Luxembourg: UK AIFMs May Continue To Manage Luxembourg AIFs After No-Deal Brexit As Third Country AIFMs Subject To Certain Conditions

Last Updated: 31 October 2019
Article by Marc Meyers

The CSSF issued a press release to alternative investment managers authorised in accordance with AIFMD in the United Kingdom and managing Luxembourg AIFs. UK AIFMs shall provide the CSSF with certain documents if they intend to continue their activities in Luxembourg as third-country managers after a hard Brexit.

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UK AIFMs which have not submitted a Brexit notification before 15 September 2019 will be considered as third-country managers.

UK AIFMs which have submitted a Brexit notification before 15 September 2019 may rescind their notification and opt for the status of third-country manager.

In both cases, UK AIFMs must file certain documents with the CSSF before 31 October 2019 in order to continue their activities in Luxembourg as third-country managers after a hard Brexit.

Context

With the deadline of 31 October 2019 approaching and in light of growing uncertainty as to how Brexit might play out, Luxembourg published two laws on 8 April 2019 regarding measures to be taken in relation to the financial sector in the event of a withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union (the Brexit Laws).

The purpose of the Brexit Laws is in particular to anticipate the loss of passporting rights for managers established in the UK which would result from a hard Brexit, since these entities will then be considered to be "third-country managers". The CSSF has now provided additional clarification by publishing Press Release 19/48 on mandatory Brexit notifications.

Scope

Press Release 19/48 only applies to Luxembourg alternative investment funds (AIFs) whose direct or indirect investors are professional and/or well-informed investors or such other equivalent local law standard, when applicable (Professional Investors) and the alternative investment managers authorised in accordance with Directive 2011/61/EU (AIFMD) in the United Kingdom (UK AIFMs) of those AIFs. Press Release 19/48 is based on the assumption of a hard Brexit occurring on 31 October 2019.

Actions to be taken

For UK managers which have not submitted a Brexit notification before 15 September 2019

  • They will not be entitled to continue their activities under the benefit of the transitional period provided for under the Brexit Laws.
  • They will be considered as third-country managers and will lose the benefit of their existing passporting rights under the AIFMD as from the date of the hard Brexit. They are required to seek the approval of the Professional Investors of the AIFs they manage in order to remain a third-country manager after the occurrence of a hard Brexit and provide the CSSF by email at brexitopc@cssf.lu with the following documents no later than 31 October 2019:
    1. a duly signed confirmation from the UK AIFM that all direct and indirect investors in the relevant AIF qualify as Professional Investors; and
    2. a copy of the appropriate and duly signed resolutions (taken under the conditions required to amend the AIF's constitutional documents) evidencing the approval of the Professional Investors; or
    3. when circumstances justify a delay, an explanation of such circumstances as well as a copy of the appropriate convening notice sent to the Professional Investors.

The UK AIFMs which have not submitted a Brexit notification or will not provide the CSSF with the above mentioned documents will be considered by the CSSF as operating in breach of applicable requirements on the Luxembourg territory as of the day of the hard Brexit. The CSSF reserves the right to publish a list of those UK AIFMs in due time.

For UK AIFMs which have submitted a Brexit notification before 15 September 2019

  • It is possible to rescind the Brexit notification filed by UK AIFMs in order to opt for the continuation as third-country managers (instead of submitting to the CSSF an application for authorisation, or, as the case may be, a notification or information on any action taken, depending on the nature of the activities the UK manager intends to pursue after the occurrence of a hard Brexit and/or the steps undertaken to address the loss of passporting rights).
  • In such case, UK AIFMs will give up their right to benefit from the transitional period, be considered as third-country managers and lose the benefit of their existing passporting rights under the AIFMD.
  • If they prefer to remain a third-country manager after the occurrence of a hard Brexit, they are required to seek the approval of the Professional Investors of the AIFs they manage and provide the CSSF by email at brexitopc@cssf.lu with the following documents before 31 October 2019:
    1. a duly signed confirmation from the UK manager that the Brexit notification should be rescinded; and
    2. a duly signed confirmation from the UK AIFM that all direct and indirect investors in the relevant AIF qualify as Professional Investors; and
    3. a copy of the appropriate and duly signed resolutions (taken under the conditions required to amend the AIF's constitutional documents) evidencing the approval of the Professional Investors; or
    4. when circumstances justify a delay, an explanation of such circumstances as well as a copy of the appropriate convening sent to the Professional Investors.

Next steps

The relevant AIFs and UK AIFMs should assess their current situation and, if they opt for the continuation as third-country managers, ensure their investors' consent is obtained as soon as possible and the necessary documents are filed with the CSSF before 31 October 2019.

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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