Luxembourg bill of law transposing the UCITS IV Directive

Luxembourg bill of law transposing the UCITS IV Directive

On 6 August 2010, the Luxembourg Ministry of Finance submitted to the Chamber of Representatives a draft law intended to transpose the “UCITS IV Directive” into domestic legislation.
The bill as submitted to the Luxembourg Parliament is expected to replace the already existing Law of 20 December 2002 on undertakings of collective investment (the “2002 Law”), which covers both UCITS (Part I UCIs) and non-UCITS (Part II UCIs).
The new draft text provides for the following key changes to the current UCITS regime following the text of the “UCITS IV Directive”:

  • Management company passport allowing a management company set-up in one EU Member State to act as management company for UCITS set-up in other EU Member States; this will be achieved through a mechanism of mutual recognition and authorization;
  • Simplification of the procedures for cross-border distribution;
  • Harmonization of the legal framework governing UCITS mergers (domestic and cross-border) ;
  • Possibility to establish master – feeder structures: a UCITS (feeder) can be (fully) invested in another UCITS (master);
  • The concept of simplified prospectus existing under UCITS III is replaced by a key investor information document (“KID”), which contains comprehensible information similar for the UCITS of each Member State.

Even if the UCITS IV Directive is silent on tax matters, the Luxembourg government proposed some tax changes in order to reinforce the attractiveness of Luxembourg as a location for funds and management companies by abolishing the subscription tax for tracker funds.
The bill contains flexible transitional provisions according to which existing UCITS and management companies as well as UCITS and management companies created between the entering into force of the new law and 1st of July 2011 may choose to be subject to the new law or remain under the 2002 Law until the 1st of July 2011.
However, all UCITS and management companies will be subject to the new law as of the 1st of July 2011 (exemptions apply regarding some aspects, such as the “key investor information” document  – UCITS which choose to remain under the 2002 Law will have to replace their simplified prospectus by the 1st of July 2012).