The 60-seat Luxembourg parliament has finalised its adoption of a major upgrade of five investment laws, making its popular international framework for investment funds even more attractive for new types of funds coming into the market, in particular Eltifs. The industry has widely welcomed the changes, with one ManCo CEO describing them as “an evolution rather than a revolution.”
After Tuesday’s vote in the Chambre des Députés, the parliament on Friday said it had obtained a waiver from the Council of State for not having to vote for a second time on the package. As a result, the adoption of Bill 8183, as the package is known to legal experts, has become final. Without such a waiver, it would have been difficult to adopt the changes in time before the upcoming general elections, scheduled for Sunday 8 October.
While underlining different elements of the revision, legal specialists and market participants agreed that the changes put Luxembourg in pole position for the growth that is projected in the market for European Long-Term Investment Funds, or Eltifs. Among other things, Bill 8183 makes it much easier to swiftly establish such funds in Luxembourg, before they can be marketed under a single passport in 30 EEA countries and across the world.
Investment specialists particularly welcomed the tweak that makes it possible to structure ‘Part II’ Eltifs as an SCA - a commercial company whose shares are freely transferable - or as an SCSp, a special limited partnership that basically is a commercial company but one without legal personality.
‘New wave of demand’
“We anticipate the new structuring flexibilities introduced for the UCI Part II initiating a new wave of demand, especially for clients wanting to launch Eltif funds,” said Denis Harty, CEO at Waystone Luxembourg, a leading third-party management company.
Silke Bernard, Eltif specialist at law firm Linklaters, also welcomed the decision to make Eltifs exempt from the Luxembourg registration tax. “This, together with some other amendments under the new rulebook – such as the possibility to structure Part II Eltifs as SCAs or SCSps – will make the Luxembourg Eltif framework even more attractive,” she said. “I am confident that Luxembourg will maintain its position as a clear ‘go to’ domicile for Eltifs.”
Bill 8183 stands for a comprehensive revamp of Luxembourg’s legislative arsenal for investment funds. Several fund categories, including Eltifs, personal pension funds known as Pepps, and money market funds, are to be exempted from the registration tax imposed on Luxembourg-domiciled funds.
‘Sensible and timely’
“Bill 8183 is evolution rather than revolution, and we at the Waystone Group see it as a welcome development,” said Harty. “It demonstrates that Luxembourg is a jurisdiction willing to make sensible and timely reforms to remain competitive and to support the local fund industry.”
The novel legislation introduced various modifications to five existing laws governing Luxembourg’s prevailing legal framework for investment funds and their managers. Numerous types of funds are involved, including widely favoured venture capital investment companies (Sicar), specialised investment funds (SIF), and reserved alternative investment funds (Raifs).
Bill 8183 includes provisions permitting the outsourcing of functions to third parties who may not reside on national territory. However, the bill mandates that these procedures must be appropriately reported to the Luxembourg financial supervisor, CSSF.
The new law also brings Luxembourg’s investment threshold for professional investors in line with common practices across the European Union, reducing it to 100,000 euros from 125,000 euros. This shift aligns its regulations with the rest of Europe and also harmonises the investor threshold for various types of investment funds.
“We trust that the harmonisation of the ‘well-informed investors’ definition for Raifs and SIFs will also help avoid unnecessary confusion,” said Harty. “The lowering of the minimum investment applicable to these will benefit our clients and enable them to expand their investor pool.”
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