French Monetary and Financial Code
In forceFor the assessment of the 60% quota set out in I of Article L. 214-31 :
1° The numerator is made up of the subscription or acquisition price of the securities or rights in the portfolio and the book value of the other assets.
The denominator is made up of the paid-up amount of subscriptions to the fund. This amount is reduced by unit redemptions requested by unitholders and carried out under conditions such that the fund rules do not allow the provisions of VII of article L. 214-28 to be invoked against them, and increased by sums reinvested by unitholders in fulfilment of the reinvestment obligation set out in article 163 quinquies B of the General Tax Code;
2° When a company whose securities or rights are included in the 60% quota is wound up by court order, the cancelled securities or rights are deemed to be held as assets at their subscription or acquisition price for five years from the date of the judgment closing the liquidation; when a company whose securities or rights are included in the 60% quota is experiencing difficulties likely to jeopardise its ability to continue as a going concern within the meaning of article L. 234-1 of the Commercial Code and is wound up out of court under the conditions defined in articles L. 237-1 to L. 237-13 of the Commercial Code or is the subject of a capital reduction followed by a capital increase under the conditions defined in article L. 224-2 of the Commercial Code, the cancelled securities or rights are deemed to have been maintained as assets at their subscription and acquisition price for a period of five years from the date of the decision by the competent bodies of the company;
3° When securities or rights included in the 60% quota are sold, the securities or rights sold are deemed to be held as assets at their subscription or acquisition price for a period of two years from the date of sale. After this period, if the fund distributes or redeems units for the proceeds of the sale, the amount of the distribution or redemption that has not been deducted under the provisions of 1° is deducted from the denominator up to the subscription or acquisition price of the securities or rights sold. As from the date on which the fund may enter a pre-liquidation period as referred to in articles R. 214-71 and R. 214-72, the denominator may, where applicable, be reduced by the amount of the distribution of the sale price of securities or rights not included in the 60% quota, up to the limit of the subscription or acquisition price of these same securities or rights, provided that the 60% quota has been reached before this date and that any new subscriptions paid up by the fund are used to cover costs or to make additional investments in securities or rights already included in the assets;
4° When securities or rights received in exchange for securities or rights included in the 60% quota are not themselves eligible for these quotas, the securities or rights delivered in exchange are deemed to be held in assets at their subscription or acquisition price for two years from the date of exchange or until the end of the period during which the management company has undertaken to hold the securities or rights in the fund's assets, whichever is longer;
5° New subscriptions to a local investment fund are taken into account from the closing balance sheet for the financial year following that in which they were paid up;
6° In the event of non-compliance with the 60% quota at the time of a half-yearly inventory, the fund is not deprived of its status if it rectifies the situation at the latest at the time of the next inventory, provided that the management company informs the tax department with which it files its income tax return within one month of the inventory showing that the quota has not been complied with, and provided that this is the first failure to comply.
