Towards Modernization of the Luxembourg Legal Form 'Toolbox' for Funds

Abstract

In the post-AIFMD era, various Member States, including, amongst others, Ireland, Liechtenstein and Malta, have introduced new legal forms for funds and thereby improved their "fund toolbox". Notorious examples of this in Ireland are the Irish Collective Asset-management Vehicle ("ICAV") and the recently proposed investment limited partnership. The general trend in the above-mentioned Member States is that legal forms for funds (so-called "Fund Forms") are less based upon pure private and company law. Instead, they are "adapted" to fit "fund governance". A successful example in Luxembourg was the introduction of the special limited partnership ("SCSp") and common limited partnership ("SCS") that were post-AIFMD introduced to better fit "fund governance".

Despite of the SCS/SCSp, the Fund Forms traditionally embedded in Luxembourg "fund product laws" seem to be increasingly "outpaced" by initiatives in other European Member States and on the European level. This has a variety of reasons. First, the Fund Forms available in Luxembourg differ from product law to product law and are not always regulated the same throughout these product laws. Second, all Fund Forms under the Luxembourg fund product laws, with the exception of the common fund ("FCP"), are regulated on both the product and corporate law level. Finally, on the European level various fund product laws have been introduced over the past years, including the ELTIFR, EuSEFR, EuVECAR and MMFR. The Luxembourg Fund Form "toolbox" is not adapted to this and it is often in practice, from a tax and regulatory perspective, warranted to combine Luxembourg product laws with European product laws. From a regulatory perspective, this leads to both a complex drafting process and unnecessary discussions with regulators and service providers.

A modernization of the Luxembourg Fund Form "toolbox" thus seems to be warranted. This contribution seeks (i) to explain why such a modernization is warranted and (ii) how such a modernization could look like. To that end, this contribution starts with describing the Luxembourg "piece-meal approach" towards Fund Forms. This contribution continues to explain "legal form neutrality" under the AIFMD and UCITSD, the role of legal forms in "fund governance" and explains why Fund Forms differ from the legal forms that are used in company and commercial law. This article then clarifies whether and to what extent Fund Forms in a number of Member States, such as France, Germany, Ireland and Liechtenstein, diverge from legal forms employed under company and commercial law. It continues by proposing possible amendments to be considered to modernize Luxembourg's Fund Form "toolbox" and then concludes.

Keywords: legal forms, AIFMD, UCITSD, Luxembourg