Law No. 88-92 of August 2, 1988 on Investment Companies

1 LAW NO. 88-92 OF AUGUST 2, 1988 ON INVESTMENT COMPANIES1 In the name of the people, Having been adopted by the Chamber of Deputies, The President of the Republic promulgates the law whose text follows:

Article 1 (new) (Law No. 2001-83 of July 24, 2001, Art. 3): Investment companies are joint-stock companies whose mission contributes to the promotion of investments and the development of the financial market.

Article 2 (new) (Law No. 2001-83 of July 24, 2001, Art. 3): Investment companies may be established under one of the following two categories:

• fixed-capital investment companies.
• venture capital investment companies. They are governed by the prevailing legislation and regulations unless otherwise provided in this law.

TITLE I FIXED-CAPITAL INVESTMENT COMPANIES

Article 3: Fixed-capital investment companies have as their objective the management, through the use of their own funds, of a portfolio of securities. They are also authorized to carry out operations that are ancillary and compatible with this objective.

Article 4 (new) (Law No. 92-113 of November 23, 1992, Art. 1): Fixed-capital investment companies must satisfy the following conditions: 1- The minimum capital may not be less than 500,000 dinars. However, a deadline expiring on December 31, 1993 is granted to approved investment companies to raise their capital to the minimum level required by this law. 2- They may only own real estate necessary for their operations.

Article 5: The bylaws of fixed-capital investment companies may provide for a declared capital. The subscribed capital may not be less than one-third of the declared capital. However, without prejudice to the provisions of this law regarding declared capital, only the subscribed capital is taken into consideration concerning the rights and obligations of the concerned companies.

Article 6: Where the bylaws provide for a declared capital, and in derogation from the provisions of the Commercial Code, particularly Article 110, the board of directors of a fixed-capital investment company may, within the limit of the declared capital, decide on an increase in subscribed capital by cash contribution without referring to the extraordinary general assembly. The decision to increase the subscribed capital must be taken by a two-thirds majority of the board members, with at least two-thirds of them present.

Article 7: The shares of fixed-capital investment companies whose bylaws provide for a declared capital must be fully paid up upon subscription.

Article 8: The board of directors sets the issue price for shares within the framework of subscribed capital increases referred to in Article 6 above. The deadline reserved for shareholders to exercise preferential rights is set at fifteen days from the date of publication in the Official Journal of the Tunisian Republic of the notice announcing the subscribed capital increase, without observing the provisions of the second paragraph of Article 113 of the Commercial Code. The subscription period for subscribed capital increases is set at two months. At the end of this period, the board of directors decides, as applicable, either to close the subscription for the amounts collected or to cancel these increases.

Article 9: Changes to the declared capital of fixed-capital investment companies are subject to prior authorization by the extraordinary general assembly and to publicity formalities regarding amendments to the bylaws.

Title II VARIABLE-CAPITAL INVESTMENT COMPANIES (Repealed by Law No. 2001-83 of July 24, 2001, promulgating the Collective Investment Scheme Code)

TITLE III VENTURE CAPITAL INVESTMENT COMPANIES

Article 21 (new) (Decree-Law No. 2011-99 of October 21, 2011, Article 1): Venture capital investment companies have as their objective participation, for their own account or on behalf of third parties and with a view to its transfer or sale, in strengthening the investment opportunities and equity of companies established in Tunisia that are not listed, with the exception of those operating in the real estate sector related to housing, and this at a rate of at least 80% of their paid-up capital and at least 80% of each amount made available to them in the form of venture capital funds, other than those originating from foreign financing sources or State budget resources, and this within a period not exceeding the end of the two years following the year in which the subscribed capital was paid up or the payment of each amount made available to them. Newly issued shares on the alternative market of the Tunis Stock Exchange are also taken into account for calculating the employment rate provided in the first paragraph of this Article, within a limit of 30% of said rate. When the shares of a company in which a venture capital investment company holds a stake are admitted to the main market of the Tunis Stock Exchange quotation, they continue to be taken into account for calculating the employment rate provided in the first paragraph of this Article for a period not exceeding five years from the date of admission.

Article 22 (new) (Decree-Law No. 2011-99 of October 21, 2011, Article 1): Venture capital investment companies intervene through the subscription or acquisition of ordinary shares or preferred dividend shares without voting rights, partnership interests, or investment certificates. The stakes of venture capital investment companies must be subject to agreements with promoters setting the terms and deadlines for carrying out transfer or sale operations. No venture capital investment company may hold a majority of the capital on its own. These agreements must not stipulate off-project guarantees or remuneration whose conditions are not linked to the results of the projects. Venture capital investment companies may also intervene through the subscription or acquisition of participatory securities, convertible bonds, and in general all other categories assimilated to equity according to prevailing legislation and regulations. They may also grant advances in the form of current accounts with partners. The limits and conditions of these interventions are fixed by decree. Venture capital investment companies are required, upon the transfer or sale of the securities subject to their interventions or in case of repayment of advances in the form of current accounts with partners, to reinvest the proceeds from these operations under the same conditions and deadlines provided in the first paragraph of Article 21 of this law, except in cases of capital reduction or withdrawal of amounts made available to them in the form of venture capital funds. The proceeds from the transfer or sale to be reinvested equal the price of the transfer or sale, minus any realized capital gain and taking into account any recorded capital loss.

