The bill of law 6471, submitted to the Luxembourg Parliament on 24 August 2012, is transposing the Alternative Investment Fund Manager (AIFM) Directive 2011/61/UE into Luxembourg law. Aiming at competing with other financial centers, Luxembourg seizes this opportunity to modernize its limited partnership regime and make it more attractive by providing a favorable tax treatment and the possibility for a full tax transparency and neutrality.
Currently, two types of limited partnerships may be set up under Luxembourg law:
- The common limited partnership (CLP) or société en commandite simple (SCS)
- The partnership limited by shares or société en commandite par actions (SCA)
The envisaged modernization focuses on reforming the limited partnership regime, especially the CLP and also introduces a new form of company without legal personality into Luxembourg law: the special limited partnership (SLP) or la société en commandite spéciale (SCSp).
In respect of their structure, CLPs and SLPs require at least two partners:
- One or more General Partner(s), indefinitely, jointly and severally liable for the CLPs and SLPs’ obligations who usually has/have control over its/their management, and
- One or more Limited Partner(s) (LP) whose liability is limited to the contribution to the partnership.
Both the new SLP and CLP are inspired by the common law model of Limited Partnerships. By renewing the limited partnership regime Luxembourg is seeking to encourage the setting up of new investment fund structures by providing investors with an efficient legal and tax structure characterized by confidentiality and contractual freedom. In this respect, both SICAR and SIF are allowed under the bill of law to adopt the form of a CLP or SLP.
Confidentiality is guaranteed in various ways. First, the Limited Partnership Agreement (LPA) may be concluded under private seal or before a Luxembourg notary. It is effective as of the date of the signature of the LPA. Even if CLP and SLP need to be registered at the Luxembourg Register of Commerce and Companies, the share capital, name of the LPs and their respective contributions do not need to be published in the Luxembourg Official Gazette. Only the General Partner has to appear in the publication. Furthermore, in respect of the SLP, there is no obligation to grant the public access to the financial statements.
Moreover, the bill of law allows both parties considerable flexibility in the drafting of the LPA of CLP and SLP unless otherwise provided for bythe Law. As such, both parties can validly decide to insert articles in the LPA with regards to the issuance of new partnership interests, the transfer of partnership interests, forms of contribution (in cash, contribution in kind or in industry), voting rights, quorum and majority rules or conditions and procedure for dissolution.
The SLP differs from the CLP in that it is not being vested with legal personality. However, like any company with legal personality, the SLP needs to have a registered address, be publicized in the Luxembourg Official Gazette and the registration of assets and formalities have to be made in the name of the SLP. The SLP does not have to prepare consolidated accounts or to grant the public access to its financial statements (as mentioned above). There is also no direct claim by a personal creditor of a partner against the assets of the SLP.
Since the AIFM Directive has to be transposed by the national lawmakers before July 22, 2013, we expect the reform and the SLP to come into force by the end of July.