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Markets and Securities Services |
Luxembourg
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After 10 years of preparation, discussions,
research and debate covering almost 1,000 pages
and amending some 130 articles, the reform finally
saw the light of day on the 101st birthday of the
original act (also referred to as the 1915 Law).
2
It is not only its date of entry into force that is
symbolic. The Company Law Reform is the first
major overhaul of the 1915 Law since the original
version. While previous amendments to the 1915 Law
focused mainly on the transposition of EU directives,
the legislature have on this occasion chosen to
go back to the very origins of the 1915 Law. The
ultimate purpose of this reformwas to modernise
the Company Law in order to provide a modern
and coherent legislative framework that would
combine contractual freedom in the structuring of
participations and governance models with a certain
level of protection, and therefore offer legal certainty
to those dealing with companies.
This is the first major overhaul of the Company
Law since the adoption of fund specific
legislation and is very good news for the
investment funds industry.
3
Indeed many
Luxembourg investment funds (UCITS and AIFs
alike) have been established in corporate form,
and Luxembourg holdings and special purpose
companies, joint venture arrangements and
other corporate structures have become some
of the most recognisable European legal and
corporate structuring solutions, including well
beyond the borders of the EU Member States.
With the main goal in mind of creating bespoke
investment opportunities and making the
Luxembourg financial sector more competitive,
the Company Law Reform offers more flexibility
in structuring Luxembourg companies and
partnerships alike and is an important tool in
maintaining the attractiveness of the Luxembourg
financial and investment funds centre.
Key areas of modernisation
The amendments made to the Company Law
Reform cover all types of companies and
partnerships. With regard to investment funds,
the reform offers substantial benefits for the
investment funds industry in two key areas . . .
COMPANY LAW REFORM:
WHAT ARE THE OPPORTUNITIES
FOR INVESTMENT FUNDS?
On 23 August 2016, one of the most important legal bills for the investment
funds industry at large, the reform of Luxembourg Company Law (Company
Law Reform), entered into force and is now fully applicable.
1
What prospects
does it hold for investment fund participants?
Easier, more
flexible structuring
of shareholders’
participations.
Tailor-made
governance
solutions.
In addition to the opportunities for structuring
shareholders’ participations and the governance
of the public limited liability company (
société
anonyme
or SA), which would benefit the
investment fund industry at large and which
are described in more detail below, the
Company Law Reform makes two important
improvements to the Luxembourg legal toolbox
available for the structuring of alternative
investment funds (AIFs) and their investments.
Firstly, the Company Law Reform completely
overhauls the Luxembourg private limited
liability company (
société à responsabilité
limitée
or SARL) — the most commonly used
corporate legal form in Luxembourg for the
structuring of international private equity
and real-estate transactions — bringing it
closer to the regime applicable to the SA
and make it more flexible. It confirms the
use of the “redeemable” share concept, the
optional softening of its transfer restrictions,
the institution of the management board,