Law of 21 July 2023: Modernizing Luxembourg's Investment Fund toolbox and its impact on RAIF, SIF, SICAR, AIFM & UCI

Investment Management 14 September 2023

Luxembourg has taken a significant stride towards modernizing its investment fund laws with the entry into force of the law of 21 July 2023 on 28 July 2023. It adopted Bill 8183 by the Luxembourg Parliament. This law 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. 

The adopted amendments encompass several significant changes, including inter alia:

1. Undertakings for Collective Investment (UCITS and UCI Part II)

	New regime introduced by the law of 21 July 2023	Previous regime under UCI Law
Timeframe for reaching the minimum capital	The period for achieving subscribed capital has been extended to 12 months for UCIs Part II.	The period for achieving subscribed capital was 6 months for UCIs Part II.
Replacement of depositary	The depositary agreement must 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.	A 2-month maximum period was previously foreseen to replace a depositary.
Suspension of subscription and/or redemption	Subscriptions and/or redemptions of a SICAV are prohibited: - for the period during which there is no depositary; or - when the depositary is in liquidation, declared bankrupt or undergoing a suspension of payments, an arrangement with its creditors or some other type of management supervision.	The prohibition of subscription and/or redemption of a SICAV for the period during which there was no depositary or when the depositary was in liquidation, declared bankrupt or undergoing a suspension of payments, an arrangement with its creditors or some other type of management supervision was not foreseen under the previous regime.
Formation	UCIs Part II opting for a corporate form as SICAV may take the form of a public limited liability company (SA), corporate partnerships limited by shares (SCA), common and special limited partnerships (SCS/SCSp), private limited liability companies (SARL), as well as cooperatives organized as public companies limited by shares (SCoSA).	UCIs Part II opting for a corporate form as SICAV may take the form of a public limited liability company (SA).
Issuance share/interests	Closed-ended UCIs Part II may issue shares/interests at a price other than the NAV, provided it is stated in the constitutive documents.	Closed-ended UCIs Part II may issue shares/interests at a NAV price.
Tax	i. UCIs Part II authorized as ELTIF are exempted from subscription tax ii. UCIs Part II reserved to PEPPs are exempted from subscription tax iii. UCIs Part II may benefit from the reduced subscription tax of 0.01% provided that certain conditions are met.

2. Specialized Investment Funds (SIFs)

	New regime introduced by the law of 21 July 2023	Previous regime under SIF Law
Eligibility 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.	The investment threshold was set at EUR 125,000.
Timeframe for reaching the minimum capital	The period for achieving subscribed capital has been extended to 24 months for SIFs.	The period for achieving subscribed capital was 12 months for SIFs.
Replacement of depositary	The depositary agreement must 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.	A 2-month maximum period was previously foreseen to replace a depositary.
Suspension of subscription and/or redemption	Subscriptions and/or redemptions of a SICAV are prohibited: - for the period there is no depositary; - the depositary is in liquidation, declared bankrupt or undergoing a suspension of payments, an arrangement with its creditors or some other type of management supervision	The prohibition of subscription and/or redemption of a SICAV for the period during which there was no depositary or when the depositary was in liquidation, declared bankrupt or undergoing a suspension of payments, an arrangement with its creditors or some other type of management supervision was not foreseen under the previous regime.
Marketing	Marketing of AIFs in the form of a SIF to well-informed investors in Luxembourg is permissible (see further point E below).	Marketing of AIFs in the form of a SIF was permissible only to professional investors.
Tax	SIFs authorized as ELTIF are exempted from subscription tax as well when they are authorized as MMFs considering some certain conditions apply.

3. Investment Companies in Risk Capital (SICARs)

	New regime introduced by the law of 21 July 2023	Previous regime under SICAR Law
Eligibility 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.	The investment threshold was set at EUR 125,000.
Timeframe for reaching the minimum capital	The period for achieving subscribed capital has been extended to 24 months for SICARs.	The period for achieving subscribed capital was 12 months for SICARs.
Replacement of depositary	The depositary agreement must 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.	A 2-month maximum period was previously foreseen to replace a depositary.
Suspension of subscription and/or redemption	Subscriptions and/or redemptions of a SICAV are prohibited: - for the period there is no depositary; - the depositary is in liquidation, declared bankrupt or undergoing a suspension of payments, an arrangement with its creditors or some other type of management supervision.	The prohibition of subscription and/or redemption of a SICAV for the period during which there was no depositary or when the depositary was in liquidation, declared bankrupt or undergoing a suspension of payments, an arrangement with its creditors or some other type of management supervision was not foreseen under the previous regime.
Marketing	Marketing of AIFs in the form of a SICAR to well-informed investors in Luxembourg is permissible (see further point E below).	Marketing of AIFs in the form of a SICAR was permissible only to professional investors.
Tax	All in-kind contributions in a SICAR should be backed up by a valuation report drawn by an auditor.	Under the previous regime, there was no explicit obligation for the contributions in kind to be backed up by a valuation report drawn by an auditor.

4. Reserved Alternative Investment Funds (RAIFs)

	New regime introduced by the law of 21 July 2023	Previous regime under RAIF Law
Eligibility 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.	The investment threshold was set at EUR 125,000.
Timeframe for reaching the minimum capital	The period for achieving subscribed capital has been extended to 24 months for RAIFs.	The period for achieving subscribed capital was 12 months for RAIFs.
Formation formalities	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.	Luxembourg notary shall acknowledge the establishment and appointment of an external Alternative Investment Fund Manager (AIFM) within five business days for RAIFs established through a notarial deed or a private deed.
Marketing	Marketing RAIFs to well-informed investors in Luxembourg is permissible (see further point E below).	Marketing of RAIFs was permissible only to professional investors.
Replacement of depositary	The depositary agreement must 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.	A 2-month maximum period to replace a depositary was previously foreseen.
Suspension of subscription and/or redemption	Subscriptions and/or redemptions of a SICAV are prohibited: - for the period there is no depositary; - the depositary is in liquidation, declared bankrupt or undergoing a suspension of payments, an arrangement with its creditors or some other type of management supervision	The prohibition of subscription and/or redemption of a SICAV for the period during which there was no depositary or when the depositary was in liquidation, declared bankrupt or undergoing a suspension of payments, an arrangement with its creditors or some other type of management supervision was not foreseen under the previous regime.
Tax	RAIFs authorized as ELTIF are exempted from subscription tax.

5. Alternative Investment Fund Managers (AIFMs)

	New regime introduced by the law of 21 July 2023	Previous regime under AIFM Law
Tied Agents	Authorized alternative investment fund managers are permitted to utilize tied agents as defined by article 1, point 1 of the law of 5 April 1993 on the financial sector. Where an AIFM decides to use tied agents, the AIFM shall, within the limits of the activities permitted under this law, comply with the same rules as those applicable to investment firms under Article 37-8 of the amended law of 5 April 1993 on the financial sector.	The appointment of tied agents was foreseen under the previous regime for pre-marketing purposes.
Marketing	AIFMs may market shares/units of AIF SIFs, RAIFs and AIF SICARs to well-informed investors established or residing in Luxembourg even if they do not fall in the scope of the definition of a professional investor.	AIFMs may market shares/units of AIF SIFs, RAIFs and AIF SICARs only to professional investors.

Should you have any inquiries or require expert guidance pertaining to the information provided, our investment management team is available to assist you.