Q. Paragraph 2(b)(ii) of Part 2 of Schedule 2 to the EC (UCITS) Regulations 2011 refers to closed ended funds constituted under the laws of contract which are "subject to corporate governance mechanisms equivalent to those applied to companies". How can these corporate governance mechanisms be assessed?
A. In assessing whether the corporate governance mechanisms for closed ended funds in contractual form are equivalent to investment companies, the following factors are indicators which can be used as guidance:
• Unit holders' rights. The contract on which the closed ended fund is based should provide for:
(i) right to vote of the unit holders in the essential decision making processes of the fund (including appointment and removal of asset management company, amendment to the contract which set up the fund, modification of investment policy, merger, liquidation);
(ii) right to control the investment policy of the fund through appropriate mechanisms.
• The assets of the closed end
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