CSSF publication of Regulation N°20-09 on the equivalence of the UK for the purpose of the MiFIR third country national regime
The CSSF has published Regulation 20-09 of December 14, 2020, amending a previous regulation of June 29 on the equivalence of certain third countries regarding supervision and authorisation rules for the provision of investment services or performance of investment activities and ancillary services by third-country firms. The regulation confirms that in the absence of an equivalence decision by the European Commission, from January 1, Luxembourg will include the UK in the list of jurisdictions deemed equivalent for the application of the national third-country regime. The CSSF may withdraw equivalence if changes to the UK regulatory framework mean the conditions underpinning the decision are no longer met.
Who's Who Legal (WWL) Private Funds 2021 I Chevalier & Sciales
We are pleased to announce that our investment funds practice partner Olivier Sciales has been recommended in the Who’s Who Legal Private Funds 2021 research report. According to WWL, the report identifies leading private funds lawyers worldwide who have outstanding skills and experience in advising clients on international fund formation and regulatory issues regarding alternative asset classes such as private equity, real estate, venture capital, private credit and hedge funds.
CSSF cautions fund industry on implications of expiry of UK’s Brexit transition period
The CSSF has set out in a press release of December 7 the implications for the fund industry of the end of the UK’s 11-month transition period following its withdrawal from the EU on January 31.
Up to now EU law and regulations have continued to apply in the UK and British-domiciled entities have been able to provide services in Luxembourg under EU single market passporting rights, but these will expire at the end of the year (December 31, 2020) .
The CSSF notes that this change will affect all UK managers on a cross-border basis of UCITS and alternative investment funds domiciled in Luxembourg, regarding passporting rights for cross-border marketing of UCITS and AIFs in Luxembourg and throughout the European Economic Area. The loss of passporting rights will also apply to entities established in Gibraltar.
Loss of passporting for cross-border management of Luxembourg funds
All Luxembourg funds currently managed by a UK manager will need to appoint an EU-domiciled manager in order to maintain EU passporting rights. Existing regulatory notifications of cross-border management of EU funds from the UK under the UCITS and AIFMD regimes will expire at midnight on December 31.
Successor notifications must be carried out according to the applicable laws in the home member state of the newly appointed EU manager. The CSSF must be informed of a change by a Luxembourg-domiciled fund to a manager in the grand duchy or in another EU jurisdiction.
Under limited circumstances Luxembourg alternative investment funds (AIFs) under supervision of the CSSF and whose direct or indirect investors are defined as professional investors may continue to be managed by existing UK managers, although they will no longer benefit from the manager’s passporting rights. This must be notified to the CSSF at the latest by December 31; investor approval is required unless the constitutive or information documents already provide for measures to be taken in the event of Brexit.
Luxembourg investment fund managers seeking to continue currently managing UK funds or operating in the UK through a branch must apply for the UK’s Temporary Permissions Regime and inform the CSSF that they have done so. Luxembourg managers of UK UCITS must be authorised by the CSSF to continue to do so after December 31 because the funds will no longer be covered by the UCITS regime and will henceforth be treated as AIFs in Luxembourg and the EU, as long as they meet the AIFMD criteria.
End of passporting for cross-border distribution of funds in Luxembourg
UK fund managers losing passporting rights for cross-border distribution of funds into Luxembourg must issue a notification to withdraw from cross-border distribution under the current regime applicable and submit a new notification or request for authorisation, depending on the new fund management arrangements, such as a cross-border notification for distribution into Luxembourg through the home regulator of an EU manager replacing a UK entity.
Loss of passporting rights also applies to European Venture capital (EuVECA) funds , European social entrepreneurship (EuSEF) funds and European Long-Term Investment Funds (ELTIFs) managed in the UK and marketed in Luxembourg.
In cases of so-called de-notification, the CSSF must be informed whether the fund or any sub-funds will retain Luxembourg investors and whether a new notification for post-transition marketing will be submitted.
Any fund subject to a marketing de-notification that will continue to have Luxembourg investors after the end of the transition period but will not conduct further marketing in the grand duchy must be registered with the CSSF and provide ongoing reporting to the regulator as long as it retains Luxembourg investors. This does not apply to UK AIFs with an EU management company that undertake no further marketing after December 31.