Article 23 (new) (Law No. 95-87 of October 30, 1995, Art. 3): The resources of venture capital investment companies are composed:

• of capital, reserves, and other equity;
• of resources in the form of venture capital funds which include: • resources assimilated to equity whose conditions are linked to the results of projects financed from these resources. • (Decree-Law No. 2011-99 of October 21, 2011, Article 1) Special resources made available to be managed on behalf of third parties; the management of these resources for the account of sophisticated investors is subject to a declaration to the Financial Markets Council. In this case, venture capital investment companies inform the Financial Markets Council of their management rules. Sophisticated investors are defined by decree. The management of these resources for the account of other than the aforementioned investors is subject to approval by the Financial Markets Council. In this case, the Financial Markets Council sets by regulation the rules to be respected for safeguarding investors' funds and ensuring the smooth conduct of operations. Venture capital investment companies that manage, on behalf of sophisticated or non-sophisticated third parties, special resources made available to them are subject to the control of the Financial Markets Council. The conditions, approval procedures, and declaration model are fixed by a regulation of the Financial Markets Council. • allocations originating from the State budget, to be managed pursuant to an agreement concluded with the State. The minimum paid-up capital of venture capital investment companies may not be less than 500,000 dinars.

Article 23 bis (Law No. 2003-80 of December 29, 2003, Art. 51): Venture capital investment companies are required to establish a professional association to ensure the role of intermediary between their members on one hand and the competent public authorities on the other regarding all questions related to the profession. The association's statutes are subject to prior approval by the Minister of Finance after consultation with the Financial Markets Council.

Article 23 ter (Added by Decree-Law No. 2011-99 of October 21, 2011, Article 2): The Financial Markets Council is invested with disciplinary authority over venture capital investment companies that manage, on behalf of third parties, special resources made available to them. The Financial Markets Council may decide, for reasoned grounds, the temporary or permanent, total or partial prohibition of the special resource management activity on behalf of third parties made available to them. The Financial Markets Council proceeds with the withdrawal of the approval provided in Article 23 of this law, either at the request of the approval holder or on its own initiative after hearing the approval holder, in the following cases:

• If no use has been made of the approval within a period of twelve months from the date of its grant,
• If the approval holder no longer meets the conditions that preceded the granting of the approval,
• If the approval holder has not complied with the prevailing legislation or regulations. The effective date of the withdrawal of approval is indicated in the withdrawal decision.

TITLES IV MISCELLANEOUS PROVISIONS

Article 24 (new) (Law No. 2001-91 of August 7, 2001 Art. 7): Investment companies must, within thirty days from their establishment, declare them to the Financial Markets Council by submitting a file containing the company's bylaws, its capital structure, and the composition of its management bodies. (Decree-Law No. 2011-99 of October 21, 2011, Article 1) Investment companies must provide the Ministry of Finance with all information and statistics it requests concerning their activities. Venture capital investment companies that manage, on behalf of third parties, special resources made available to them are required to provide the Financial Markets Council with all information concerning their activities that it requests, the content, periodicity, and submission procedures of which are specified by a regulation of the Financial Markets Council.

Article 25 (new) (Law No. 2001-91 of August 7, 2001 Art. 7): Investment companies may change category, as defined in Article 2 of this law, provided they meet the conditions stipulated by law for their new category and make the declaration provided in Article 24 of this law.

Article 26 (Repealed by Law No. 2001-91 of August 7, 2001 Art. 8) Article 27 (Repealed by Law No. 2001-91 of August 7, 2001 Art. 8)

Article 28: Investment companies established under Law No. 85-108 of December 6, 1985 encouraging financial and banking institutions operating essentially with non-residents are not subject to the operational conditions and control provided in Articles 4, 17, and 27 of this law. However, conditions guaranteeing risk distribution will be provided by the agreement referred to in Article 28 of Law No. 85-108 and also inserted into the bylaws of these companies. However, companies that submit their activities in Tunisia to the provisions of Articles 4, 17, and 27 of this law are authorized to freely acquire and sell Tunisian securities on the Stock Exchange.

Article 29 (new) (Decree-Law No. 2011-99 of October 21, 2011, Article 1): The founder, managing director, general manager, chairman of the management board of an investment company, or one of its board or management members who violates any provision of this law regarding creation and operational conditions, as well as any person or de jure or de facto director of an active venture capital investment company exercising the activity of managing special resources on behalf of third parties without obtaining approval in accordance with this law or continuing to exercise this activity after the withdrawal of approval under Article 23 ter, shall be punished by imprisonment from sixteen days to one year and a fine of two thousand to twenty thousand dinars, or by either of these penalties. The sanction is doubled in case of recidivism.

Article 30: All provisions contrary to this law are repealed, particularly the provisions of Law No. 59-29 of February 12, 1959 establishing investment companies and Law No. 68-11 of May 7, 1968 regarding variable-capital investment companies as amended respectively by Law No. 69-49 of July 26, 1969.

1 As amended and supplemented by Law No. 92-113 of November 23, 1992, Law No. 95-87 of October 30, 1995, Law No. 2001-83 of July 24, 2001 promulgating the Collective Investment Scheme Code, Law No. 2001-91 of August 7, 2001, Law No. 2003-80 of December 29, 2003, Law No. 2005-104 of December 19, 2005, Law No. 2008-78 of December 22, 2008, and Decree-Law No. 2011-99 of October 21, 2011.