The bill of law 8183 amending the SICAR, SIF, RAIF, UCI and AIFM Laws

On March 24th, 2023, the Ministry for Finance submitted to the Luxembourg Parliament (Chambre des Députés) the bill of law n°8183 proposing to make changes to the Luxembourg investment funds legal framework (the “Bill”).

The objective of the Bill is to improve and modernise the Luxembourg toolbox for investment funds and thereby increase the attractiveness and competitiveness of the financial center. The Bill takes place in a context of increase demand for long-term investments financing and access to alternative investment funds by retail investors (so-called “retailisation”) recently supported by the revision of the European Long Term Investment Fund (“ELTIF”) regulation.

Thus, the Bill amends the five sectorial laws currently regulating investment funds and their managers (“IFM”) in Luxembourg: the Law of June 15, 2004 on the investment company in risk capital (SICAR) (the "SICAR Law"), the Law of February 13, 2007 on specialised investment funds (SIF) (the "SIF Law"), the Law of December 17, 2010 on relating to undertakings for collective investment (UCI) (the "UCI Law"), the Law of July 23, 2016 on reserved alternative investment funds (RAIF)(the "RAIF Law") and the Law of July 12, 2013 on alternative investment fund managers (the "AIFM Law").

1. New definition of “well informed investor”

To enhance consistency among the SICAR Law, SIF Law and the RAIF Law, the Bill proposes to amend the definitions of "well informed investor" as currently provided into those laws to retain a single one. In this context, the Bill intends to clarify that “professional investors” are the ones defined in the AIFMD and to lower the existing investment threshold to qualify as well informed investor from EUR 125,000 to EUR 100,000. By doing so the Bill will harmonise the investor eligibility criteria and will align those laws with the new EU standards in terms of minimum investments in AIFs.

2. Extension of timing to reach minimum capital

Additionally, the Bill contemplates to address market demands, in particular those of AIFMs implementing illiquid strategies, to extend the period to achieve the legal minimum capital. SICARs, SIFs and RAIFs would in the future have 24 months (instead of 12 currently) as from their approval by the CSSF for SICARs and SIFs/ their incorporation or establishment for RAIFs, to reach their applicable legal minimum capital, that is to say EUR 1,000,000 for SICARs/ EUR 1,250,000 for SIFs and RAIFs (or equivalent in another currency). Funds subject to the Part II of the UCI Law (“Part II”) would also benefit from an extension to 12 months (instead of 6 currently) from the date of their approval by the CSSF to reach EUR 1,250,000 of minimum capital.

3. Extension of the corporate forms available for Part II

Echoing the industry request in the current retailisation context, the Bill further proposes to broaden the scope of corporate structures available to Part II and introduces the possibility to adopt, on top of the public limited company (société anonyme), the form of a partnership limited by shares (société en commandite par actions), simple limited partnership (société en commandite simple), special limited partnership (société en commandite spéciale), limited liability company (société à responsabilité limitée), or cooperative organised as a public limited company (société coopérative organisée sous forme de société anonyme). This change will eventually enable Part II to avail of the same flexibility as the other Luxembourg AIFs.

4. Lighting of establishment formalities for RAIFs

The Bill also intends to simplify the establishment formalities for RAIFs established under notarial need by removing the requirement to have a second notarial deed confirming the formation of such RAIF.

5. New rules on withdrawal of depositary banks

The Bill further intends to pass into law the CSSF administrative practise in relation to the appointment of a replacing depositary bank for SICARs, SIFs, UCITS and Part II, which would no longer be required to be made within 2 months of the withdrawal of the depositary bank but within the timing contractually agreed between the parties. It also proposes to clarify that in case of liquidation of the fund, the depositary bank appointed at the time of the opening shall continue to act as such until the closure of the liquidation operations.

6. Clarification regarding distribution of foreign funds in Luxembourg

The Bill also includes certain provisions regarding the distribution of foreign funds in Luxembourg to retail investors by clarifying the harmonisation between the UCI and the AIFM Laws. It also proposes to enable AIFMs to use the services of tied agents as it is currently the case for UCITS management companies, removing the discrepancy currently existing between both type of managers.

7. Application of the non-judiciary liquidation regime to IFMs

On the IFMs side, the Bill foresees to extend the non-judiciary liquidation regime currently available for investments funds to both UCITS management companies and authorised AIFMs.

8. New rules relating to withdrawal from CSSF lists

The Bill further contemplates to put an end to the automatic appointment of the CSSF as commissaire de surveillance in case of withdrawal of SICAR, UCITS, SIF and Part II from the CSSF official list. Instead, the commissaire de surveillance will be designated by the judge presiding over the Tribunal d’Arrondissement (District Court) dealing with commercial matters acting on the CSSF’s request.

It also intends to allow the CSSF to withdraw the authorisation of one or more compartment without triggering the withdrawal of the entire umbrella structure from the CSSF official list, thus avoiding the liquidation of the fund.

9. Amendment of the subscription tax regime

The Bill also intends to modernise the regime of the subscription tax (taxe d’abonnement) by providing, among other, a tax exoneration to funds authorised as ELTIFs and Pan-European Pension Products (“PEPP”).

It also contemplates to exonerate from this tax, the portion of the investments made in funds already subject to the subscription tax.