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Legislation Related to Investment Funds in Luxembourg

Legislation Related to Investment Funds in Luxembourg

Updated on Saturday 18th June 2016

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Legislation-related-to-investment-funds-in-LuxembourgLuxembourg is Europe’s engine when it comes to investment funds because of its well-developed and modern financial sector. Foreign investors choose to set up investment funds in the Grand Duchy because of the tax facilities they can take advantage of, and also because of the legislation which enables them to select between two types of investment schemes:

  • -          undertakings for collective investment in transferable securities (UCITS);
  • -          alternative investment funds (AIFs).

Both types of schemes fall under the same legislation in Luxembourg. However, the Grand Duchy also enabled the Specialized Investment Fund Law several years back.

Our law firm in Luxembourg can assist foreign investors with the registration procedure of investment companies.

The UCITS Directive in Luxembourg

UCITS and alternative investment funds in Luxembourg fall under the Undertakings for Collective Investment in Transferable Securities Directive which is based on the law with the same name enabled by the European Union in 2002. The Luxembourg UCITS legislation has been modified since then and not long ago, Luxembourg incorporated the new UCITS V Directive in its national law on investment funds.

Under this legislation, investors can set up the following types of investments funds:

  • -          undertakings for collective investments (UCI);
  • -          risk capital investment funds (SICAR).

UCIs and AIFs in Luxembourg can be established under three forms:

  • -          investment company with variable capital;
  • -          investment company with fixed capital;
  • -          common investment fund.

AIF managers are subject to more stringent requirements.

The Luxembourg Specialized Investment Fund Law

In 2007, Luxembourg enabled the Specialized Investment Fund Law in order to facilitate the establishment of alternative investment funds. This type of funds can now be registered without prior approval from the Luxembourg Financial Regulator.

The main difference between UCIs and AIFs is that AIFs are recommended to qualified and experienced investors only as they offer less protection to the investors. AIFs must achieve a minimum share capital of 1,250,000 euros within a year from its incorporation.

For complete information on the legislation governing investment funds in the Grand Duchy, please get in contact with our law firm in Luxembourg.

 

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