New notifications or requests for authorisation for cross-border marketing into Luxembourg must be made under the 2010 investment fund legislation or the AIFM law, taking into account the required distinction between marketing of AIFs to professional and retail investors. Marketing of UK funds automatically qualifies as marketing of third-country AIFs in Luxembourg, and UK managers are considered third-country managers from January 1.
Marketing in Luxembourg to professional and retail investors
Marketing to professional investors in Luxembourg after December 31 must take place mainly under the provisions of Article 37 of the AIFM law, covering the marketing in Luxembourg of UK AIFs managed by an EU AIFM, or Article 45, covering the marketing of EU or third-country AIFs with a UK manager. Notification to the CSSF under Article 45 must be made before the start of the marketing in Luxembourg, and automatically triggers de-notification under the pre-Brexit regime. Notification under Article 37 is required only when active marketing in Luxembourg will take place or continue after December.
The CSSF also notes that Luxembourg AIFMs currently managing UK AIFs and that have issued notification of marketing to professional investors in other member states will need to review marketing requirements for the funds after January 1, which are subject to the provisions in each country on marketing of third-country AIFs.
Marketing to retail investors in Luxembourg will require authorisation under the 2010 legislation for UK or non-UK funds other than closed-ended vehicles managed by a UK manager or for UK funds managed by a EU manager; only regulated funds can be marketed under these provisions. The procedural details regarding requests for authorisation for marketing in Luxembourg under the 2010 law will be published by the CSSF later.
Delegation of portfolio or risk management to UK entities
The CSSF notes that Luxembourg’s fund legislation permits delegation of investment fund manager functions including investment or portfolio management and risk management to entities outside the EU as long as the delegate entities are authorised or registered for asset management and are subject to prudential supervision, that supervisory co-operation is in place between the CSSF and the entity’s home regulator – in this case UK’s Financial Conduct Authority (FCA).
On February 1, 2019 ESMA, EU national securities regulators and the FCA signed a multilateral memorandum of understanding covering supervisory cooperation, enforcement and information exchange between EU national regulators and the FCA, allowing them to share information in areas including market surveillance, investment services and asset management. The agreement, confirmed on July 17, 2020, allows activities such as the delegation of fund management functions to continue to be carried out by UK entities on behalf of investment fund managers in the EEA.
Compliance with investment policy and eligibility issues
After the transition period, any non-compliance with investment rules or policies triggered by the withdrawal of the UK from the EU will be considered active breaches. The CSSF highlights provisions related to structures such as a UCITS feeder fund in Luxembourg investing in a UCITS master fund in the UK, given that UK UCITS will henceforth be considered ‘other UCIs’ under the 2010 law, and investments in them may not in aggregate exceed 30% of the assets of the Luxembourg UCITS.
In addition, the EU’s 2017 Money Market Funds Regulation states that deposits with a credit institution with a registered office in a third country is an eligible investment by a money market fund only if the institution is subject to prudential rules considered equivalent to those in the EU. Currently this will not be the case from January 1, 2021 for banks whose registered office is in the UK.
Secondment of staff
Under UCITS and AIFMD subsidiary legislation, investment fund managers in Luxembourg may use seconded staff in the provision of portfolio management services, and the CSSF says this remains acceptable, as long as the secondees comply with applicable requirements and the fund manager ensures they are appropriately supervised. The requirements include secondees’ physical presence in the premises of the Luxembourg manager, although travel for professional purposes is admissible. The CSSF must be notified in advance of any use of secondments.
The regulator also underlines the need for market participants to reorganise certain functions and specifically the marketing function, if it is staffed with secondees from the UK that are not always physically present in Luxembourg because of business travel. Reorganisation of affected functions should in principle take place before December 13, with regard to the Covid-19 pandemic.
The CSSF’s full press release 20/26 on the changes to the rules governing funds, managers, delegation and investment policy can be viewed here.
Sustainable Finance | CSSF fast track procedure
Head of investment fund supervision Marco Zwick says the CSSF will launch a fast-track procedure for updating fund prospectuses to help asset managers meet the deadline of March 10 for compliance with the EU’s Sustainable Finance Disclosure Regulation (SFDR). He says boards of directors will have to certify that funds meet the SFDR requirements to disclose sustainability risks in their portfolios, and the CSSF will conduct sample checks. However, the regulator recognises that asset managers lack details about the rules since the European Commission has not yet published regulatory technical standards, and in many cases may struggle to obtain needed information from companies in which funds have invested.
