either by a court or by an independent administrative body.” Strict exceptions are also made for targeted data collection on individuals believed to be involved in terrorist activities.

Finally, the court held that the directive “requires national criminal courts to disregard information and evidence obtained by means of the general and indiscriminate retention of traffic and location data in breach of EU law.”

Changes to Business Law, COVID-19

Germany’s lower and upper houses of parliament have passed the federal government’s package of measures designed to tackle the crisis surrounding the coronavirus and assist others in overcoming its economic impact.

The coronavirus pandemic is having a substantial impact on the overall economy. The Gesetz zur Abmilderung der Folgen der COVID-19-Pandemie (Act to Mitigate the Effects of the COVID-19 Pandemic) introduces major legal changes. We at the commercial law firm MTR Rechtsanwälte can report that these changes also affect business law.

The scope of the measures ranges from short-time allowance (Kurzarbeitergeld), loans and rescue funds, to changes to insolvency law and company law. In addition to preserving the business and jobs as well as ensuring liquidity, it is necessary for companies’ decision-making capacity to be maintained.

To ensure that important decisions can still be taken in times of crisis, the federal government has also strengthened the capacity of businesses, cooperatives, homeowners’ associations, as well as other associations, to act and make decisions. Moreover, stock corporations will now be able to hold virtual annual general meetings.

To ensure that companies remain able to act and make decisions, the legislation provides for new ways of conducting annual general meetings in stock corporations (Aktiengesellschaft, AG), commercial partnerships limited by shares (Kommanditgesellschaft auf Aktien, KGaA), mutual insurance companies (Versicherungsvereins a.G., VVaG), and European companies – also known as a “Societas Europaea” (SE for short) – shareholders’ meetings in limited liability companies (GmbH), general meetings and representatives’ assemblies in cooperatives, and members’ meetings in associations. In the case of the AG, KGaA, and SE, for instance, it will be possible to participate in the annual general meeting online without the need for authorization pursuant to the articles of association. The legislation also allows annual general meetings to be held remotely.

Furthermore, it will be possible to reduce the notice period to 21 days. The board of directors will be able to arrange advance payments on the net profit, even in the absence of provisions to this effect in the articles of association.

The annual general meeting is to be held within the financial year, which represents an extension to the previous eight-month deadline. Since virtual annual general meetings without compulsory attendance are uncharted territory, the risk of legal challenges will be largely excluded.

The plans also feature comparable measures to facilitate virtual meetings and decision-making mechanisms that take place outside of meetings for associations and cooperatives.

Germany’s Federal Financial Supervisory Authority, the BaFin, is also revising its supervisory role in response to the circumstances brought about by the coronavirus pandemic, including, for example, with regards to the disclosure of financial circumstances when grading creditworthiness, as well as with respect to obligations pertaining to conduct and information in securities trading.

Lawyers with experience in the field of business law can offer advice.

https://www.mtrlegal.com/en/legal-advice/business-law/corona-and-business-law.html

Alternative Investment Funds in Cyprus

Cyprus in the last few years is establishing itself as one of the top investment fund centers in Europe.

The Fund management industry is fast becoming one of the most promising sectors of Cyprus economy. The volume of funds and assets under management have shown huge increase, as assets under management have more than tripled from €2.1 billion in 2012 to €6.8 billion in June 2019.  Assets under management are expected to reach €20 billion in the next five years.

What is an Alternative Investment Fund or AIF in short?

Alternative Investment fund is joint investment agreement raising capital from a number of investors with a view to investing it in line with an investment policy for the benefit of the involved investors.

Legal framework.

Alternative Investment Funds legislation has aligned Cyprus legal and regulatory framework with the European directives on asset management enhancing transparency and investor protection.

Cyprus has introduced a new law offering more investment structuring possibilities and upgraded rules for the authorisation, on-going operations, transparency requirements and supervision of Cyprus AIFs. In addition, new rules shape the regulation on the role and responsibilities of their directors, custodians but also external managers.

AIFs that are established under domestic Cyprus fund legislation can be sold on a private placement basis or marketed to professional investors across the EU under the AIFMD passport.

An AIF can take the following legal forms and may be established with limited or unlimited duration:

  • Fixed Capital Investment Company – FCIC
  • Variable Capital Investment Company – VCIC
  •  Limited Partnership – LP
  • Common Fund – CF

A Variable Capital Investment Company (VCIC) and Fixed Capital Investment Company (FCIC) may be set-up as self-managed, or it may be externally managed. A Limited Partnership (LP) and Common Fund (CF) must always appoint an external manager.

Types of Investors.

Professional.

A professional investor is the person who has the experience and expertise to make his/her own investment decisions and assess the risks involved. The investor must also comply with the criteria prescribed in the Markets in Financial Instruments Directive.

Well-informed.

