On 27 March 2023, the Luxembourg government introduced a new draft bill of law (the “Draft Bill”) to the Luxembourg parliament, aiming to introduce some rather welcome amendments into the five existing laws about investment funds: specialized investment funds (SIFs), investment companies in risk capital (SICARs), reserved alternative investment funds (RAIFs) and the law dated 17 December 2010 in relation to the so-called part II - funds (Part II funds). The Daft Bill also intends to make some changes relating to management companies and alternative investment fund managers (AIFMs). Although no fundamental changes are planned, the intention is to introduce more flexibility and clarifications that result from the practice of the past years.
Which key changes are envisaged ?
The intended amendments can broadly be categorised in those that concern the investment funds themselves, and those that are relevant for their management companies or AIFMs. In the following, we are highlighting the most interesting ones.
Changes relating to investment fund products
The deadline to reach the minimum capital for a fund, previously set at 12 months, will be extended to 24 months after the approval or establishment (RAIFs, SIFs, SICARs).
The threshold to automatically qualify as well-informed investor will be lowered from currently € 125,000 to € 100,000.
More flexibility is planned for Part II UCIs: Similar to RAIFs, SIFs and SICARs, these retail funds with the possibility to invest into alternative asset classes are no longer confined to the corporate form of an S.A. (when established as an investment company / SICAV), but can also adopt the form of a corporate partnership limited by shares (SCA), a common limited partnership (SCS) or a special limited partnership (“SCSp”).
The conditions for a withdrawal of the depositary are clarified. The agreement with the depositary must provide for an appropriate notice period allowing to find a replacement (rectifying the current uncertainty around the two months provisions), and the resigning bank is obliged to continue as depositary until a replacement has been made. Part II funds, SIFs and SICARs must be struck from the CSSF’s official list when the depositary definitely resigns, enacting an existing practice from the regulator.
Concerning RAIFs, some much needed corrections include the clarification that a notarial confirmation for the establishment is only necessary for those RAIFs that are not incorporated with a notary. Also, it is intended to clarify that RAIFs can be marketed to non-professional investors in Luxembourg if they qualify as well-informed investors.
ELTIFs will be exempt from any subscription tax.
Intended changes relating to management companies and AIFMs
AIFMs can now appoint so-called tied agents, just as UCITS management companies already can. The tied agent has to comply with the same obligations as credit institutions and investment firms. That also means that pre-marketing or marketing of alternative investment funds through tied agents no longer requires the appointment of an investment firm.
The rules on voluntary liquidation set out in the various investment fund product laws, applying by way of derogation from the usual Luxembourg insolvency laws, are intended to extend also to management companies and AIFMs. This should significantly simplify the winding-down of such companies and reduce costs.
What are the next steps ?
The Draft Bill will now be discussed through the usual legislative process in Luxembourg, including a review from the State Council (Conseil d’Etat) and the Chamber of Commerce. As the envisaged changes do not appear to be contentious in nature, it can be expected that the Draft Bill will pass rather quickly, hopefully before the sumer holiday this year.