Luxembourg offers a platform of services and structuring opportunities to the private equity as well as the venture capital industry. Products include competitive structures for setting-up private equity and venture capital funds, such as the investment company in risk capital (SICAR) or the specialized investment fund (SIF). Luxembourg has thus emerged as a prime jurisdiction for the structuring of private equity and venture capital acquisitions and financings.
Besides the SIF and the SICAR, Luxembourg has built up its market share in private equity and venture capital funds thanks to its non-regulated
special purpose companies (such as the SOPARFI – the financial participation company) which are used for private equity/venture capital acquisitions and financings alike. A SOPARFI is typically used for holding and financing private equity and venture capital investments. It may thus equally serve as an SPV, a joint venture vehicle or more rarely a fund vehicle itself (in which case it may qualify as AIF).
Other types of commercial companies, such as the SCA, the SCS and the SCSp, qualifying as AIF, are frequently used to structure private equity and venture capital funds.
The EuVECA Regulation (EU) No. 345/2013) provides harmonized requirements for qualified venture capital funds that intend to invest at least 70% of their aggregate capital contributions and uncalled committed capital in assets that are ‘qualifying investments”.
EuVECA funds can be internally or externally managed, and managers marketing funds to professional investors benefit from an EU-wide distribution passport.
The RAIF (Reserved Alternative Investment Fund) structure, which became available in the summer of 2016, allows private equity and venture capital fund initiators to set up Luxembourg-domiciled funds that are not subject to regulatory approval by the Luxembourg supervisory authority, the Commission de surveillance du secteur financier, the “CSSF”). This option permits the achievement of a significantly enhanced time-to-market for new fund launches. However a RAIF must be managed by an authorized AIFM.
In order to set up a corporate partnership limited by shares (Société en Commandite par Actions or SCA), a common limited partnership (Société en Commandite Simple or SCS or C.L.P.) or a Special Limited Partnership (Société en Commandite Spéciale or SCSp or SLP), at least one general partner as well as at least one limited partner is required.
The management of the SCA, SCS or SCSp can solely be entrusted to this one (or more) GP(s), itself managed by a single manager or a board of managers. Limited partners may also be entrusted with limited management functions.