What is a Free Investment Company (SIL)?
The Free Investment Company (‘SIL’) is a type of collective investment undertaking (‘CII’) that is little known, but which enjoys significant advantages, both from the point of view of flexibility in its types of investment and from a commercial and taxation point of view.
To such an extent that, from our professional experience at Devesa, we have observed a growing interest not only in setting up this type of investment vehicle, but also in transforming the classic open-ended investment companies (SICAV) into Free Investment Company.
To begin with, the Free Investment Company, in contrast to the more well-known investment funds, has its own legal personality. This means that it can directly buy and hold a wide range of assets (e.g. shares, stocks, real estate or works of art) and contract directly with third parties.
As a practical consequence of this separate legal personality, the Free Investment Company can contract freely (never better said) without, unlike investment funds, needing a management company to contract with third parties. This significantly simplifies its incorporation, its operations and, a priori, the cost structure of the vehicle.
Its tax treatment is extremely favourable, paying 1% Corporation Tax.
Requirements for setting up a Free Investment Company (SIL)
They are regulated by Law 35/2003, of 4 November, on Collective Investment Undertakings, as well as its implementing regulations approved by Royal Decree 1082/2012, of 13 July, according to which:
- The SIL must necessarily take the form of a public limited company and have a share capital of at least EUR 2.4 million. This initial share capital must be held by at least 25 shareholders, who must have individually subscribed a ticket equal to or greater than 100,000 EUR , in the case of professional or qualified investors. While traditionally shareholders have been required by law to be qualified (prior financial training and experience), the recent RD 1180/2023 also gives retail investors access to this type of vehicle from 10,000 EUR, provided that they are covered by advisory contracts with specialised financial institutions and under certain limits with respect to their financial assets.
- In addition to the requirements for an ordinary public limited company (incorporation in a public deed and registration in the relevant territorial Commercial Register), prior authorisation from the CNMV and subsequent registration in a special register for this type of entity is required for the creation of a Free Investment Company.
- A key aspect to take into account regarding the operation of the SIL is that its net asset value must be calculated on a quarterly basis, except for those cases in which the planned investments make it advisable to calculate it after this period and provided that it does not exceed a half-yearly period.
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