AIFMD II and the current situation
The original AIFMD of 2011 established a basic framework for alternative investment fund managers in the EU. Over the more than a decade of its existence, the market has changed significantly: credit-providing funds have grown, the use of illiquid assets has increased, and extensive outsourcing of management has led to discussions about so-called letterbox companies. AIFMD II responds to these trends with targeted regulation whilst harmonising the rules for alternative and standard funds (UCITS), thereby increasing the overall consistency of fund regulation in the EU.
As an EU directive, AIFMD II must undergo the process of transposition into national legal systems. The Czech amendment to the ZISIF, however, does not merely envisage a mechanical adoption of European rules – it also contains a number of national provisions addressing issues arising from domestic application practice, including the removal of certain requirements that go beyond EU law (goldplating).
Status of the legislative process
The government’s draft amendment to the ZISIF was submitted to the Chamber of Deputies on 7 November 2025. It is unlikely that the transposition of AIFMD II will take place by the set deadline of 16 April 2026.
Following the first reading, the amendment will be discussed in committees, where technical amendments and proposed amendments may be tabled. The bill must then pass a second and third reading in the Chamber of Deputies, proceed to the Senate and be signed by the President. Any delay – such as a Senate veto or other political complication – further increases the already high risk of late implementation.
In practice, it cannot be ruled out that the law will be published in the Collection of Laws at the last minute and will come into force almost immediately upon publication. Fund managers should therefore not wait for final approval, but should start preparing for the new requirements now.
Key changes introduced by the ZISIF amendment
1. New framework for credit funds
The most far-reaching change is the introduction of a comprehensive regulatory framework for so-called loan-originating funds – funds whose primary activity is the provision of loans. AIFMD II introduces several key rules in this area.
Prohibition of the “originate to distribute” model: A fund may not grant a loan solely for the purpose of its immediate sale. When selling defined loans, the fund must retain at least 5% of the loan’s value as so-called “skin in the game”.
Fixed leverage caps: Excessive indebtedness of funds providing loans will be restricted by binding limits: a maximum of 175% of NAV for open-ended funds, and 300% of NAV for closed-ended funds.
Fund structure: Loan-granting funds will generally be required to be closed-ended. Open-ended funds will be permitted only in exceptional cases, and only provided that enhanced liquidity management requirements are met.
2. Mandatory liquidity management tools
For open-ended funds redeeming units at investors’ request, the amendment introduces an obligation to implement at least two liquidity management tools (LMTs) from the harmonised list set out in AIFMD II. The aim is to strengthen funds’ resilience to sudden capital outflows in situations of heightened market volatility. The harmonised list of tools includes, amongst others:
- redemption gates – limiting the volume of redemptions in a given period to a specified percentage of NAV,
- swing pricing – a mechanism for adjusting the net asset value (NAV) so that transaction costs are borne by the investors who cause them,
- suspension of share issuance and redemptions – a temporary and complete halt to all transactions,
- extension of the redemption period,
- redemption fee,
- dual pricing – a mechanism for setting two prices – a higher price for buying and a lower price for selling units,
- non-cash settlement on redemption – a professional investor receives only a proportionate share of the fund’s portfolio assets upon redemption,
- separate portfolio – problematic assets are segregated into a separate part of the fund,
- anti-dilution levy – a fee paid to the fund upon the purchase and sale of units.
The introduction of these mechanisms will require amendments to fund statutes and the establishment of new back-office processes. This is insurance for crisis situations, not a restriction on the normal functioning of the market.
3. European passport for depositaries
The amendment introduces the so-called European passport for depositaries: a bank from another EU Member State will now be able to act as a depositary without having to maintain a branch in the Czech Republic. This is subject to the individual approval of the Czech National Bank. This opening up of the market increases competition among depositaries, which may in future lead to more favourable fees and a wider choice of depositary services for domestic funds.
4. Tighter rules on the delegation of activities
AIFMD II tightens the rules on the outsourcing of key activities by fund managers. Managers will be required to report the structure of delegated activities in detail to the Czech National Bank. The aim is to curb the practice of so-called letterbox companies – managers who are merely empty shells formally holding a licence, whilst all substantive management activities are carried out by third parties. The regulator will focus on ensuring that every manager possesses genuine management capabilities and that the level of delegation does not exceed an acceptable limit.
5. Deregulation and reduction of the administrative burden
In addition to transposing European rules, the amendment also removes certain redundant national requirements. A key change is the abolition of the statutory minimum share capital for investment funds, which has been repeatedly criticised as an unnecessary barrier to new funds entering the market. The amendment also standardises the approval process for senior management and removes certain interpretative uncertainties from current practice. The aim is to reduce the administrative burden, increase the competitiveness of the Czech fund industry and strengthen legal certainty.
Practical implications for fund managers
The implementation of AIFMD II through the ZISIF amendment will require fund managers to take specific steps in several areas.
1) Review of investment strategies and documentation: Managers should analyse whether their funds meet the definition of a loan-originating fund and amend their articles of association and contractual documentation accordingly. For open-ended funds, it is necessary to assess which LMT instruments are suitable for the given investment strategy and investor profile.
2) Liquidity and risk management systems: The introduction of mandatory LMT instruments requires not only formal incorporation into the fund’s documentation, but also the actual configuration of back-office processes and systems, including integration with custody and settlement systems.
3) Contractual relationships and delegation: Managers should audit existing outsourcing arrangements and prepare for stricter reporting obligations to the CNB regarding the delegation of key activities.
4) Monitoring the legislative process: It will be crucial to monitor developments in the legislative process on an ongoing basis and prepare for the very short timeframe between the law’s approval and its entry into force.
Conclusion
AIFMD II does not represent a revolution, but a significant evolution of the fund market, which will impact the day-to-day operations of fund managers in the manner described above. Crucially, the timeframe for implementation in the Czech Republic is extremely tight. Fund managers who wait for the final approval of the amendment run the risk of not having enough time to make the necessary adjustments to their articles of association, internal processes and systems. Active preparation for the new requirements is therefore essential right now – regardless of exactly when the law comes into force.
