The Law of 15 June 2004 introduced into Luxembourg law the investment company in risk capital (société d'investissement en capital à risque or "SICAR") which was conceived as a customised vehicle for investment in private equity and venture capital. The intention was to introduce a vehicle which could cope with the specific structural needs of private equity and venture capital projects, benefiting from a light regulatory regime while still being subject to the permanent supervision of the Commission de Surveillance du Secteur Financier ("CSSF"). In a nutshell, the SICAR regime offers a great deal of corporate flexibility along with recognised supervision and favourable tax treatment.

The SICAR regime was amended by the Law of 12 July 2013 on alternative investment fund managers ("AIFM Law") which implements the AIFMD1 into Luxembourg law. Whilst the AIFM Law mainly purports to regulate alternative investment fund managers ("AIFM(s)") it also contains various provisions applicable to alternative investment funds ("AIF(s)"), for which SICARs may qualify.

The amended Law on SICARs ("SICAR Law")2 is now structured into two main parts. The first part relates to general provisions applicable to all SICARs and the second part contains specific provisions applicable to SICARs which qualify as AIFs and which are required to be managed by an authorised AIFM ("SICAR AIF(s)") and to meet the requirements of the AIFM Law.

In addition to the AIFM Law, the Venture Capital Regulation ("EuVECA Regulation")3 may also benefit SICARs that adopt venture capital strategies.



1.1 Concept of risk capital

The SICAR regime may be opted for by vehicles whose purpose is to invest their assets in securities representing "risk capital". The concept of risk capital is defined by the SICAR Law as "the direct or indirect contribution of assets to entities in view of their launch, development or listing on a stock exchange". 

The parliamentary documents of the SICAR Law clearly state that this definition is only indicative. A comprehensive definition was not adopted in order to avoid the Law lagging behind the market.

The SICAR Law does not impose any restrictions regarding the type of assets that may be held by a SICAR. Parliamentary documents confirm that the definition includes any kind of contribution of assets, be it in the form of capital, debt, or financing of the "mezzanine" or "bridges" type. Loan contracts structured either as senior or subordinated debt can also constitute eligible assets.

The CSSF assesses on a case-by-case basis, compliance of the proposed investment policies with the SICAR Law. In April 2006, the CSSF published Circular CSSF 06/241 ("Circular") which describes its interpretation of the concept of risk capital under the SICAR Law and the criteria to be applied when assessing the eligibility of contemplated investment policies.

Pursuant to the Circular, the concept of "risk capital" generally hinges on two cumulative elements, namely a high risk and an intention to develop the target entities (portfolio companies). The main objective of a SICAR must be to contribute to the development of the target entities. This concept is to be understood, in the broad sense, as value creation at the level of the target entities. Basically, the investment of the SICAR should, directly or indirectly, enable the target entities to finance their own development. Besides, as opposed to a holding company, a SICAR is in essence an investment vehicle. Accordingly, its primary objective must be to acquire financial assets in order to sell them at a profit.

The Circular lists a series of elements that should be considered in order to assess whether an investment policy is acceptable, for example:

  • the number and the nature of the target entities;
  • their maturity level;
  • the SICAR's development projects; and
  • the envisaged duration of holding.

The Circular confirms that an indirect investment through another investment vehicle is acceptable, provided that the exclusive investment policy of such a vehicle is to invest in eligible assets within the meaning of the SICAR Law

The Circular further confirms that a SICAR may invest in real estate if this investment can be considered as "risk capital". Such an investment must be made through SPVs as a SICAR cannot directly acquire real estate. The Circular specifies under what conditions private equity real estate is eligible under the SICAR Law. Again, eligibility criteria are based on the concept of development. The SICAR may not be used to make a long-term, passive investment in stabilised real estate assets. Rather, the SICAR can be used to implement valueenhancing real estate strategies where it proposes to achieve high yields through redevelopment or repositioning of properties.

Finally, investments in listed securities are also permitted under certain limited circumstances, for example in the case of investments in a distressed company in view of a de-listing, in companies listed on immature markets which do not offer real liquidity to the securities listed, or when the issuer has recently been listed or is in a new phase of development.

As an alternative to the SICAR, reserved alternative investment funds (“RAIFs”) incorporated as investment companies which state in their constitutive documents that their sole objective is to invest their funds in securities representing risk capital (and that they are subject to the provisions of the specific article of the RAIF Law4) will benefit from certain features of the SICAR regime, such as the non-applicability of the diversification requirement and the specific SICAR tax regime, the so-called “RAIF-SICAR”5. Contrary to the SICAR, RAIFs are not subject to the supervision of the CSSF but they must always be managed by an authorised AIFM.

1.2 Investment rules

The SICAR Law does not impose any risk-spreading requirements (i.e. the SICAR is not prevented from holding only securities of the same or of different types issued by the same issuer), nor does it impose any investment rules or restrictions other than those set out above. Further, there are no restrictions on investments in any jurisdictions, industries or currencies.

In addition, there is no prohibition against holding a majority stake in an entity nor is there any prohibition on being the sole owner thereof.

However, where the articles of association or the prospectus of the SICAR detail specific investment rules or restrictions, these will have to be complied with.


Investment in SICARs is restricted to well-informed investors who are deemed to be able to adequately assess the risks associated with an investment in such a vehicle.

The SICAR Law defines well-informed investors not only as institutional investors and professional investors, but also as other investors who:

  • confirm in writing that they adhere to the status of well-informed investors, and
  • either
    1. invest a minimum of EUR 125,000, or
    2. benefit from an assessment made by a credit institution, an investment firm or a UCITS management company certifying their expertise, experience and knowledge to adequately appraise the contemplated investment and the risks thereof.

Within this category, sophisticated retail or private investors are authorised to invest in a SICAR.

The above conditions do not apply to persons involved in the management of the relevant SICAR.

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1. "AIFMD" refers to Directive 2011/61/EU of 8 June 2011 on Alternative Investment Fund Managers.

2. "SICAR Law" refers to the Law of 15 June 2004 relating to the investment company in risk capital (SICAR), as amended. The SICAR Law is available on our website, in English and French versions.

3. "EuVECA Regulation" refers to Regulation (EU) 345/2013 of 17 April 2013 on European venture capital funds, as amended by Regulation 2017/1991.

4. “RAIF Law” refers to the Law of 23 July 2016 on RAIFs, see Art. 48 of the RAIF Law.

5. For more information on RAIFs, see our Memorandum RAIFs, Luxembourg regime for investment funds not supervised by the Luxembourg regulator and dedicated to sophisticated investors on our website.

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.