As a result of the difficulties facing the KG model, new alternative financing sources have been explored by German shipowners, and institutional private equity has become the predominant alternative financing in Germany’s shipping industry. Whilst the traditional tools for a successful structuring of joint ventures and private equity club deals is well known, the AIFMD regime has added an important regulatory aspect that must be taken into account when establishing such structures.
Even though the AIFMD indicates that the AIFMD should not apply to joint ventures, it must be noted that there does not exist an official definition of the notion of “joint ventures”. The intentionally broad definition of AIF means that joint ventures and club deals cannot be excluded a priori from the AIFMD regime. It depends solely on how they will be structured. Therefore, the EU Commission has stressed that joint ventures are not exempted from the AIFMD regime as such, but that each situation should be assessed on its own merits, in order to determine whether the criteria of the AIF-definition are fulfilled. This case-by-case approach is of even greater importance when assessing private equity “Club Deals”, as they typically involve several investment partners who do not necessarily have the same level of control over the management of the assets held by the company.
Whilst most of the existing joint ventures and club deals between – mainly US – private equity and German ship owners, were established before the KAGB entered into force in July 2013, and thus, did not have to comply with the AIFMD regime while being incorporated, the implementation of the AIFMD regime, or of the KAGB respectively, has reset the rules for the structuring of joint ventures and private equity club deals.
For instance, the raising of capital “from a number of investors” cannot be avoided simply by the fact that only one investor exists; it is sufficient and of relevance only if the law or the by-laws of the undertaking do not prevent raising capital from more than one investor. On the other hand, even if the investor is prevented by law (or by its by-laws) from raising capital from a number of investors, the European Securities and Market Authority (ESMA) takes the view that the undertaking should still be regarded as an undertaking which raises capital from a number of investors, if the sole investor invests capital which it has raised from more than one legal or natural person, with a view to investing it for the benefit of those persons, and consists of an arrangement or structure which in total has more than one investor; examples of such arrangements or structures being (among others) such where the sole investor is a fund of funds or a nominee acting as agent for more than one investor. It is also possible that a joint venture or club deal structure that initially did not qualify as AIF, may turn into an AIF if (for example) capital increase measures are being carried out in order to get further “partners” on board. Moreover, the fact that one or more, but not all of the unitholders or shareholders are granted day-to-day discretion or control, should not be taken to show that the undertaking is not a collective investment undertaking.
The aforementioned list is not exhaustive and could be supplemented by a range of further examples. However, the application of the AIFMD regime may not be required depending on how the undertaking is structured.