Law of March 26, 2012 amending the SIF Law

Legal AlertMarch 2012

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Introduction

I. CHANGES

On March 6, 2012 the Luxembourg Parliament approved draft law no. 6318 (the “2012 Law”) mo-difying the law of February 13, 2007 on specialised investment funds (the “SIF Law”).The 2012 Law amends the SIF Law in order to take into account certain provisions of the AIFMD Directive1 and the experience the CSSF has gained to date in regulating specialised investment funds (“SIFs”). In addition certain amendments have been made in order to offer SIFs some of the same opportunities available to undertakings for collective investment (“UCIs”) regulated by the law of December 17, 2010 (the “2010 Law”).

1. Corporate

1.1. A SIF established in the form of a SICAV or SICAF which publishes its articles of incorpora-tion in English need no longer prepare a French or German translation thus derogating from the general corporate law of August 10, 1915 on commercial companies, as amended (the “1915 Law”).

1.2. A SICAV/SICAF will no longer be obliged to send the annual accounts, annual report and ma-nagement report to the shareholders at the same time as the convening notice for the annual general meeting of shareholders. The convening notice shall indicate where such documents can be obtained.

1.3. For SICAVs or SICAFs incorporated in the from of a public limited company, a partnership limited by shares or a co-operative organised in the form of an public limited company their convening notices to general meetings of shareholders may provide that the presence quorum shall be established on the basis of the number of shares in issue on the fifth day preceding the general meeting (the “Record Date”). Voting rights and attendance rights shall also be determined on the basis of who held the shares on the Record Date.

1.4. In the case of a contribution in kind to a SIF established in any of the legal forms (SICAV, SICAF, FCP) such contribution in kind will be subject of a report of an approved statutory auditor thus enshrining in law the practice of the CSSF.

1.5. The possibility for a sub-fund of a SIF to cross invest in one or more other sub-funds in the same SIF has been introduced. This puts SIFs on a similar footing as UCIs under the 2010 Law. Such cross investment is only permitted in certain conditions which are less stringent to those applicable to UCIs under the 2010 Law:

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1. Directive 2011/61 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No. 1060/2009 and (EU) No. 1095/2010, OJ L 174, 1.7.2011, p.1-73.

11. REGULATORY

• The target sub-fund does not invest in the investing sub-fund.

• The voting rights attached to the relevant shares/units in the target sub-fund shall be sus-pended.

• The value of the shares/units in question is not taken into account for the purposes of calcula-ting the net assets of the SIF in order to verify if the SIF has reached the minimum prescribed by law. Neither are the shares/units taken into account for the calculation of the quorum or majority at meetings of shareholders/unitholders.

2.1. The prior authorisation of the CSSF shall now be required for the setting up of a SIF.

2.2. SIFs must have the necessary means to ensure respect of the condition whereby all investors in a SIF

must be well informed investors.

2.3. The identity of the persons in charge of investment management shall be communicated to the CSSF

and such persons are subject to the prior approval of the CSSF. Such persons must be of good repute

and possess relevant experience in relation to the type of SIF to be managed.

2.4. Appropriate risk management systems will have to be put in place.

2.5. A SIF will have to be structured and organised in such a manner so as to mitigate any conflicts of in-

terests. In case of a potential conflict of interest the SIF shall be required to protect the interests of its

investors.

2.6. The 2012 Law introduces provisions concerning the delegation of functions to third parties similar to

those applicable under the 2010 Law. In this regard it is important to note that the investment ma-

nagement function may only be delegated to persons licensed to carry out the activity of investment

management and subject to regulatory supervision unless otherwise approved by the CSSF.

2.7. The CSSF may withdraw the authorisation of one or several sub-funds of a SIF without such with-

drawal having any impact on the authorisation of the SIF itself. In addition, the court acting at the

request of the public prosecutor (who may act of his own accord or at the request of the CSSF) may

dissolve and liquidate one or several sub-funds of a SIF in the event of their authorisation being with-

drawn.

2.8. Article 51 of the SIF Law is amended in order to be in line with what is provided for in the 2010 Law,

in particular the maximum amount of the fines which the CSSF may impose in the case of a refusal to

provide financial reports or providing incomplete, inaccurate or false information are increased from

EUR 500 to EUR 12,500. In addition, it is specified that the CSSF may, in certain circumstances make

public such fines.

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2.9. Article 54 of the SIF Law is amended to clarify that the authorisation of the CSSF is required for any

essential change to the offer document.

2.10. Article 68 of the SIF Law is amended to clarify that the fact that SIFs must pursue an exclusive object

in order to benefit from certain exemptions from the subscription tax does not exclude them from

managing liquid assets on an ancillary basis or from using techniques and instruments for the purposes

of hedging or efficient portfolio management. This brings the SIF Law into line with the 2010 Law in

this regard.

2.11. In the case where the liquidation of the last sub-fund of a SIF results in the liquidation of the SIF itself, it

is now provided that as soon as the event giving rise to liquidation of a fund in corporate form (SICAV/

SICAF) occurs, the issue of shares shall be prohibited (except for the purposes of the liquidation), such

issuance being null and void. Thus the prohibition already applicable to FCPs is extended to SICAVs

and SICAFs.

Legal AlertMarch 2012

II. TRANSITIONAL PROVISIONS

SIFs created prior to the entry into force of the 2012 Law shall have until June 30, 2012 to conform to the pro-

visions of article 2(3) of the SIF Law (necessary means to ensure investors are well informed investors) and with

the provisions concerning risk management and conflicts of interest. The CSSF will adopt a regulation relating

to risk management and conflicts of interest. Such SIFs have until June 30, 2013 to conform to the provisions

regarding delegation insofar as they are applicable.

For further information on this subject please contact

Luc COURTOIS, Partner lcourtois@bsp.lu

Evelyn MAHER, Partner

emaher@bsp.lu

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22, Rives de Clausen L-2165 Luxembourg BP 522 L-2015 Luxembourg

T. +352 26025-1 I F. +352 26025-999

mail@bsp.lu I www.bsp.lu

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CORPORATEBANKING & FINANCE

TAX

IP, IT, GENERAL COMMERCIALREAL ESTATE, CONSTRUCTION

INVESTMENT FUNDS DISPUTE RESOLUTION

EMPLOYMENT, COMPENSATION & BENEFITS

B S P BONN STEICHEN & PARTNERSAvocats

22, Rives de Clausen L-2165 Luxembourg BP 522 L-2015 Luxembourg

T. +352 26025-1 I F. +352 26025-999

mail@bsp.lu I www.bsp.lu