The bill of law regarding reserved alternative investment funds (fonds d’investissement alternatifs réservés “RAIF” or "FIAR") has just been approved by the Council of Government. It must now be published on the Luxembourg Parliament’s website.
The RAIF represents the most significant advance for the Luxembourg fund structuring toolbox. The new regime will allow fund initiators and authorised alternative investment fund managers to set up a new type of alternative investment fund (“AIF”), which combines the legal and tax features of the well-known specialised investment fund (“SIF”) and société d’investissement de capital à risque (“SICAR”) fund regimes but without the regulatory oversight of the CSSF.
Please find below a brief outline of the key features of the RAIF regime.
Legal structuring flexibility
All Luxembourg corporate, partnership and contractual legal forms are available:
- partnerships: common limited partnership (société en commandite simple – SCS or CLP), special limited partnership (société en commandite spéciale – SCSp or SLP), partnership limited by shares (société en commandite par
actions - SCA)
- corporate entities: public limited company (société anonyme - SA), private limited company (société à responsabilité limitée - S.à r.l.), cooperative organised as a public limited company (société coopérative organisée comme une SA - SCOSA)
- contractual form: common fund (fonds commun de placement - FCP)
A RAIF may opt for a variable capital structure. Furthermore, a RAIF can be organised as an umbrella structure (i.e. have multiple compartments or sub-funds). The risk-spreading requirements are aligned with those applicable to SIFs except if the RAIF elects to invest in qualifying risk capital investments only, in which case the risk-spreading requirement does not apply.
RAIFs will be available to well-informed investors. This category includes institutional investors, professional investors and investors investing certain minimum amounts (EUR 125,000) or who qualify as well-informed investors.
RAIFs are not subject to CSSF supervision
Contrary to a SIF or a SICAR, the RAIF is not subject to the prior authorisation of the CSSF or to its prudential supervision. A RAIF must be registered with the Luxembourg Trade and Companies’ Register within 10 days of its formation.
Authorised AIFM must be appointed
A RAIF automatically qualifies as an AIF and must designate an authorised AIFM established in Luxembourg, in another Member State of the European Union or in a third country (once the AIFMD management passport becomes available to third country managers).
RAIFs will either be subject to an annual subscription tax (taxe d’abonnement) at a rate of 0.01%, with various exemptions, or be subject to the tax regime applicable to SICARs, i.e., be fully subject to tax save for qualifying risk capital income and gains. The VAT exemption on AIF management services will also apply.
Existing SIFs, SICARs and unregulated AIFs may elect for the RAIF regime subject to securing the relevant approvals from investors and where applicable the CSSF.
The bill of law is expected to enter fully into force during the second quarter of 2016.
Finally, please note that the text of the bill of law will not be public until its publication on the Parliament’s website.