Definition and legal basis:

An investment stock corporation with variable capital (InvAG) is a special form of stock corporation that is designed as an investment fund. It is an open-ended investment company in which the share capital is variable and changes constantly through the issue and redemption of shares. The legal basis for InvAGs can be found in the German Capital Investment Code (KAGB), in particular in Sections 108-123 KAGB.

The InvAG was introduced in Germany with the 2004 Investment Modernization Act and further regulated by the KAGB in 2013. It represents an alternative to traditional investment funds in contractual form and is based on international models such as the SICAV (Société d’Investissement à Capital Variable) in Luxembourg and France.

Main features:

1. variable capital: The share capital adjusts automatically through the issue and redemption of shares.

2. open structure: Investors can join the company or redeem their shares at any time.

3. separation of management and assets: an external capital management company (KVG) manages the fund assets.

4. investment limits and risk diversification: Subject to the provisions of the KAGB on diversification.

5. tax transparency: tax benefits if certain conditions are met.

Types of InvAGs:

1 UCITS-InvAG: Complies with the EU directives for undertakings for collective investment in transferable securities (UCITS).
2. AIF-InvAG: Alternative investment funds with potentially broader investment strategies.

Structure and organs:

1st Management Board: Responsible for management, but not for investment management.
2. supervisory board: supervises the management board and appoints the external KVG.
3rd Annual General Meeting: Decides on fundamental company matters.
4. depositary: safekeeping the assets and monitoring certain transactions.
5. external KVG: responsible for portfolio management and risk management.

Foundation and approval:

The formation of an InvAG requires:

1. preparation of the Articles of Association and the Sales Prospectus
2. Appointment of an external KVG and a depositary
3. Approval by the Federal Financial Supervisory Authority (BaFin)
4. Entry in the commercial register

The minimum capital on formation is EUR 300,000. InvAG must achieve net assets of at least EUR 1.25 million within six months of admission.

Types of shares and share certificates:

InvAGs can issue different share classes with different rights and obligations:

1. company shares: are held by the founders and confer voting rights.
2. investment shares: are issued to investors and represent the participation in the fund assets.

The shares are generally registered shares and can be structured as no-par value shares or par value shares.

Investment policy and risk management:

The investment policy of an InvAG must comply with the requirements of the KAGB and be described in detail in the sales prospectus and the investment conditions. Depending on the type of InvAG (UCITS or AIF), different investment limits and risk diversification rules apply.

The external asset management company is responsible for implementing the investment policy and risk management. It must have suitable risk management systems in place to identify, measure, control and monitor all relevant risks.

Valuation and pricing:

The value of the shares (net asset value, NAV) is calculated regularly, but at least once a week. The assets are valued in accordance with the rules set out in the KAGB. The issue and redemption price of the shares is based on the NAV, but may include premiums or discounts.

Tax aspects:

If certain conditions are met, InvAGs enjoy tax advantages:

1. exemption from corporation and trade tax at fund level
2. Taxation of income only at investor level
3. Possibility of applying the partial exemption procedure for certain types of funds

The exact tax treatment depends on the type of InvAG and the composition of the fund assets.

Advantages and disadvantages:

Advantages:
– Flexibility through variable capital
– Possibility of stock exchange listing
– Transparent corporate structure
– Potential tax advantages
– Adaptability to different investment strategies

Disadvantages:
– More complex structure compared to traditional investment funds
– Higher set-up and administration costs
– Stricter regulatory requirements
– Less familiar to investors

Current developments and trends:

1. increasing importance of ESG criteria (environmental, social, governance) in investment policy
2. digitization and automation of processes
3. growing demand for specialized and thematic funds
4. adaptation to new regulatory requirements (e.g. sustainability reporting)

Summary:

The investment stock corporation with variable capital is an innovative and flexible legal form for investment funds in Germany. It combines the advantages of a stock corporation with those of an open-ended investment fund and offers investors a transparent and regulated investment opportunity. Although InvAGs are less widespread in Germany than traditional investment funds, they offer interesting opportunities for specialized investment strategies and could gain in importance in the future. It is important for investors and fund managers to carefully examine the specific legal, tax and operational aspects of this legal form in order to weigh up its advantages and disadvantages compared to other fund structures.