The Specialised Investment Fund (SIF) has been introduced by the law of 13 February 2007 as amended by
the law of December 19, 2008 on the capital duty and transfer tax
the law of the December 18, 2009 on the audit professio
and the law of December 17, 2010.
The SIF may at a glance, look like a SICAR but presents fundamental differences with this latter.
The SIF does not constitute a new legal form of company but rather a new legal and tax framework adapted on existing legal forms. Unlike the SICAR, a SIF is obliged to a certain risk diversification. The tax regime also distinguishes the SIF from the SICAR,
The exclusive object of the SIF is the collective investment of their funds in assets in order to seek a certain risk diversification and to make investors benefitting from the results of the management of their assets.
Investing in a SIF is reserved to sophisticated investors know as “Well Informed Investors”. Well informed investors are
Any other investor who have declared in writing their status as an experienced investor and who meets the following conditions;
invests a minimum of EUR 125,000, or
benefits from an assessment by a credit establishment within the meaning of the Directive 2006/48/EC, an investment company within the meaning of the Directive 2004/39/EC, or a management company within the meaning of Directive 2001/107/EC certifying their expertise, their experience and their understanding to appreciate in an adequate manner investments in risk capital
A SIF can incorporated as a mutual fund (FCP) managed by a Luxembourg management company
It can also be incorporated as an Investment company with variable capital (SICAV) or fixed capital (SICAF) which has adopted the following legal form :
Public Limited Company (SA)
Partnership Limited by Shares (SCA)
Private Limited Company (SARL)
Cooperative Company organized as a Public Limited Company (SCoSA)
Authorization and supervision
SIFs are subject to the supervision of the CSSF
SIFs must, in order to carry out their activities, be authorized by the CSSF.
SIFs shall be authorized only if the CSSF has approved its constitutive documents and the choice of the depository
The replacement of the management company or of the depository and any amendment of the constitutive documents of the SIF are subject to approval by the CSSF
Authorized SIF shall be entered by the CSSF on a list. Applications for entry on the list must be filed with the CSSF within the month following their constitution or formation.
The management company shall not be authorized by the CSSF if it manages only one SIF.
The directors of the SIF or of the management company must justify probing experience and be of good standing with regard to the contemplated investment.
For the FCPs: the net assets may not be less than EUR 1,250,000 and this minimum must be reached within a period of 12 months following the authorization of the mutual fund.
For the SICAV/F:
The SA, SCA must have a minimum capital of EUR 31,000 at the date of incorporation of the company.
The SARL must have a minimum capital of EUR 12,500 at the date of incorporation of the company.
The subscribed capital of the SICAV, increased by share premium if any, may not be less than EUR 1,250,000. This minimum must be reached within a period of twelve months following the authorization of the SICAV/F.
SIFs can invest in all types of assets
The investment policy shall be described in the Private Placement Memorandum (PPM)
In principle, a SIF may not invest more than 30% of its commitments to in the same asset from the same issuer. This restriction does not apply to:
investments in securities issued or guaranteed by an OECD Member State or its regional or local authorities or by EU, regional or global supranational institutions and bodies;
investments in target UCIs that are subject to risk-spreading requirements at least comparable to those applicable to SIFs.
Legal and regulatory framework
The head office of the registered office of the management company must be situated in Luxembourg
SICARs are subject to the general provisions applicable to commercial companies.
The custody of the assets of a SIF must be entrusted to a depository
The depository must be a credit institution within the meaning of the amended law of 5 April 1993 concerning the financial sector
The depository must either have its registered office in Luxembourg or be established in Luxembourg if its registered office is in another Member State of the European Union.
The depository’s liability shall not be affected by the fact it has entrusted all or some of the assets in its custody to a third party
The promoter / initiator shall not have any minimum subscribed capital requirement and does not need to be authorized by the CSSF.
The central administration of the SIF must be situated in Luxembourg.
The central administration can be entrusted to an external administrative agent (LuxGlobal Trust Services for instance).
If outsourced, the central administration needs to have a CSSF licence known as Professional of the Financial Sector (“Professionnel du Secteur Financier”)
Offering document and annual report
The SIF or the management company have to draft a Private Placement Memorandum (“PPM”), and to establish an annual report for each financial year
If a prospectus under the Law of 10 July 2005 concerning the prospectus for transferable securities has been published, there is no obligation to establish an offering document within the meaning of this Law
The annual report must be available to investors within six months from the end of the period to which it relates
The SICAR is not required to establish a set of consolidated financial statements.
The annual accounts have to be reviewed by an approved statutory auditor (“réviseur d’entreprises agréés”).
Issuing new shares
For mutual funds :
Units shall be issued and, as the case may be, redeemed in accordance with the conditions and procedures set forth in the management regulations.
There is no legal restriction concerning the valuation of the shares/units unless if provided by the management regulations.
For the SICAVs:
Variations in the capital are realised ipso jure and without any publication obligation or modification in Trade register
In case new shares or units are issued, pre-emption rights may not be claimed by existing shareholders or unitholders unless the articles of incorporation provide for such a right by dedicated provision
There is no legal restriction concerning the valuation of the shares/units unless if provided by the articles of incorporation.
Dividend distribution have to be foreseen in the PPM
FCPs and SICAVs are not subject to any rules in relation with distribution of interim dividends other than those set forth in their articles of incorporation
For the SICAFs :
The distributions cannot reduce the assets of the SICAFs to less than 1.5 times the SICAFs liabilities
Interim dividends are subject to statutory conditions (article 72/2 of the company law)
Net asset valuation
The management regulation of the FCP or the articles of incorporation of the SICAV have to describe the computation of the net asset value of the company.
The valuation of the net asset value of the SIF is based on the fair value concept.
The SIF may be incorporated with multiple compartments
Each compartment may have its owns investment policy, characteristics and rules
Each compartment is deemed to be a separate entity unless otherwise provided in the articles of association. A given compartment may be separately liquidated without leading to the liquidation of another compartment.
The rights of investors and of debtors concerning a compartment are strictly limited to the assets of that compartment unless otherwise agreed in the incorporation.
The SIF is subject to an annual subscription tax at a rate of 0.01% assessed on its NAV.
The SIF is not subject to Corporate Income Tax (CIT), Municipal Business Tax (MBT) and Net Wealth Tax (NWT)
The SIFs whose main purpose is the investment in microfinance institutions are exempt from subscription tax.
There is no withholding tax on dividends and capital gains distributed to shareholders, unless in some exceptional circumstances residing in countries with which Luxembourg has no Double Tax Treaty :
However, distribution of dividends and any other distribution of income made by the SIF under the form of FCPs might be subject to withholding tax according to the EU Saving Tax Directive under certain conditions
Distributions do not fall in the scope of the Directive if the direct investments in receivables do not exceed 15% of the SIF assets.
The sales of UCIs do not fall in the scope of the Directive if the direct and indirect investments in receivables do not exceed 40% of their assets.
Double tax Treaties / European Directive
The FCPs do not benefit from double tax treaties except the tax treaty concluded with the Ireland.
In principle, the SICAV/Fs benefit from certain Double Tax Treaties concluded by Luxembourg
The provision of management services rendered to a SIF is exempt from VAT