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The draft bill 6318 amending the Luxembourg law of 13 February
2007 relating to specialised investment funds (hereafter the
"Bill") has been filed by the Luxembourg government
before the Luxembourg Chamber of Deputies on 12 August 2011.
This Bill takes into account in particular the adoption of the
Directive of the European Parliament and of the Council of 27 May
2011 on alternative investment fund managers (hereafter the
"AIFM Directive").
It also attempts to modernise the Luxembourg law of 13 February
2007 relating to specialised investment funds (hereafter the
"SIF Law") by implementing certain provisions already
existing under the Luxembourg law of 17 December 2010 on
undertakings for collective investment (hereafter the "UCITs
Law").
In detail, the changes proposed by the Bill can be (inter alia)
summarised as following:
Authorisation process with the CSSF
First of all, specialised investment funds ("SIFs")
shall now be submitted to the prior authorisation of the CSSF
before carrying out their activities. This change will create the
same authorisation process (at least from a timing perspective) as
currently existing for collective investment funds under the UCITs
Law.
The risk management and conflict of interest
The Bill introduces the concept of "risk management"
and "conflict of interest" stemming from the AIFM
Directive. SIFs shall implement an appropriate risk management
system to limit the risk linked to the investment positions and
their contribution to the general risk profile of the portfolio. In
addition, SIFs shall also be structured and organised in order to
limit any possible conflict of interest with their counterparts or
any persons linked to SIFs.
Investment management
In order to exclude the possibility to set up a passive SIF
having an investment activity limited to shareholding, the Bill
introduces the definition of the "management" of the
assets, which is an activity including at least the management of
portfolio meaning that SIFs should carry out a real and active
management of their portfolio.
Delegation to third parties
The Bill follows the same provisions as given under the UCITs
Law when it comes to the delegation of tasks by the management of
the SIF to third parties. In such case, SIFs shall adequately
inform the CSSF and the mandate shall not prevent the supervision
conducted by the management on the SIF. In case of an appointment
of an investment manager, such must be authorised or registered in
order to manage investment portfolios and submitted to a prudential
supervision.
Cross-investments
With regard to cross-investments (i.e. possibility for a
sub-fund of a SIF to invest in another sub-fund of the same SIF),
the Bill follows again the UCITs Law. Indeed, cross-investments
will be possible under following conditions:
the cross investment between the sub-fund target and the
investing sub-fund are not permitted;
the voting rights of the target compartment are suspended
during the period of investment;
the value of the assets is not taken into account for the
calculation of the NAV in the context of meeting the minimum net
assets requirements.
Contributions in kind
Regarding contributions in kind, the Bill puts an end to several
discussions about the requirement of an independent auditor's
report. Henceforth, any contribution other than cash shall,
whatever the legal structure of the SIF is and prior to the
incorporation, meet the conditions of article 26-1 of the law of 10
August 1915 concerning commercial companies (i.e. auditors'
report).
Derogation of the corporate law
Finally, as it is already foreseen under the UCITs Law, SIFs
will be exempted to translate their articles of incorporation or
any modifications of it into French or German, if these documents
have been drawn up in English.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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