SICAV Investment Funds in Luxembourg: how do they work?
The acronym SICAV means "open-ended investment company" and refers to share companies aimed at collectively investing the assets collected through the public offering of shares, whose value amounts to the net worth of capital account divided by their number.
SICAV Investment Funds were introduced in Italy by the Legislative Decree no. 84/1992. They are characterized for being the only kind of company which allows shareholders to enter and exit the company at any moment, hence the name "open-ended investment company".
Moreover, investors can buy registered or bearer shares, thus becoming shareholders of the SICAV company and acquiring the right to take part in shareholder meetings, as well as to influence management choices in proportion to the number of shares they own.
Article 1 of the Italian Legislative Decree no. 58 of 24 February 1998 (the so called Consolidated Law on Finance) includes SICAV among collective investments undertakings. Therefore, SICAV Investment Fundsare subject to supervision by the Bank of Italy and Consob.
SICAV Investment Funds are constituted upon authorization of the Bank of Italy, provided that the minimum capital anounts to 1 million euros.
The assets of a SICAV Investment Fund, then, coincides with the company's share capital, and, therefore, it increases with the access of new shareholders and with capital gains realised during the course of business activities.
Since the share capital has no nominal value, SICAV shares only have an initial issue price and, subsequently, an issue and redemption value, equal to the net asset value (total asset value net of costs and taxes) divided by the number of outstanding shares.
SICAV Investment Funds should not be confused with mutual investment funds. Even though both offer their investors the possibility to freely enter and exit the company, mutual investment funds involve a separation between the assets of the fund and those of the company managing he fund itself, while in SICAV Investment Funds the open-end share capital is invested.
SICAV Investment Funds in Luxembourg: how to create a SICAV Investment fund?
SICAV are the most popular investment funds in Europe. The reasons of their popularity are: favoured tax conditions, flexible legislation, professionalism and experience of local providers, low domiciliation and setting-up costs, political and social stability, and good coordination between legislator and supervisory authorities.
SICAV Investment Funds are share companies whose assets coincide with the net asset of the company. Their Board of Directors play a supervisory role, and can delegate managing tasks to specialised companies, supervised by the Luxembourgian Commission de Surveillance du Secteur Financier (CSSF).
The Custodian Bank, based in Luxembourg, keeps the assets of the fund and guarantees the investors' interests.
Usually SICAV Investment Funds are distinguished according to the different financial instruments in which the assets of the company can be invested:
- part I, which includes harmonized SICAV companies, i.e. companies satisfying the requirements of the UCITS Directive, thus distributable in EU Countries;
- part II, non harmonized SICAV companies, which cannot be freely distributed in EU Countries, unless they comply with the terms established by local authorities.
SICAV can be constituted as:
- "umbrella" funds;
- independent funds;
- retail funds, which are not subject to UCITS Directive;
As regards umbrella funds, they consist in different funds, each of which is autonomous and has its own assets, objectives, and investment policies and strategies. Moreover, each fund can issue a specific category of shares.
Investors can purchase different shares of one or more funds, and have the right to shift their investment from one fund to another free of charge, just converting their shares in another fund.
Each fund has its own net asset value. Therefore, the subscription price per share is variable. The assets of a SICAV company, thus, are actually the sum of the assets of the single funds.
Each fund can be liquidated separately, without involving the other funds. Only liquidating the last fund results in liquidating the entire SICAV company.
SICAV Investment funds in Luxembourg: taxation
Luxembourgian SICAV Investment funds are not subject to taxation. This latter is actually the liability of the investor.
SICAV Investment fundsare subject tolocal dividend withholding tax, as imposed by the country in which the dividend is issued. Thanks to some tax treaties, anyway, the applied taxation can be reduced.
Finally, they are subject to a "Taxe d'abonnement" of 0.05% per annum on the net asset value of the fund for retail investors and of 0,01% per annum on the net asset value of the fund for institutional investors.
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SICAV Investment funds in Luxembourg: how can we help you?
Arnone&Sicomo International Law Firm provides you legal advice for constituting SICAV Investment funds in Luxembourg. We believe that investing in open-ended investment companies offers a range of benefits usually foreclosed to single investors. Therefore, we offer our clients the possibility to diversify their portfolios according to their specific needs and their appetite for risk/profit.
Our lawyer in Luxembourg examine each single case with an eye to innovation, taking into account the evolution of international market needs.
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.