Source: Lux regulator to “fast track” ESG disclosures (available here)
FCA Brexit communication to CSSF - UK Temporary permissions regime
On 19 November 2020, the Luxembourg regulator (“CSSF“) issued press release 20/23, on behalf of the UK Financial Conduct Authority (“FCA”) wishing to address Luxembourg-based entities regarding the UK Temporary Permissions Regime (“TPR”) following the Brexit.
As such, it is reminded that the TPR will enable Luxembourg based firms and funds operating in the UK through the passport regime to continue their activities in the UK from the end of the transitional period. In order to benefit from the TPR, the FCA will have to be notified so as to start authorization and recognition proceedings. The press release 20/23 addresses three (3) key points:
- For firms and funds passporting into the UK, the notification window for the TPR has reopened on 30 September 2020, allowing to submit or update previously notifications, as the case may be;
- If firms hold a passport and have already notified the FCA but that do not require a UK authorization (i.e. because they do not wish to pursue business in the UK), they should withdraw their TPR notification and cancel their passport; and
- For firms or funds with a passport to the UK that do not enter the TPR but wish to perform an existing contract, the Financial Services Contracts Regime (“FSCR”) will automatically apply in order to wind down their UK business. As a consequence of the aforementioned, firms in the FSCR will not be able to perform new business in the UK.
On 23 September 2020, the FCA issued the consultation paper 20/20 for firms or funds that wish to undertake regulated activities in the UK on an on-going basis and how the FCA will assess these international firms against minimum standards. Substantially the content of the consultation paper is the following:
Scope of application
The consultation paper applies (i) to European Economic Area (“EEA”) firms that have applied for authorization in the UK or intend to do so (including the TPR) and (ii) international firms from non-EEA countries that are authorized in the UK, or that have applied or intend to do so.
This consultation paper does not apply to (i) depositaries, trustees and managers of UK authorized funds (including UK undertakings for collective investment (“UCITs”)), as such entities are supposed to be incorporated and administered in the UK; (ii) international alternative investment firms (“AIFs”) managers, after the transition period as only firms with their registered office in the UK can obtain permission to manage an AIF.
Context
The FCA states that firms having notified their intention to enter the TPR will be allowed to continue their UK business within the scope of their current permissions for a limited period after the end of the transition period, while they wait to be called by the FCA to submit their applications for full UK authorization. If an EEA firm or fund do not obtain a permanent authorization, the FSCR will apply until its contracts in the UK expire.
Firms and funds seeking an authorization will rely on Part 4A of the Financial Services and Markets Act 2000 (“FSMA”), setting out the threshold conditions in its schedule 6 (as well as the Cond part of the FCA’s handbook). Other legislations may set threshold conditions, similar to those of the FSMA.
With the FSMA, the FCA seeks to (i) secure an appropriate degree of protection for consumers; (ii) protect and enhance the integrity of the UK financial system and (iii) promote an effective competition in the interests of consumers. The consultation does not seek to challenge or amend the threshold conditions of the FSMA.
Minimum standards
- Branch or subsidiary: the FCA will consider as to whether there is a heightened potential to cause harm from the activities being undertaken from a branch and whether the risks can be adequately mitigated. The FCA will also consider the nature and scale of the activities the international firm intends to conduct from outside the UK. Therefore, the FCA recommends to rather operate through an UK-incorporated subsidiary;
- Risk of harm: the FCA will consider the following;
- Protection for the UK office’s retail customers, through redress and supervisory oversight for example, could be less effective, especially if the international firm becomes insolvent or exits the UK (‘retail harm’);
- The UK rules that protect client money or custody assets safeguarded through the UK office and the home state insolvency regime which become applicable if the international firm fails may not be aligned (‘client assets harm’); and
- Shocks or risks that originate from the international firm’s overseas offices could, in some circumstances, be more difficult to detect or prevent and could be passed easily to its UK office, affecting the stability and integrity of the UK markets in which it operates or to which it is connected (‘wholesale harm’).
Mitigation of those above-mentioned risks will be considered on a case-by-case basis.
Following an assessment, the FCA may impose (i) limitation to the activities performed by the firms or funds and (ii) requirements to refrain from taking certain actions, in order to comply with the minimum standards on an ongoing basis. In case of noncompliance the FCA may refuse the firms or funds to perform the requested regulated activities.
To sum up the above, an international firm or fund that performs or plans to perform any activity requiring an authorization needs to demonstrate that it (i) is ready, willing and organized and (ii) meets the relevant minimum standards.
