New requirements on the identification of the beneficial owners of Luxembourg SICARs
The Luxembourg regulatory authority (Commission de Surveillance du Secteur Financier or CSSF), as competent authority to exercise the supervision within the meaning of article 11(1) of the Law of 15 June 2004 relating to the investment companies in risk capital, as amended or supplemented from time to time (the “SICAR Law”), requires all Luxembourg SICARs to transmit to the CSSF the identity of their beneficial owners in compliance with article 32 of the SICAR Law and for the first time in the half-yearly reporting as at 31 December 2009.
Such information on the identity of the beneficial owners is required for (i) the authorisation of the SICAR and (ii) in the context of half-yearly reporting.
In its Newsletter of October 2009 (available on the website of the CSSF, www.cssf.lu), the CSSF has confirmed that an updated table K 3.1 will be published on its website and has also specified the concept of “beneficial owner” as follows:
- Application of the definition of beneficial owner as provided in Article 1(7) of the law of 12 November 2004 on the fight against money laundering and terrorist financing, as amended (the “2004 Law”).
- Application of the concept of beneficial owner to any natural person who owns or controls directly or indirectly a percentage of more than 25% of the SICAR’s shares as well as any natural person who otherwise exercises control over the management of the SICAR.
- Identification of beneficial owners required where the investors of the SICAR are legal persons other than the entities referred to under Article 3-1 of the 2004 Law allowing the application of simplified customer due diligence procedures. The information on beneficial owners must be provided independently from the setting-up of a nominee structure.
Requirements regarding half-yearly financial information for SICARs
In its circular 08/376 regarding financial information to be submitted by investment companies in risk capital (SICARs), the Luxembourg regulatory authority (Commission de Surveillance du Secteur Financier or CSSF), as competent authority to exercise the supervision within the meaning of article 11(1) of the Law of 15 June 2004 relating to the investment companies in risk capital, as amended or supplemented from time to time (the “SICAR Law”), requires all Luxembourg SICARs to transmit to the CSSF half-yearly financial information (the “Half-Yearly Report”) in compliance with article 32 of the SICAR Law and for the first time for the financial reporting as at 31 December 2008.
Such requirements on the disclosure of the Half-Yearly Report is a confirmation of the will of the CSSF to strengthen its supervision of SICARs.
SICARS shall draw up their Half-Yearly Report, if appropriate on a compartment basis, in accordance with table K 3.1 (available on the CSSF website (http://www.cssf.lu) under the section Legal reporting/Periodic reporting/SICAR).
The reference dates for the drawing up of the Half-Yearly Report are 30 June and 31 December of each year. SICARs must transmit the Half-Yearly Report to the CSSF within 45 calendar days from the reference date.
Finally it should be reminded that any SICAR shall also submit to the CSSF a copy of its audited annual report as soon as it is available and in any event within six months from the end of the period to which the report relates (article 28 of the SICAR Law).
Amendments to the SICAR law
On 15 October 2008, the Luxembourg Parliament amended the existing SICAR law of 15 June 2004 with the aim to make the SICAR regime more attractive to private equity and venture capital investors.
The main amendments that have been voted are briefly set out hereunder:
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Umbrella structure
The new SICAR law has introduced the possibility to create multiple compartments. The principle of compartment segregation already well known for SIFs, securitization vehicles and UCITS funds is now also applicable to the SICAR. Compartment segregration means that the liabilities of the SICAR can be split into different compartments each of which are treated as separate entities making distinct transactions. The rights of investors and creditors are limited to the risks of a given compartments's assets. Each of the compartments can be liquidated separately without triggering the liquidation of other compartments of the SICAR. The main advantage of the umbrella SICAR is that it can issue several tranches of securities corresponding to different collateral and providing different values, yields and redemption terms. It is important that the constitutional documents of the SICAR expressly provide for the possibility to have multiple compartments and expressly outline the rules that are applicable to them. The issue document must outline the investment policy of each compartment. The shares of the umbrella SICAR may be of different value.
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Minimum capital
The share premium (if any) will be taken into account for the computation of the minimum capital. The share capital increased by the share premium must be at least 1,000,000 Euro to be reached within a period of 12 months from its authorisation by the CSSF.
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No requirement to publish the NAV
Under the initial SICAR law it was required to provide the net asset value to the investors every 6 months. This provision has been abolished.
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Valuation of assets
The valuation of the assets of the SICAR must be based on the fair market value (rather than the foreseeable sales price estimated in good faith).
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Reduction of the duties of the custodian
The SICAR law has reduced substantially the duties of the custodian. More in particular, the following duties do not need to be fulfilled by the custodian under the new SICAR law:
- control that the subscription price for the securities of the SICAR has been received within the time limits set forth in the constitutive documents;
- control that in transactions involving the assets of the SICAR, a consideration is paid or delivered to it within the customary time limits;
- control that the income of the SICAR is applied in accordance with its constitutive documents.
The abolition of the above control duties previously imposed on the SICAR will certainly reduce the annual costs charged by the custodian of a SICAR.
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Annual report
The annual report must be provided to investors within a period of 6 months after the end of the financial year rather than be "published" as was required under the initial SICAR law.
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Limited partnership (société en commandite simple)
The SICAR can now be set up as a société en commandite simple (limited partnership) with a variable share capital.
Amendment to the SICAR regime – possibility to have multiple compartments
On 21 February 2008, the Luxembourg government has introduced a draft law aimed to make more attractive the SICAR vehicle to private equity and venture capital investors.
Brief overview of the main changes proposed in the draft law:
- introduction of possibility to create multiple compartments (as is already the case for the Luxembourg specialized investment fund (SIF) vehicle;
- share premiums will be taken into account for the computation of the minimum capital (share capital + share premium must be at least 1,000,000 Euro)
- no requirement to publish NAV of its assets;
- obligation to publish annual report within 6 months following the end of the accounting year;
- lighter requirements imposed upon custodian (the SICAR regime will be aligned on the SIF regime as to that). Consequently, the annual running costs of the SICAR will be reduced;
- the assets of the SICAR will have to be valued at fair market value;
Please contact Olivier Sciales or Rémi Chevalier should you have any further questions.
