Article 16 of the Italian law of March 5th, 2024, no. 21 (referred to as the “Capital Law”) has implemented measures aimed at simplifying the regulatory framework of SICAFs and SICAVs in Italy.  These measures bring about a clear distinction between self-managed SICAFs and SICAVs, i.e., those that directly manage their assets, and externally managed SICAFs/SICAVs which outsource the management of their assets to duly authorized management companies. The new provisions clarify that externally managed SICAFs and SICAVs are no longer considered as entities subject to authorization for collective asset management.

This legislation brings Italy's regulatory landscape for externally managed SICAVs and SICAFs in line with international standards observed in other EU markets, such as Malta and Luxembourg. The applicable changes also streamline the Italian regulatory regime applicable to externally managed SICAVs and SICAFs bringing it closer to that of contractual funds.

Hereunder is a list of the primary innovations introduced by the Capital Law applicable to externally managed SICAFs/SICAVs:

1) Simpler set-up and operational requirements:

The provisions regulating the authorization of the establishment of SICAFs and SICAVs and the related prerequisites – including the requirements of corporate representatives and capital participants – no longer apply to externally managed SICAVs and SICAFs. Notably, the by-laws of externally managed SICAVs and SICAFs (excluding non-reserved externally managed SICAF/SICAVs) are no longer subject to the prior approval of the Bank of Italy.

Furthermore, there are no longer any specific requirements for members of the board of directors, and the control procedures generally imposed by the Bank of Italy shall not apply in case of purchase or transfer of shareholdings exceeding 10% of the capital.

These amendments significantly improve the time to market of such funds, rendering externally managed SICAFs and SICAVs more appealing to fund promoters.

2) Segregation of assets between compartments within the same multi-fund SICAF.

The Capital Law specifies that each compartment constitutes autonomous assets, distinct for all purposes from the assets of other compartments under the same SICAF. Consequently, any liabilities incurred on behalf of a specific compartment of the SICAF may only be settled out of the assets of that specific compartment. The new rules clarify that each compartment of a SICAF has the capacity to generate and distribute income even in the absence of overall profits of the SICAF. Likewise, losses pertaining to a compartment are attributed exclusively to its assets.

3) Clarity on the procedure for managing insolvency situations.

According to the new Capital Law, in instances where the operations of an externally managed SICAF or a compartment thereof within a multi-fund scheme are unable to meet their respective obligations and there are no reasonable prospects for overcoming this situation, one or more creditors or the external manager can petition to the competent court based on the registered office, to request the liquidation of the scheme or the compartment. This means that externally managed SICAFs, including multi-compartment schemes, along with their individual compartments, operate under a distinct crisis management protocol overseen by the Bank of Italy, rather than adhering to conventional corporate insolvency regulations.

4) The role of the external Manager

In terms of management liabilities - without prejudice to the application of the responsibilities incumbent on the directors of the externally managed SICAFs pursuant to the Civil Code – the Capital Law expressly assigns the liability for compliance with the provisions of the Consolidated Law of Finance applicable to externally managed SICAFs to the external manager. It is clarified that "the Bank of Italy and CONSOB may, within the scope of their respective competencies and in harmony with the provisions of the European Union, request information from the external manager on the … SICAF managed as well as carry out inspections and request the production of documents and the performance of acts deemed necessary at such companies."

5) Replacement of the External Management Company

The scheme must adopt suitable procedures to ensure continuity in the event of replacement of the external manager. In the event of liquidation of the external manager or dissolution of the management contract, it is expected that the board of directors of the SICAF promptly convene a shareholders’ meeting to decide on the replacement of the management company. Failure to effect this change within two months of the aforementioned occurrences would necessitate the dissolution of the SICAF.  

It must be highlighted that SICAFs have their own tax code and their own VAT number, rendering them operationally more efficient than contractual funds. Notably, in the event of replacement of the management company, there is no requirement to provide for the re-registration of contracts. For real estate funds, this implies that there is no requirement to update the registration of the properties in the real estate registers, as would be necessary in case of replacement of the management company of contractual funds.

The newly enacted provisions, effective as of 27 March 2024, will affect all ongoing processes related to externally managed SICAF/SICAVs. The Bank of Italy will remove all externally managed SICAF/SICAVs from the register within six months of the new rules taking effect, whereas existing externally managed SICAF/SICAVs will have a grace period of 12 months from the effective date to ensure compliance with the updated regulations.