The FCA will then consider, (a) the nature of the operations; (b) the personnel and decision making process; (c) the systems and controls in place; (d) the factors related to the home state and lastly (e) adequate mitigation process against the retail, client assets and wholesale harm.
The consultation closes on 27 November 2020.
The consultation paper can be accessed here and the CSSF press release 20/23 here.
Cross-border distribution of funds I ESMA consultation paper
The European Securities and Markets Authority has launched a consultation on guidelines on marketing communications under the Regulation on Cross-Border Fund Distribution. The proposed guidelines set out the requirements for communications sent to investors to promote UCITS and AIFs, including EuSEFs, EuVECAs and ELTIFs. ESMA proposes that the communications should be identifiable as marketing material, set out the risks and rewards of investment equally prominently, and ensure that the information provided is fair, clear and not misleading.
The consultation is open until February 8. The ESMA consultation paper, guidelines on marketing communications under the regulation on cross-border distribution of funds is available here.
For more information, please contact Olivier Sciales at oliviersciales@cs-avocats.lu
COVID-19: CSSF waives prior notification of swing pricing in FAQ update
In the light of the exceptional circumstances of the Covid-19 pandemic, on April 7 the Luxembourg regulator (CSSF) issued an updated version of its FAQ document relating to the use of the swing pricing mechanism by Luxembourg-domiciled investment funds that are UCITS, Part II collective investment undertakings and specialised investment funds (SIFs).
The swing pricing mechanism is designed to protect long-term shareholders from dilution of value resulting from trading costs engendered by subscription and redemption activity by other investors in the fund.
The CSSF has confirmed that investment fund managers may increase the swing factor to be applied to the fund’s net asset value up to the maximum level provided for in its prospectus without prior notification to the CSSF.
In addition, a swing factor may be applied beyond the maximum stipulated in the fund’s prospectus in various situations:
Where the fund’s prospectus formally authorises the management body to exceed the maximum level subject to certain predefined conditions, the manager can decide to increase the swing factor in accordance with the provisions and conditions set out in the prospectus.
If the prospectus does not offer this possibility to the manager, the CSSF is permitting managers on a temporary basis, given the current exceptional market circumstances, to increase the swing factor beyond the maximum stipulated in the prospectus. In this event, an update of the prospectus formally to authorise the manager to exceed the maximum swing factor under certain conditions must be carried out as soon as possible.
In both cases, the fund’s board of directors must communicate its decision to current as well as new investors through the customary communication channels stipulated by the prospectus. In the second case, communication to investors must take place before applying an increase in the swing factor beyond the maximum authorised by the prospectus, and the CSSF must receive a copy of the communication at the same time.
In each case, the decision must be duly justified and take into account the best interest of investors, and must be communicated to current as well as new investors through the customary communication channels set out in the prospectus, for example through the ordinary notice to investors, the fund’s internet site or any other means indicated in the prospectus.
If the fund prospectus does not offer the possibility of exceeding the maximum swing factor stipulated by the fund prospectus, not only must the decision to increase it be communicated to investors in advance, but investment funds must provide the CSSF with a detailed notification including an explanation of the reasons for the decision.
Increasing the maximum swing factor on a temporary basis beyond the maximum level laid down in the prospectus is conditional on the following conditions being fulfilled:
- The revised swing factors are the result of a robust internal governance process and based on a robust methodology, including analysis based on market or transaction data, that provides an accurate net asset value representative of prevailing market conditions.
- Appropriate communication must be made to investors through the customary communication channels.
Swing factors usually range between 1% and 3% depending on the type of assets held by the fund. In the even of implementation of a swing factor adjustment going beyond the maximum authorised by the prospectus as it stands, the CSSF may ask the fund to justify on a retrospective basis the level of swing factor applied and to provide documentary evidence that the factor at that time reflected the prevailing market conditions.
For additional information, the complete frequently-asked questions document is published by the CSSF here.
We will continue to keep you informed of any further CSSF regulatory updates that may impact your fund.
COVID-19 investment funds news | Ensuring corporate governance in time of crisis: measures for regulated investment funds
The public health emergency and economic slump precipitated by the Covid-19 pandemic has prompted the authorities to amend various rules and regulations applicable to the fund industry in Luxembourg.
We have summarised below the most important developments.
Prohibition on holding physical meetings
In the current circumstances, with the circulation of people drastically restricted in the European Union and worldwide, the holding of both meetings of management boards and boards of directors of a company and of general meetings of shareholders has been significantly affected.
