End of life of private equity funds: the AMF amends its General Regulation and policy

The relevant amendments to the AMF General Regulation were approved by the decision of 12 November 2024, published in the Official Journal of the French Republic on 5 December 2024.

Update of policy in view of the extension of the maximum legal lock-up period

The AMF has updated Position-Recommendation DOC-2012-11 to take account of the extension (from 10 to 15 years) of the maximum lock-up period for redemption requests for units in private equity funds authorised subsequent to the enactment of the Attractiveness Law No. 2024-537 of 13 June 2024.

Information in fund rules on the main grounds for extending the life of a fund

The standard rules for private equity funds (Annex VII of Instruction DOC-2011-22) have been supplemented to include clarifications as regards the main grounds that may lead a portfolio asset management company to exceptionally extend the life of a fund.

Warnings in promotional marketing materials

In its position-recommendation DOC-2012-11, the AMF states that promotional marketing materials for private equity funds must mention that the management company may decide that it is in the interest of unitholders to extend the life of the fund beyond the scheduled date on an exceptional basis.

Moreover, a new Article 422-120-14-1 of the General Regulation requires a warning to be included in the promotional marketing materials of the private equity fund if, over the ten years prior to the fund’s authorisation date, the management company has not respected the lifespan of at least 50% of the retail or professional private equity funds that it manages or has managed. In addition, two conditions of materiality must be met for a warning to be required:

• the management company must manage or have managed at least one other retail private equity fund; and
• the management company must manage or have managed at least three retail or professional private equity funds that have reached the end-of-life date stipulated in their constitutive documents.

The provisions of Article 422-120-14-1 do not apply to funds whose management or liquidation function has been taken over by or transferred to another management company. Position-Recommendation DOC-2012-11 sets out the content of the warning.

Informing unitholders of the start of liquidation

The AMF has added a standard format for a letter to unitholders in the event of the winding-up of a private equity fund at Annex X of AMF Instruction DOC-2011-22. This standard format has also been appended to the Guide for writing letters to fundholders of authorised CIUs.

In addition, since a standard template of a letter to investors is now dedicated to the winding-up of private equity funds, the AMF has:

• deleted the information specific to this type of fund from the standard template of the letter to investors in relation to the winding-up of authorised CIUs appended to the said Guide; and
• deleted this standard template letter to investors in relation to the winding-up of authorised CIUs, which appeared at the end of Annex IX of Instruction DOC-2011-22.

Introduction of a half-yearly report on fund liquidation progress

In accordance with the new Article 422-120-18 of the General Regulation, management companies managing private equity funds must now send the AMF a half-yearly report on the liquidation of these funds from the moment they begin winding up, in accordance with the conditions set out in Article 35 of Instruction DOC-2011-22.

Distributions to be made at least annually during the liquidation period

A new Article 422-120-17 of the General Regulation establishes the principle that, during the liquidation phase of private equity funds, distributions shall be made at least annually, provided that two cumulative criteria are met to prevent economically irrelevant distributions.

Clarification of the options available to management companies in the event of difficulties in liquidating residual participating interests

In its Instruction DOC-2011-22, the AMF lists the options available to management companies that have failed to dispose of some of the participating interests of a private equity fund that is being liquidated. In particular, they may keep the fund alive, or use a continuation fund, a successor fund or a hive-off vehicle. The AMF specifies the procedures for informing investors in each of these circumstances.

Communication by investors of their bank details prior to subscription

In order for the management company to be able to pay distributions and redemptions of units by bank transfer, a new Article 422-120-16 of the General Regulation requires that the bank details of holders of units in private equity funds established after 5 December 2024 be communicated to the management company prior to the subscription of units and in the event of subsequent changes. This measure limits loss of contact with the holder and the number of payments that cannot be executed as a result. Instruction DOC-2011-22 specifies the bank details to be provided on the fund subscription form.

AMF communication mechanism to support the takeover of collective investment undertakings in liquidation by a new management company

In addition to Articles 316-7 and 321-6 of the General Regulation, the AMF has introduced a communication mechanism that consists, where appropriate, of indicating on its website the conditions under which a portfolio asset management company is taking over the management of funds that were initially managed by another portfolio asset management company whose authorisation has been withdrawn, thereby helping to limit the reputational risk for acquiring portfolio asset management companies. This system is not limited to the management of private equity funds; it applies to all collective investment undertakings.