LEGAL PERESPECTIVE: Private Investment Undertakings (PIU) by Dr AbdelGadir Warsama, Legal Counsel

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Dr AbdelGadir Warsama, Legal Counsel

Private Investment Undertakings (PIU) represent a lucrative investment opportunity in Bahrain. We will highlight the main info regarding PIU for easy reference. PIU are defined as investment undertakings / funds that are registered with CBB, and may be initiated by or offered to high net worth individuals or institutional investors, and impose a minimum initial investment / participatory interest of USD 3 million (or equivalent in any other currency).

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As per regulations of CBB, the PIUs must be registered with CBB prior to being offered to high net worth investors. The High Net Worth investors are, Individuals holding financial assets (either singly or jointly with their spouse) of USD 25 million or more, or companies, partnerships, trusts or other commercial undertakings, which have financial assets available for investment of not less than USD 25 million, or Governments, supranational organizations, central banks or other national monetary authorities, and state organizations whose main activity is to invest in financial instruments (such as state pension funds).

Applications for registration are to be made only by the operator/ custodian of the PIU. Herein, operator means a person undertaking the functions of establishing, operating or winding-up a CIU \ PIU. Whereas, a custodian is a person mandated to hold and safeguard the financial instruments and other assets of a person, as in a collective investment undertaking.

A request for registration, must be made by submitting a formal letter containing the structure of the PIU and the relevant persons to the PIU, and signed by authorized signatory, together with all supporting documentation. Required docs include, Draft Private Offering Document, Draft Memorandum and Articles of Association or Trust Instrument (or trust deed, where appropriate), passports and CVs of directors, and board resolution of the operator approving the application to seek registration of the PIU. The request for registration must identify a representative as the person responsible for submitting the application for the PIU. This person must be, an officer of the operator/ custodian of the PIU, and an individual capable of being contacted by CBB.

The operator/ custodian of a PIU together with the directors of the PIU, or trustees, as appropriate, must ensure that the documents constituting the PIU, do not contain false or misleading info, do not contain any provisions that conflict with either CBB requirements or other laws and regulations, that may apply to the PIU operator/ custodian, fund manager and other relevant persons to the PIU, and re not unfairly prejudicial to the interests of the PIU participants, either generally or to a particular class of PIU participants. An applicant may appoint a representative, such as a law firm to prepare and submit the application. An applicant may also appoint a professional consultant to prepare and submit the application, in which case the application has to be reviewed by a professional law firm or internal legal counsel prior to submission to CBB. In all cases, the applicant retains full responsibility for the accuracy and completeness of the application, and is required to certify the application form accordingly. CBB will acknowledge requests for registration of PIUs within 2 business days and provide formal feedback (if any) on the request within 5 business days. This feedback will confirm whether the request is complete, or whether further information/documents are required. Should further information/documents be required, then the applicant has 90 calendar days from the date of CBB feedback in which to complete the application, failing which CBB reserves the right to cancel the request and require the submission of a new one. To be registered, an applicant must demonstrate compliance with the conditions specified in CBB regulation. Should the request for registration be accepted, CBB will notify the applicant in writing of the fact. The registration may be subject to additional conditions being met. Other details will follow.

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