On 20 March, the Luxembourg government issued a grand-ducal decree offering practical solutions to the difficulty in conducting meetings on the part of companies and other legal entities. Other shareholders’ rights, including the right to information and convening formalities, remain applicable. The decree applies equally to regulated funds.
Impact on shareholders
Regarding general meetings of shareholders, Article 1(1) of the decree states that, irrespective of any contrary provision in a company’s articles of association, or of the number of participants present or represented, a company is entitled to hold any general meeting of shareholders without conducting a physical meeting, and summon shareholders to attend meetings.
They may exercise their rights via remote voting, either in writing or in electronic form, provided that the full text of resolutions or decisions to be taken has been published or communicated to them. Alternatively, they may exercise voting rights through a proxy appointed by the company, such as a lawyer, auditor, notary or board member, or by videoconference or any other telecommunications channel allowing the identification of each participant.
Shareholders who participate by these means are deemed to be present for the calculation of the quorum and majority at the meeting.
Should it be necessary to hold an extraordinary general meeting in front of a notary, please note that this is still feasible despite the exceptional circumstances. We can assist you should you need to organise a meeting urgently.
Impact on governance bodies
According to Article 1(2), irrespective of any contrary provision in a company’s articles of association, other governance bodies may hold meetings without a physical presence through written circular resolutions, or by videoconference or any other telecommunications channel allowing the identification of each participant. Members who participate by these means are deemed to be present for the calculation of the quorum and majority.
Feel free to contact us if you need our assistance to organise such meetings and prepare relevant documentation to reflect the situation resulting from the Covid-19 pandemic.
Exceptional extension of annual accounts approval and filing
A fund’s annual accounts should normally be approved by shareholders within six months of the end of the financial year. Under Article 1(3), irrespective of any contrary provision in a company’s articles of association, the representative of a fund is exceptionally authorised to convene its annual general meeting at the latest on a date within six months after the end of its corporate year, or on a date up to 30 June 2020. This decision may be of relevance to your fund if it has a statutory fixed date for its AGM.
If you have already convened the annual general meeting, according to Article 1(4), you can still inform your shareholders of your intention to conduct the meeting in accordance with the provisions of Article 1(1) as above, provided you do so no later than three business days before the scheduled meeting.
The company’s annual accounts should normally be deposited within one month of their approval with the Luxembourg register of commerce and companies. The Luxembourg Business Register announced on March 18 that companies will have an additional period of four months to file their annual accounts, at the standard administrative fee – that is, with no late filing penalty.
We encourage you to remain in contact with your fund administrator and auditor to check on a regular basis how you will be able to meet the deadline under article 1(3) of the decree. We are currently assisting clients with the approval of their annual accounts as smoothly as possible, from organising approval to deposit of the accounts with the Luxembourg Business Register. Please contact us should you need our assistance.
CSSF reporting deadlines
On March 23, the CSSF issued a statement informing supervised entities that while entities remain bound by the prescribed deadlines to carry out regulatory reporting, if entities can provide justification for a delay, the regulator will not enforce the rules strictly.
Two days later, the CSSF announced that if necessary the long-form report exceptionally may be submitted up to four months after the annual general meeting of the audited entity or fund, excluding delays to AGMs authorised by the government as part of its exceptional measures. The delays may not be applied cumulatively.
In the latest update of its frequently-asked questions on Covid-19, the CSSF has provided for further delays to fund reporting where necessary:
- Annual O 4.1./O 4.2 reporting (investment funds) under IML Circular 97/136 should be submitted to the CSSF within six months from the reference date for non-UCITS and within four months for UCITS. This deadline may be extended until 30 June 2020.
- Quarterly G 2.1 reporting (management companies subject to Chapter 16 and AIFMs) under CSSF Circular 15/633 should be submitted to the CSSF within 20 calendar days following the end of the preceding month. This deadline may be extended to 40 calendar days.
- Quarterly G 2.1 reporting (self-managed investment companies and alternative funds) under CSSF Circular 18/698 should be submitted to the CSSF within 20 calendar days following the end of the preceding month. This deadline may be extended to 40 calendar days.
- The management letter under CSSF Circular 02/81 should be submitted to the CSSF within six months from the reference date for non-UCITS and within four months for UCITS. An additional period of three months may be granted.
