New Swedish corporate fund structure presented by the Fund Market Inquiry

The Swedish Fund Market Inquiry has presented a proposal (SOU 2025:117) for a new law on corporate fund structures with variable capital (referred to as the Open-Ended Investment Company Act).

Key points from the proposal:

• A new corporate fund structure (“Fund Company”) for UCITS and AIFs, with characteristics designed to be suitable for funds
• The Fund Company will have a variable share capital and greater flexibility around share classes and governance, including differentiation of voting rights
• The Fund Company will facilitate improved operational efficiency for AIFs, including improved redemption mechanics and greater flexibility on continuous distributions to investors without the need for new audited financial statements

The purpose of the inquiry has been to strengthen the competitiveness of the Swedish fund market. To enable Swedish actors to compete on an equal footing with those in other EU countries, a new corporate fund entity is proposed. Such structures are common in the international market, where the dominant structure is the Luxembourg SICAV (Société d’Investissement à Capital Variable). 

The new Fund Company may be used to form both UCITS (Sw. värdepappersfonder) (referred to as “investment companies” in the proposal) and alternative investment funds (referred to as “AIF-companies”). It may be noted that AIF-companies may be open-ended and closed-ended. The proposal further allows investment companies to create sub-funds.

The activities of the Fund Company are to consist exclusively of making collective investments for investors. As with Swedish limited liability companies, shareholders will not have any personal payment liability. Instead of having employees, the Fund Company will be managed by an external fund manager (a Swedish or EEA management company or AIF manager). The Fund Company must have a board whose primary task is to appoint and supervise the activities of the external fund manager. 

The share capital of the Fund Company will be variable and consist of the total value of the company’s assets minus its liabilities. New shares may be issued immediately upon the investor’s capital contribution. Fund Companies may issue different share classes with different terms. Unlike a Swedish limited liability company, there are no limitations on differences in voting rights. This means that the external fund manager can hold a small portion of the fund’s capital, yet control the general meeting through shares with multiple votes. 

The new law is intended to complement the regulatory rules in the Swedish Alternative Investment Fund Managers Act (Sw. lagen (2013:561) om förvaltare av alternativa investeringsfonder), and the Swedish UCITS Act (Sw. lagen (2004:46) om värdepappersfonder), both of which still apply to activities carried out through a Fund Company. 

UCITS investment companies will be subject to the same income tax rules as UCITS, and their shareholders will be taxed in the same way as unit holders in other UCITS. AIF-companies will essentially be taxed in the same way as Swedish limited liability companies, and shareholders in an AIF-company will be taxed in the same way as shareholders in a Swedish limited liability company. 

The proposal is considered a major step in the right direction, particularly with regard to the proposals concerning investment companies, where the market has long called for a corporate fund structure for UCITS. Our initial view is therefore that, together with the proposal on tax-transparent UCITS, this may prove useful for the UCITS market. In relation to AIF-companies, our initial view is that the proposal represents several steps in the right direction that may facilitate matters for the market. Examples include proposals on limited access to the shareholder register, an absence of distribution restrictions, an absence of limitations regarding voting value differences and more efficient redemption possibilities. Furthermore, distributions could be made in a more efficient and flexible manner. However, we note that the proposal does not go as far as the market had hoped in certain respects, particularly in relation to certain types of funds, such as debt funds. 

The new law is proposed to enter into force on 1 July 2027. 

For questions, please contact:

Carl Johan Zimdahl, Partner, carl.johan.zimdahl@msa.se

Oscar Gerdhem, Senior Associate, oscar.gerdhem@msa.se

Caroline Karlsson, Senior Associate, caroline.karlsson@msa.se

Oliver Friberg, Associate, oliver.friberg@msa.se