Collective investment in infrastructure projects

InfraKAP is a company that develops ideas for collective investment activities, arranges their implementation as part of investment partnership agreements together with specialized industry experts, and carries out the administration of the established funds, engaging highly-qualified service companies.

The legal basis for an investment partnership agreement (hereinafter – IPA) is based on Federal Law No. 335-FZ “On Investment Partnership” dated 28/11/2011, which defines investment targets, distributes roles between investors and their responsibilities, as well as the procedure for making and terminating of the agreement.

IPA is a type of a simple partnership agreement (Chapter 55 of the Russian Civil Code).

In Russia, IPA was formed based on Western practice. Europe and America used the structure of LLP (limited liability partnership), whereunder investors’ funds were raised to be managed by professional managers that received the appropriate remuneration.

IPA is a form of collective investment, subject to which fellow limited partners transfer funds as contributions to apply them towards joint investment activities. Partners carry out joint investment activities (including, but not limited to) as follows:

  • purchase of shares, bonds, financial futures instruments, other securities, as well as shares (stakes, equities) in authorized (joint-stock) capitals of Portfolio Companies, including by making supplementary contributions to increase the authorized (joint-stock) capital of a Portfolio Company, payment of a share in the authorized (joint-stock) capital of a Portfolio Company upon its incorporation;
  • provision of a loan to a Portfolio Company;
  • acquisition of other assets that is allowed under the current laws.

In addition to limited partners, IPA features a category of participants that manages external investments – managing partners, conducting operational activities under IPA (organize investment disposition transactions, service account administration, send reports to investors and fiscal authorities, represent IPA’s interests in the invested facilities and before third parties, etc.) and receiving the appropriate remuneration from the contribution amount.

As a general rule, IPA establishes an investment committee that studies the managing partner’s suggestions and determines, in what projects to invest and subject to which terms and conditions.

IPA’s rate of return is determined as agreed upon by the parties and, generally, is divided into:

  • hurdle (trigger) rate of return, which is defined by the parties as the estimated rate of return for the contributions made (sent to investors upon receiving revenues from investment activities);
  • • charge for success: the category of return on investment obtained, under IPA, more than the trigger rate of return. Generally, it is distributed in proportions from 70 (investors)/30 (managing partners) to 80 (investors)/20 (managing partners).

The IPA term cannot be over 15 years, the number of participants – no more than 50.

IPA is executed by entering into an agreement with mandatory notarization.

As IPA refers to civil law contracts, all the taxes on the income, received under IPA, are paid directly by its participants.

Unlike other forms of collective participation or participation in business companies (investors have mutual funds or shares in investing companies), investors under IPA retain shared ownership in investment targets, what guarantees protection of their interests.