Opportunities for mutual funds for financing in a group of companies

All this is really applicable to mutual funds. A mutual fund, as a tool, has unique properties. However, the high cost of “maintenance” due to the need to comply with a number of mandatory procedures makes mutual funds inaccessible and inappropriate for mass use.

Having rich experience in structuring a business using bold decisions and non-standard combinations of various organizational and legal forms, we will make a small remark – the effects achieved with the help of mutual funds are purely individual.

In one of our projects, at the request of the Customer, several scenarios for using mutual funds for conducting development projects were considered. One of them is the non-obvious ownership mechanism.

Let us illustrate with an example. With minor adjustments, the findings will apply to any other business.

Confidentiality
The mutual fund is attractive for its possibilities of using non-obvious ownership as a tool, since information about the owners of the units is non-public and can be provided only at the request of a limited number of persons, on the grounds provided for by law.

Due to the peculiarities of legislation and lending to developers, mutual funds, as a rule, cannot directly own shares / shares in legal entities – developers. Therefore, traditionally a mutual fund is endowed with shares in the parent company of developers in the form of an LLC. That is, the mutual fund becomes an additional link between the participants and the parent company.

In the information about the participants of the LLC in the Unified State Register of Legal Entities, only the name of the mutual fund, information about the management company, the size of the owned share and the nominal value are indicated. The Unified State Register of Legal Entities will not contain information on the beneficiaries – the owners of the unit investment funds.

However, in the case of developers, the absence of real participants in the Unified State Register of Legal Entities does not mean anything.

Developers are currently required to publicly disclose certain information in the Unified Housing Information System. We will not go into details – the list is long. But, what is important, developers are obliged to disclose information about their participants and beneficiaries (clause 3.1, part 1, article 20 of Federal Law No. 214-FZ of December 30, 2004).

Thus, although a unit investment fund will be indicated in the Unified State Register of Legal Entities as a participant, it will be necessary to disclose not only a unit investment fund as a participant in an LLC, but also the ultimate beneficiaries – individuals and legal entities, who here act as the owners of the mutual fund. Anyone can get acquainted with this information on the resource of the same name.

In addition, since the construction of residential buildings is carried out at the expense of targeted lending, banks often ask for a personal guarantee of the beneficiaries.

In such a situation, there is no need to talk about the implementation of indirect ownership.

Businesses that resort to lending with a guarantee of beneficiaries should say goodbye to the illusion of unobvious ownership through mutual funds.

Tax effect
A mutual fund is not a legal entity, therefore its income is not subject to income tax (In accordance with clause 2 of article 11, clause 1 of article 246 of the Tax Code of the Russian Federation, according to Russian tax legislation, organizations (legal entities) are recognized as payers of income tax).

This distinctive feature provides an extremely attractive opportunity for using unit investment funds as a financial center, which allows you to freely redistribute money within a group of companies without excessive tax consequences.

Let’s continue with the example of the mentioned project.

As in the previous scenario, the mutual fund is endowed with shares in the parent company of developers. However, in this case, the mutual fund becomes a financial center in a group of companies:

accumulates developers’ profits from completed projects through dividends paid by the parent company,

further, it finances developers through loans.

Moreover, each of the steps described will not lead to tax losses.

The payment of dividends to the parent company is subject to income tax at the rate of 0% based on the exemption provided for in paragraphs. 1 p. 3 art. 284 of the Tax Code of the Russian Federation (ownership of at least 50% shares within 365 days).

Any income of a mutual fund is not subject to income tax.
Thus, the redistribution of money within the group of companies of the developer takes place without tax consequences.

As we can see, the mutual fund allows you to get a certain tax effect. However, in any case, it is necessary to correlate this effect with the cost of servicing such a structure.

Let’s continue with the example of the mentioned project.

Service cost
We will not make discoveries here. Serving a mutual fund does not cost little money.

Firstly, the unit investment fund operates through a management company that carries out trust management of the unit’s property. Trust management is a professional financial activity. The management company must comply with the licensing requirements and have an appropriate license (subparagraph 7, paragraph 2, article 1 of the Federal Law of May 4, 2011 No. 99-FZ “On licensing certain types of activities”).

Secondly, the property of the mutual fund is recorded in a specialized depository (clause 1 of article 42 of the Federal Law of November 29, 2001 No. 156-FZ “On Investment Funds).