Luxembourg has taken a significant stride towards modernizing its investment fund laws with the recent adoption of Bill 8183 by the Luxembourg Parliament. This bill introduces amendments to several pivotal fund laws, including the Law of 2010 on Undertakings for Collective Investment (UCI Law), the Law of 2007 on Specialized Investment Funds (SIF Law), the Law of 2004 on Investment Companies in Risk Capital (SICAR Law), the Law of 2013 on Alternative Investment Fund Managers (AIFM Law), and the Law of 2016 on Reserved Alternative Investment Funds (RAIF Law). These amendments are designed to update and strengthen the country’s fund-related regulations, bolstering the competitiveness and attractiveness of Luxembourg’s financial centre.

On March 24, 2023, a bill of law proposing amendments to the Luxembourg fund laws was submitted to the Luxembourg Parliament. The first constitutional vote, held on July 11, 2023, resulted in the adoption of Bill 8183, with an overwhelming majority of 55 votes in favour out of 60. To expedite the implementation of the law, a request was made to dispense with the second vote, which was accepted on 14 July with unanimity.

The adopted amendments encompass several significant changes, including:

Definition of “Well-informed Investor” and marketing RAIFs to well-informed investors in Luxembourg

The definition of a “well-informed investor” has been harmonized across the SIF, SICAR, and RAIF Laws as well as the possibility to market shares or units of such vehicles to retail investors within the meaning of “well-informed investor”. The investment threshold has been lowered to EUR 100,000, and the list of entities authorized to certify the experience of other well-informed investors has been aligned.

Time limit for reaching minimum capital

The period for achieving subscribed capital has been extended to 24 months for SICARs, SIFs, and RAIFs and to 12 months for UCIs (Part II). This extension grants fund managers increased flexibility in meeting the minimum capital requirement.

Harmonization of legal form for Part II UCIs

The available legal forms for Part II SICAVs have been aligned with the legal forms permitted under the SIF, SICAR, and RAIF Laws. This harmonization ensures consistency among various types of investment funds.

Simplification for RAIFs

The formation formalities for RAIFs have been streamlined. The requirement for a Luxembourg notary to acknowledge the establishment and appointment of an external Alternative Investment Fund Manager (AIFM) within five business days has been eliminated for RAIFs established through a notarial deed, though it still applies to RAIFs established through a private deed. Furthermore, the amendment clarifies that marketing RAIFs to well-informed investors in Luxembourg is permissible.

Amendments to the AIFM Law

Authorized managers of alternative investment funds are now permitted to utilize tied agents, as defined by the 1993 law on the financial sector. This amendment provides them with additional operational flexibility.

Replacement of a depositary 

Previously, SICARs, SIFs, UCITS, and Part II funds had an automatic two-month period to replace a depositary in the event of resignation or termination. However, under the new rules, this automatic de-listing provision has been eliminated. Instead, the depositary agreement must now include prior notice provisions, and a replacement depositary must be appointed before the expiry of this notice period. During this transition period, outgoing depositaries are still required to safeguard the interests of investors. This change mitigates the risk of automatic de-listing, considering the necessary time for conducting due diligence and onboarding a new depositary.

Main tax amendments

The newly introduced exemptions from the subscription tax, as part of the Bill of Law 8183, offer benefits to specific structures. These include (i) Part II UCIs, SIFs, RAIFs and their respective sub-funds, provided they are authorized as ELTIFs under the ELTIF Regulation, and (ii) UCITS/Part II UCIs and their sub-funds that cater specifically to investors saving under a pan-European Personal Pension Product (PEPP) established as per the PEPP Regulation. This is a concerted effort to stimulate the creation and growth of ETIFs and PEPPs.

The adoption of these amendments by the Luxembourg Parliament signifies a momentous development in the country’s investment fund legislation. The reforms aim to modernize and enhance the toolbox for Luxembourg funds, fostering a more consistent and practical approach. These changes not only strengthen the regulatory framework but also contribute to the competitiveness and allure of Luxembourg’s financial center. The anticipation is that the legislation will soon be published in the Luxembourg Official Gazette. It will become effective on the fourth day following its publication in the Luxembourg Official Gazette.

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