Luxembourg implements the AIFM Directive

On 10th July 2013, the Luxembourg Parliament adopted the law implementing the AIFM Directive (“the Law”).

The Law also comprises a “package” of measures, aiming at enhancing the legal framework applicable to the alternative funds industry.

The Law will enter into force on the day it is published in the Mémorial which is expected to be on or around 17 July 2013.

Below a summary of the most relevant provisions of the Law:

Transposition of the AIFMD

The first part of the Law is a near literal implementation of the AIFM Directive.

These provisions cover several areas, including e.g. authorisation and operating conditions, depositaries, transparency, delegation, valuation and leverage requirements, management and marketing passport, specific rules related to third countries and supervision.

Amendments to Sectorial Laws

The second part of the Law amends several sectorial laws, including those governing the regulated investment vehicles concerned by the implementation of the AIFM Directive into Luxembourg law.

The major amendments refer to:

  • The sectorial laws on regulated investment vehicles, i.e. UCIs (Part II of the 17 December 2010 Law), SIFs (13 February 2007 Law) and SICARs (15 June 2004 Law);
  • The 5 April 1993 Law on financial sector professionals (“FSP”) by introducing a new FSP status of “depositary for assets other than financial instruments”;
  • The 10 August 1915 Law on commercial companies modernising the Luxembourg limited partnership regime and introducing a limited partnership of a new type.

The New Limited Partnership

The Law modernises the existing Luxembourg limited partnership regime, and creates a new type of limited partnership without legal personality in order to offer an attractive alternative to Anglo-Saxon limited partnerships.

The new limited partnership further reflected in the sectorial laws applicable to the investment company in risk capital (SICAR) and specialised investment funds (SIF).

The most significant changes are inter alia:

  • The large contractual freedom prevailing in limited partnership structurings;
  • The extension of the concept of partnership interests;
  • The clarification of the transferability regime;
  • A limited liability regime attaching to appointed managers;
  • The roles and internal management rights of limited partners are clarified;
  • The confidentiality of limited partners is safeguarded;
  • Contributions in industry, in addition to the already existing contributions in cash and in kind, are now permitted;
  • New tax provisions are introduced in the Luxembourg income tax laws, allowing full tax transparency of the limited partnership;
  • The creation of a new vehicle, the “special limited partnership” without legal personality, benefiting from simplified accountancy and reporting regimes.

Tax Considerations

The Law provides for specific tax provisions applicable to limited partnerships and to carried interest schemes which aim at creating a favourable tax framework for structuring alternative (namely private equity) investments via Luxembourg.

The Law also expressly provides that foreign AIFs which are effectively managed or have their central administration in Luxembourg are not taxable in Luxembourg.

The Law widens the existing VAT exemptions applicable to management services to include management services provided to AIFs.

If you wish to read the latest version of our AIFMD Survival Kit, click here.

If you wish to read the AIFMD Transposition Toolkit related to the transposition of the AIFM Directive into Luxembourg law, click here.

If you wish to read our Limited Partnership Toolkit related to the Luxembourg limited partnership regime, click here.

If your wish to receive more information, please liaise with Freddy Brausch, Hermann Beythan, Emmanuel-Frédéric Henrion, Josiane Schroeder, Rodrigo DelcourtJean-Paul Spang, Nicolas Gauzès, Manfred Müller, Olivier Van Ermengem, Aurélie Clementz or your usual Linklaters contact.