Collective investment undertakings are legally defined as follows:
а) The only aim is the collective investment in transferable securities and/or in other – specified in the law – liquid financial assets of capital attracted through public offering, the functioning of which is in conformity with the principle of risk distribution.
b) The share units of which are at the request of their holders subject to redemption or re-purchasing, whether directly or indirectly, from the assets of these undertakings. The actions undertaken by UCITS for the purpose of avoiding any significant difference between the exchange value of its share units and the value of its net assets shall be equalized to such redemption or re-purchase.

According to the law of Liechtenstein a UCITS may be established in the form of a contract (managed by an “investment fund” company), in the form of a trust (“collective trust”) or in the form of articles of association (“investment company”). While collective trust is widely spread in Liechtenstein, in Germany, for example, the predominant form is the contractual form.

Other essential characteristics of UCITS are that they can be publicly placed and in this way they are generally directed towards a wide circle of people. The reason for this is that a UCITS is intended for small investors’ placement. For this reason the European Directive and the law of Liechtenstein contain broad regulations concerning investor protection.
Prerequisites for licensing

The Financial Market Authority (FMA) must issue a license to the UCITS after the prior approval of:
a) the application of the licensed company or in case of self-management of the licensed investment company for management of the UCITS;
b) the election of a depository; and
c) the founding documents.
Application and licensing procedure

The FMA must send within three working days after the receipt of the complete application a confirmation of the receipt thereof. Within ten working days after the receipt of the full documentation the FMA must make a decision in relation to the application. The time limit can be extended to no more than two months after the receipt of the full documentation, if this is needed to protect the investors or the public interest. In order to meet these short time limits it is necessary to use document forms.
Authorised assets

The UCITS can invest the assets on account of its investors exclusively in one or more of the following assets (summary):
a) Securities and money market instruments
b) Securities from new issues
c) Shares in UCITS and other collective investment undertakings comparable to UCITS
d) Demand or term deposits having a term of a maximum of twelve months in credit institutions
e) Derivatives, the underlying asset of which are the above assets or financial indexes, interest rates, exchange rates or currencies
f) Money market instruments that in the presence of certain prerequisites are not traded on a regulated market