LUXEMBOURG Law and Practice Contributed by: Frédéric Feyten, Alejandro Dominguez Becerra, Gérard Maîtrejean and Pawel Hermeliński, CMS
Scope Investing in a SIF is an activity reserved for well- informed investors who have the expertise and expe - rience required to properly assess the risks inherent in this type of investment. Under the SIF Law, the defini - tion of well-informed investors encompasses not only institutional investors and professional investors as set out in Annex II of MiFID, but also extends to other categories of investors, such as sophisticated retail or private investors, who: • provide written confirmation of their status as well- informed investors; and • either (i) invest at least EUR100,000, or (ii) obtain a certification from an European Union credit insti - tution, a MiFID investment firm, a UCITS (Under - taking for Collective Investment in Transferable Securities) management company, or an author - ised AIFM, attesting to their sufficient expertise, experience and knowledge to properly assess the proposed investment. An investment vehicle reserved for one or more well- informed investors is not automatically subject to the SIF regime. The application of the SIF regime is indeed elective, requiring that the constitutive or offering doc - uments explicitly state that the investment vehicle is governed by the provisions of the SIF Law. Conse - quently, the SIF could be constituted as an unregu - lated entity and falling under the general provisions of the Luxembourg Law of 10 August 1915 on com - mercial companies, as amended. Legal forms The SIF can be established under the form of a fonds commun de placement (FCP), which is a common contractual fund. The FCP does not have legal per - sonality but constitutes a co-ownership of assets managed by a management company, generally cre - ated and governed in accordance with Chapter 15 of the UCI (Undertaking for Collective Investment) Law or Chapter 16 of the UCI Law, for the benefit of co- owners. Units subscribed by the investors in the FCP represent a portion of the SIF’s net assets. The liability of investors is strictly limited to the amount of their own contribution.
any kind, held in account with professional financial service providers. The SPF is only allowed to hold a participation in a company provided it does not interfere in the man - agement of this company. It cannot grant interest- bearing loans, even to the company in which it holds a participation. However, the SPF may, on an ancillary basis and free of charge, make an advance payment or endorse the commitments of the company in which it holds a participation. It also cannot provide services, directly hold real estate assets or intellectual property, or conclude life insurance contracts. The fact that the legal personality of the SPF is distinct from that of its investors limits the liability of the lat- ter to their respective contribution and, consequently, clarifies their position in terms of liability towards third parties, especially in the case of borrowing operations as a means of estate planning. It is a suitable solution for individuals wishing to organise and consolidate their private assets. The incorporation of a PSF does not require any special requirements and a standard limited capital. The lim - ited liability, corollary of its distinct legal personality, allows it to develop a flexible management of invest - ments, adapted to the specific needs of each family. It allows smooth management without heavy formalities of the transfer of wealth between generations, thus making asset management more efficient and secure. Regulated or Supervised Entities One of the main vehicles for structuring private assets is the specialised investment fund (SIF). Established under the Law of 13 February 2007 (“SIF Law”), the SIF is a regulated investment vehicle with considerable flexibility regarding both investment strategies and structuring options. The scope of eli - gible investors is not limited to institutional investors and professional investors but encompass also other types of well-informed investors, such as sophisticat - ed private investors meeting certain conditions. It is further distinguished by its favourable tax treatment.
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