- Semi-annual UCITS risk reporting) should be submitted within 45 calendar days following the reference date. The CSSF will inform firms of any postponement in due time.
- Quarterly value at risk and leverage reporting (UCITS) may be suspended until further notice.
- Early warning reporting on large redemptions (UCITS) may be suspended until further notice.
- Closing documents to be provided annually by investment fund managers under sub-points 3 to 15 of point 3 of Annex 2 to CSSF Circular 18/698 should be submitted within five months following the closing date of the manager’s financial year. For managers that closed their financial year on December 31, 2019, the deadline may be extended until August 31, 2020.
- The deadline for investment fund managers whose financial year closed after December 31, 2019 may also be extended by three months.
- For the management letter to be submitted by investment fund managers within the month following the ordinary general meeting that approved the annual accounts and at the latest seven months after the closing date of the manager’s financial year, an additional period of one month may be granted.
- The deadline for quarterly reporting of authorised AIFMs with the list of managed alternative investment funds is extended until June 30, 2020.
Communication with the CSSF must be conducted solely by e-mail and to the address opc@cssf.lu. Funds should liaise with their service providers on this.
The CSSF continues to encourage all entities to meet their regular deadlines if this is feasible. Please contact your auditor to assess the feasibility and timing of the audit of your fund.
We will continue to keep you posted regarding CSSF regulatory updates that may impact your fund.
The full text of these regulations or announcements is available as follows:
The Financial Sector Supervisory Authority (CSSF) has confirmed it has issued a circular requiring investment funds domiciled in the grand duchy to report whenever they receive investor redemption requests amounting to more than 10% of the fund’s asset in a day or more than 30% over a week.
The CSSF is acting in response to broader concern about the impact on the fund industry of market volatility stemming from the coronavirus pandemic. It has also requested that funds notify it of any other significant developments, such as operational or liquidity issues
The regulator initially contacted the 60 biggest asset managers with funds domiciled in the grand duchy on March 10, and issued the circular including a standard reporting template three days later. It has not indicated how many funds, if any, have seen redemptions request levels requiring reporting.
The CSSF’s action reflects the possibility of high levels of redemption requests following precipitous falls in stock markets in March, that previously liquid assets may become harder to trade, and that fund managers and service providers may have problems determining an accurate valuation of fund assets.
A number of funds have already suspended trading as a result of the volatility, especially UK-domiciled open-ended property funds that offered daily trading, but also equity and credit funds in the Nordic countries and France.
However, the CSSF says it believes that at present, the use of existing liquidity management tools approved by the Luxembourg regulator and other international authorities, such as gating, will enable funds to operate in the best interest of investors.
COVID-19 investment funds news | Ensuring corporate governance in time of crisis: measures for regulated investment funds
The public health emergency and economic slump precipitated by the Covid-19 pandemic has prompted the authorities to amend various rules and regulations applicable to the fund industry in Luxembourg.
We have summarised below the most important developments.
Prohibition on holding physical meetings
In the current circumstances, with the circulation of people drastically restricted in the European Union and worldwide, the holding of both meetings of management boards and boards of directors of a company and of general meetings of shareholders has been significantly affected.
On 20 March, the Luxembourg government issued a grand-ducal decree offering practical solutions to the difficulty in conducting meetings on the part of companies and other legal entities. Other shareholders’ rights, including the right to information and convening formalities, remain applicable. The decree applies equally to regulated funds.
Impact on shareholders
Regarding general meetings of shareholders, Article 1(1) of the decree states that, irrespective of any contrary provision in a company’s articles of association, or of the number of participants present or represented, a company is entitled to hold any general meeting of shareholders without conducting a physical meeting, and summon shareholders to attend meetings.
They may exercise their rights via remote voting, either in writing or in electronic form, provided that the full text of resolutions or decisions to be taken has been published or communicated to them. Alternatively, they may exercise voting rights through a proxy appointed by the company, such as a lawyer, auditor, notary or board member, or by videoconference or any other telecommunications channel allowing the identification of each participant.
Shareholders who participate by these means are deemed to be present for the calculation of the quorum and majority at the meeting.
Should it be necessary to hold an extraordinary general meeting in front of a notary, please note that this is still feasible despite the exceptional circumstances. We can assist you should you need to organise a meeting urgently.
