LUXEMBOURG Law and Practice Contributed by: Stefanie Ferring, Oliver Zwick and Geoffrey Scardoni, Clifford Chance
Foreign Debt Investments Foreign investment taking place by way of loans to the private credit fund would normally only be subject to the leverage restrictions as they apply to the fund, rather than to specific restrictions on such investment. 2.4 Compliance and Reporting Requirements There are no specific compliance and reporting requirements in Luxembourg for private credit providers. General reporting obligations may apply to Luxembourg entities though, including for instance the national balance of payments reporting to the Luxembourg Central Bank. Regulated private credit providers are subject to the usual reporting requirements as these apply to investment funds and/or licensed profession - als performing lending operations (but not sub - ject to any standalone corporate lending report - ing requirements). 2.5 Club Lending and Antitrust There are no specific concerns on club lending by private credit providers, neither is this to the best of the authors’ knowledge a priority of the national competition authority in Luxembourg. However, club lending is subject to applicable EU and national antitrust rules and, accordingly, private credit providers should not use a club lending occasion for purposes of (tacit) collusion on other (competitively sensitive) matters. 3. Structuring and Documentation 3.1 Common Structures Common Structures The most common structures (disregarding any holdco financing or equity co-investments) are either a combination of senior term debt and a
In addition to the above, there are specific rules on consumer lending set out in the Luxembourg Consumer Code. Consumer lending is subject to a number of specific protective rules as well as a specific licensing requirement. An exemption from these rules is for instance available where each loan is granted for an amount higher than EUR75,000. Taking Security Over Assets Located in Luxembourg Taking security over assets which are located in Luxembourg is normally not subject to any specific local licensing or regulatory approval requirements. 2.2 Regulators of Private Credit Funds The primary regulator for private credit activity in Luxembourg in relation to both consumer and corporate lending is the CSSF. 2.3 Restrictions on Foreign Investments Foreign Equity Investments There are no specific restrictions on foreign equity investment in private credit funds in Lux - embourg. In 2023, the Luxembourg legislature adopted a law establishing a mechanism for the national screening of foreign direct investment likely to undermine security or public order for the purposes of implementing Regulation (EU) 2019/452, which foresees specific screening requirements where direct or indirect control in certain critical sectors is acquired. Private credit should normally not constitute such a critical sector, given that within the financial sector the law rather refers to central bank activities as well as exchange, payment and securities settlement infrastructures and systems. A case-by-case analysis is however recommended.
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