Luxembourg modernises Funds law in response to request from the industry

This new law is a result of the close cooperation of the legislator with the alternative fund industry, all working together to keep Luxembourg the leading alternative fund jurisdiction.

Many measures demanded by the alternative fund industry have been implemented including:

The reduction of the minimum investment threshold to €100,000, expanding the pool of potential investors.

Ending a debate on the scope of investors to which a RAIF may be marketed in Luxembourg by clearly setting out that such RAIFs may be marketed in Luxembourg to all well-informed investors, even those that do not qualify as professional investors. For this purpose, the Bill includes an explicit cross-reference to MiFID to define a “professional investor”. Also here a broader pool of investors can be targeted.

The extension of the minimum capital formation period. The existing 12 month period is extended to 24 months, and the six months period is extended to 12 months for Part II-Funds. The idea is to adapt to the operating modes of illiquid strategies for which, schematically, capital is only called upon when the manager has found the right investment opportunities.

Furthermore, a simplification of the constitution formalities for SICAV/SICAF-RAIFs is introduced by the removal of the requirement to have the constitution of the RAIF recorded in a notarial deed within 5 working days from the constitution.

Another key change relates to the expansion of available company structures for Part II funds.

The law also specifies many technical elements of the subscription tax — how to calculate it, who must pay it, to whom, how and within what timeframe — by unifying the hitherto disparate regimes depending on the structure (either a SICAR, a SIF or a RAIF).

The Luxembourg changes to the subscription tax meet the wishes of the European Commission, which wants member states to give a tax boost to Eltifs and the European pension product (Pepp). Preferential rates of 0.01% will be applied to these two vehicles instead of the standard rate of 0.50%. In some cases, they may even be exempt from contributions altogether.

How ZEDRA can help

For more information, contact Wim Ritz or ZEDRA’s other fund experts around the world to discuss the possibilities these opportunities might bring for you and your investors.