Impact on governance bodies
According to Article 1(2), irrespective of any contrary provision in a company’s articles of association, other governance bodies may hold meetings without a physical presence through written circular resolutions, or by videoconference or any other telecommunications channel allowing the identification of each participant. Members who participate by these means are deemed to be present for the calculation of the quorum and majority.
Feel free to contact us if you need our assistance to organise such meetings and prepare relevant documentation to reflect the situation resulting from the Covid-19 pandemic.
Exceptional extension of annual accounts approval and filing
A fund’s annual accounts should normally be approved by shareholders within six months of the end of the financial year. Under Article 1(3), irrespective of any contrary provision in a company’s articles of association, the representative of a fund is exceptionally authorised to convene its annual general meeting at the latest on a date within six months after the end of its corporate year, or on a date up to 30 June 2020. This decision may be of relevance to your fund if it has a statutory fixed date for its AGM.
If you have already convened the annual general meeting, according to Article 1(4), you can still inform your shareholders of your intention to conduct the meeting in accordance with the provisions of Article 1(1) as above, provided you do so no later than three business days before the scheduled meeting.
The company’s annual accounts should normally be deposited within one month of their approval with the Luxembourg register of commerce and companies. The Luxembourg Business Register announced on March 18 that companies will have an additional period of four months to file their annual accounts, at the standard administrative fee – that is, with no late filing penalty.
We encourage you to remain in contact with your fund administrator and auditor to check on a regular basis how you will be able to meet the deadline under article 1(3) of the decree. We are currently assisting clients with the approval of their annual accounts as smoothly as possible, from organising approval to deposit of the accounts with the Luxembourg Business Register. Please contact us should you need our assistance.
CSSF reporting deadlines
On March 23, the CSSF issued a statement informing supervised entities that while entities remain bound by the prescribed deadlines to carry out regulatory reporting, if entities can provide justification for a delay, the regulator will not enforce the rules strictly.
Two days later, the CSSF announced that if necessary the long-form report exceptionally may be submitted up to four months after the annual general meeting of the audited entity or fund, excluding delays to AGMs authorised by the government as part of its exceptional measures. The delays may not be applied cumulatively.
In the latest update of its frequently-asked questions on Covid-19, the CSSF has provided for further delays to fund reporting where necessary:
- Annual O 4.1./O 4.2 reporting (investment funds) under IML Circular 97/136 should be submitted to the CSSF within six months from the reference date for non-UCITS and within four months for UCITS. This deadline may be extended until 30 June 2020.
- Quarterly G 2.1 reporting (management companies subject to Chapter 16 and AIFMs) under CSSF Circular 15/633 should be submitted to the CSSF within 20 calendar days following the end of the preceding month. This deadline may be extended to 40 calendar days.
- Quarterly G 2.1 reporting (self-managed investment companies and alternative funds) under CSSF Circular 18/698 should be submitted to the CSSF within 20 calendar days following the end of the preceding month. This deadline may be extended to 40 calendar days.
- The management letter under CSSF Circular 02/81 should be submitted to the CSSF within six months from the reference date for non-UCITS and within four months for UCITS. An additional period of three months may be granted.
- Semi-annual UCITS risk reporting) should be submitted within 45 calendar days following the reference date. The CSSF will inform firms of any postponement in due time.
- Quarterly value at risk and leverage reporting (UCITS) may be suspended until further notice.
- Early warning reporting on large redemptions (UCITS) may be suspended until further notice.
- Closing documents to be provided annually by investment fund managers under sub-points 3 to 15 of point 3 of Annex 2 to CSSF Circular 18/698 should be submitted within five months following the closing date of the manager’s financial year. For managers that closed their financial year on December 31, 2019, the deadline may be extended until August 31, 2020.
- The deadline for investment fund managers whose financial year closed after December 31, 2019 may also be extended by three months.
- For the management letter to be submitted by investment fund managers within the month following the ordinary general meeting that approved the annual accounts and at the latest seven months after the closing date of the manager’s financial year, an additional period of one month may be granted.
- The deadline for quarterly reporting of authorised AIFMs with the list of managed alternative investment funds is extended until June 30, 2020.
Communication with the CSSF must be conducted solely by e-mail and to the address opc@cssf.lu. Funds should liaise with their service providers on this.
The CSSF continues to encourage all entities to meet their regular deadlines if this is feasible. Please contact your auditor to assess the feasibility and timing of the audit of your fund.
We will continue to keep you posted regarding CSSF regulatory updates that may impact your fund.
The full text of these regulations or announcements is available as follows:
