On 27 March 2023, draft law No. 8183 (the “Draft Law”) has been submitted to the Luxembourg Parliament (Chambre de Députés). The Draft Law proposes to amend the following Luxembourg laws:
- the law of 15 June 2004 as amended, relating to the investment company in risk capital (SICAR) (the “SICAR law“);
- the law of 13 February 2007 as amended, relating to specialised investment funds (SIF) (the “SIF law”);
- the law of 17 December 2010 as amended, relating to undertakings for collective investment (UCI) (the “UCI law”);
- the law of 12 July 2013 as amended, on alternative investment fund managers (AIFM) (the “AIFM law”); and
- the law of 23 July 2016 as amended, on reserved alternative investment funds (RAIF) (the “RAIF law”).
The Draft Law includes relevant provisions of draft law No. 6936 (introduced in 2016), which has been withdrawn from the roll.
Objective
The objective of the Draft Law is to improve and modernise the Luxembourg toolbox for investment funds and thereby increase the attractiveness and competitiveness of the financial sector. The Draft Law amends the five sectoral laws, which currently regulate investment funds and fund managers in Luxembourg.
Main Amendments
The most notable amendments proposed by the Draft Law are as follows:
- Certain of the proposed amendments are common to the SIF, RAIF and SICAR laws, as follows:
- to modify the definition of “well-informed investor” (investisseur averti) contained in the SICAR law, the SIF law and the RAIF law respectively, in order to reinforce the coherence between the laws and to align the Luxembourg regime with the European standard, by referring to the professional investor concept under Directive 2014/65, updating the legislative references, allowing an AIFM to evaluate the status of a well-informed investor and lowering the current investment threshold from EUR 125,000 to EUR 100,000;
- to extend the period by which the minimum capital must be reached, for funds governed by the SICAR law, the SIF law, and the RAIF law, from 12 months to 24 months;
- providing that the issue and redemption of shares/units would be prohibited where the fund has no depositary or upon liquidation or insolvency of the depositary;
- removal of the reference to the two-month notice period applicable to the replacement of the depositary and the addition of a requirement to replace the depositary within the notice period provided under the depositary agreement, failing which the CSSF will remove the fund from the official list; and
- to clarify the rules applicable to the appointment and duties of the supervisory commissioner if the fund is liquidated.
- The SIF Law and RAIF Law are to be specifically amended as follows:
- to clarify that a SIFs minimum capital can also include the value of any amount constituting partnership interests and also that the requirement that a SIF’s capital be entirely subscribed and paid up to 5% only applies to the société anonyme, société en commandite par actions and the société à responsabilité limitée;
- In order to encourage investment into European Longer Term Investment Funds (“ELTIFs”) it is proposed to amend the SIF Law and RAIF Law to provide that investments into ELTIFs by SIFs or RAIFs are exempt from subscription tax; and
- Removal of the requirement to do a constat de constitution for a RAIF that has been incorporated before a notary.
- The SICAR Law is to be updated in light of the experience gained by the CSSF and to align it with similar provisions of the SIF Law:
- to implement the practice developed by the CSSF regarding conditions of delegation by a SICAR;
- to require that the persons responsible for portfolio management be subject to the CSSF’s prior approval;
- to update the CSSF of any material amendment to the information pursuant to which the CSSF based its authorisation of the SICAR ; and
- to prohibit the issue of Shares/units in a SICAR from the date of the event triggering its liquidation.
- The changes to the UCI Law largely concern Part II Funds and management companies:
- it is proposed to introduce the possibility for SICAVs subject to Part II of the UCI Law to adopt, in addition to the form of a public limited company, the form of a partnership limited by shares, a limited partnership, a special limited partnership, a limited liability company or a cooperative society organised as a public limited company;
- In relation to Part II Funds it is proposed to increase the period by which the minimum capital is to be reached, from 6 to 12 months;
- It is proposed to remove the requirement for units/shares of closed ended funds to be issued at NAV;
- Clarification that the provisions of Article 100 of the UCI law relating to foreign undertakings for collective investment, does not apply to the marketing to retail in Luxembourg of units/shares of AIFs carried out in accordance with the provisions of the AIFM Law; and
- Amendments to the regime for judicial and non-judicial legislation of management companies.
- Finally, the most notable amendments to the AIFM law include:
- A proposal to introduce the possibility for AIFMs to use tied agents, thus aligning the legal framework applicable to them with that of management companies authorised under Part IV, Chapter 15 of the UCI law;
- Similar amendments to the UCI Law in order to update the regime for judicial and non-judicial legislation of AIFMs; and
- A proposal to modify the provisions of the AIFM Law governing marketing of AIFs to retail investors in order to add SIFs and SICARs to those funds subject to supervision designed to protect investors and thus remove any ambiguity about offering such funds to well-informed investors in Luxembourg.
Next steps
The Council of State will now review the Draft Law.
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