On 11 July 2023, the Luxembourg Parliament adopted bill of law n°8183 which amends five existing Luxembourg laws relating to alternative investment funds (“AIFs”) and alternative investment fund managers (“AIFMs”), namely the UCI Act1, the SICAR Act2, the SIF Act3, the RAIF Act4 (the “Fund Product Laws”) and the AIFM Act5. For a summary of the bill of law, please refer to our OnPoint by clicking here.
The act of 21 July 2023 (the “Modernization Act”) was published in the Official Journal of the Grand Duchy of Luxembourg on 24 July 2023. Most of the amendments introduced by the Modernization Act will enter into force on 28 July 2023.
The objective of the Modernization Act is to improve the Luxembourg toolbox relating to Luxembourg UCITS and AIFs. This includes introducing measures that aim to increase the appeal of alternative assets classes to retail investors, such as the European long term investment fund (“ELTIF”), particularly given the adoption on 15 March 2023 of Regulation (EU) 2023/606 that amends Regulation (EU) 2015/760 on ELTIFs6. The Modernization Act also brings some of the CSSF’s administrative practice into legislation.
The below table summarizes the key changes introduced by the Modernization Act for Luxembourg investment funds:
Key Amendments to Fund Product Laws
1 Société en commandite par actions; SCA.
2 Société en commandite simple; SCS.
3 Société en commandite spéciale; SCSp.
4 Société à responsabilité limitée; SARL.
5 Société cooperative sous forme d’une société anonyme; SCoSA.
For Luxembourg management companies and AIFMs, chapter 16 of the UCI Act and the AIFM Act will be amended to transpose into legislation some of the Commission de Surveillance du Secteur Financier’s (“CSSF”) current administrative practice.
Where a Luxembourg AIFM enters liquidation voluntarily, the liquidator must be approved by the CSSF before its appointment and the AIFM will continue to be under the supervision of the CSSF until the liquidation process is complete. The liquidation report is subject to review of the statutory auditor of the AIFM. The Modernization Act also introduces rules for judicial liquidation of the AIFM that are based on rules for judicial liquidation of regulated AIFs.
Finally, the Modernization Act enables Luxembourg AIFMs to appoint tied agents. Tied agents are non-regulated persons or companies appointed by credit institutions or investment firms under MiFID7 for the purposes of promoting their services, soliciting business, or receiving orders from clients or potential clients and transmitting them, placing financial instruments, and providing advice in respect of such financial instruments and services offered. Where an AIFM appoints a tied agent, the AIFM will be subject to the same obligations as credit institutions and investment firms.
Footnotes
1 The act of 17 December 2010 on undertakings for collective investment, as amended (the “UCI Act”).
2 The act of 15 June 2004 on investment companies in risk capital, as amended (the “SICAR Act”).
3 The act of 13 February 2007 on specialized investment funds, as amended (the “SIF Act”).
4 The act of 23 July 2016 on reserved alternative investment funds, as amended (the “RAIF Act”).
5 The act of 12 July 2013 on alternative investment fund managers, as amended (the “AIFM Act”).
6 Our OnPoint on ELTIF is available here.
7 Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments.
