In recent years, the regulatory framework for the duties and responsibilities of the board of directors or management board and for the control functions within Luxembourg investment fund managers has evolved significantly. Among others, CSSF Circular 18/698 has tightened the regulatory requirements for the authorisation and organisation of Luxembourg investment fund managers («IFMs»).
The importance of sound corporate governance and effective management control is strongly emphasised in this circular. It is therefore crucial, not only for IFMs, but also for investment funds in corporate form, that the management body is composed of the right people having the necessary skills.
Good corporate governance is reinforced by the ever-changing regulatory environment, is demanded by investors and is in the interests of all stakeholders.
Professional added value
Universal-Investment-Luxembourg S.A. (“Universal Investment“) has decided to establish a so-called Directors› Office in order to provide its clients with professional added value. The Directors› Office supports and accompanies clients within the framework of proper business management - among others in the implementation of the strongly increasing regulatory requirements. The Directors› Office has two main tasks: Firstly, the experts ensure that the management and board mandates assigned to Universal Investment are carried out responsibly. This applies to regulated and non-regulated investment companies as well as to other investment vehicles. On the other hand, it serves and advises clients and provides comprehensive support services to enable clients to realise their investment ideas. In all of this, the Directors› Office works closely with the other specialist departments.
Decisive for the structure of the Directors› Office and the selection of its members is extensive international experience in management positions and a sound fund-specific professional background. Due to the regulatory and other substance requirements applicable in Luxembourg, the governing body of an investment company usually consists of at least three directors, the majority of whom should be resident in Luxembourg. In the interest of good corporate governance, in most cases, an external «independent director» and a representative of the client or fund initiator are also appointed to the board of directors.
Director’s duties & obligations
Within the framework of proper management, the director of an investment company has the same duties and obligations as in any other company. He may be assisted in the performance of his duties by a service provider, but he must also control and supervise this service provider. This is also a question of corporate governance. The work in the Directors› Office is based on the autonomous and independent assessment by each individual director. Nonetheless, it is necessary to act in the best interests of investors and clients and to avoid or at least minimise potential conflicts of interest. As a rule, the management body is composed of several directors who have different experience, knowledge and skills. They complement each other so that, as a team, they are able to fully supervise and represent the company.
Universal Investment’s Directors› Office team is organisationally integrated into the Corporate Investment Service department. Clients served by the Directors› Office include international asset managers, credit institutions, insurance companies and asset managers as well as family offices, private equity companies and pension funds. The advantages of such a Directors› Office are obvious: firstly, it eases the burden on Universal Investment staff who hold board mandates in addition to their main job. Secondly, it brings a much-needed level of professionalism in dealing with clients and financial regulators in the face of ever-increasing regulatory requirements.
Martin Groos is a member of the management board at Universal Investment Luxembourg, a knowledge partner of Investment Officer Luxembourg.