When a person is not considered a professional investor confirming in writing that he is a qualified investor aware of the risks involved with an investment in the relevant AIF. Also, a Well-informed investor has to make an investment of a minimum €125,000 or has been evaluated by a licensed bank, or an authorised investment firm or an authorised Management Company that he has the experience and knowledge in evaluating an investment opportunity.

Retail.

Any investor who not considered either professional or well-informed investor.

Types of AIF’s. There are two different types of AIF’s.

AIF with unlimited number of persons.

  • May be marketed to “retail”, or “well-informed” and/or “professional investors”
  • Freely transferable investor shares
  • Minimum capital requirements of €125,000 or €300,000 if a self-managed fund
  • Must be appointed to a global custodian
  • Can be listed on stock exchange, and AIFs marketed to retail investors can be traded
  • Depending on the investor type and the overall investment policy may fall under certain investment restrictions

AIF with limited number of persons.

  • May be marketed only to “well-informed” and/or “professional investors”
  • Cannot exceed total number of 75 investors / unit holders
  • Freely transferable investor shares, with the condition that their transfer does not result in the AIF having more than 75 investors
  • May not be required to appoint a licensed manager or a custodian in some cases
  • Assets under management do not exceed the AIFMD thresholds of €100 million (including leverage) or €500 million (5-year lock-up period without leverage)

Tax advantages of AIF in Cyprus.

  • Notional Interest Deduction (NID) for new equity may reduce taxable base for interest received by up to 80% (for company-type funds) reducing the effective tax on interest to 2.5%Tax resident funds are eligible to all benefits under a double tax treaty or the EU Directives
  • Services provided by the Investment Manager of fund are not subject to VAT
  • No withholding tax on any type of payments to non-residents
  • No subscription tax on net assets of a fund
  • Extensive network of Double Tax Treaties in place with more than 60 countries
  • Dividends received, capital gains arising from sale of property abroad, capital gains from sale of shares of foreign property companies are excluded from tax

Other advantages of AIF in Cyprus.

  • Easy to set-up, cost-efficient management and operations
  • A framework fully in line with EU directives
  • Full transparency through annual audited reports to CySEC and investors (That includes financial statements, borrowing information, acquiring portfolio information and Net Asset Value)
  • Supervised by a competent and accessible regulatory authority
  • No restrictions imposed by the Regulator on type of investments
  • Can be self-managed – subject to the approval of the Regulator
  • Can be set-up as umbrella funds with multiple compartments
  • Can be listed on Cyprus Stock Exchange and other recognised EU stock exchanges ( in case the number of investors is not limited)

Business Insolvency – New EU Rules

The EU is giving reputable bankrupt entrepreneurs a second chance, and making it easier for viable enterprises in financial difficulties to access preventive restructuring frameworks at an early stage to prevent insolvency.

The Council formally adopted today the directive on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures. This decision marks the end of the legislative procedure.

The overall objective of the directive is to reduce the most significant barriers to the free flow of capital stemming from differences in member states’ restructuring and insolvency frameworks, and to enhance the rescue culture in the EU based on the principle of second chance. The new rules also aim to reduce the amount of non-performing loans (NPLs) on banks’ balance sheets and to prevent the accumulation of such NPLs in the future. In doing so, the proposal aims to strike an appropriate balance between the interests of the debtors and the creditors.

The key elements of the new rules include:

  • Early warning and access to information to help debtors detect circumstances that could give rise to a likelihood of insolvency and signal to them the need to act quickly.
  • Preventive restructuring frameworks: debtors will have access to a preventive restructuring framework that enables them to restructure, with a view to preventing insolvency and ensuring their viability, thereby protecting jobs and business activity. Those frameworks may be available also at the request of creditors and employees’ representatives.
  • Facilitating negotiations on preventive restructuring plans with the appointment, in certain cases, of a practitioner in the field of restructuring to help in drafting the plan.
  • Restructuring plans: the new rules foresee a number of elements that must be part of a plan, including a description of the economic situation, the affected parties and their classes, the terms of the plans, etc.
  • Stay of individual enforcement actions: debtors may benefit from a stay of individual enforcement actions to support the negotiations of a restructuring plan in a preventive restructuring framework. The initial duration of a stay of individual enforcement actions shall be limited to a maximum period of no more than four months.
  • Discharge of debt: over-indebted entrepreneurs will have access to at least one procedure that can lead to a full discharge of their debt after a maximum period of 3 years, under the conditions set out in the directive.

Next steps

This formal vote marks the end of the legislative process. The directive will now be formally signed and then published in the official journal. Member states will have two years (from the publication in the OJ) to implement the new provisions. However, in duly justified cases, they can ask the Commission for an additional year for implementation.

Background

The proposal was presented by the Commission on 22 November 2016. The new rules complement the 2015 Insolvency Regulation which focuses on resolving the conflicts of jurisdiction and laws in cross-border insolvency proceedings, and ensures the recognition of insolvency-related judgments across the EU.

The European Parliament formally voted on the directive on 28 March 2019.