The investment company with fixed capital (SICAF) is one of the available legal structures for opening an investment fund in Luxembourg. In order to set up a SICAF (Société d’Investissement à Capital Fixe), an investor needs to observe the requirements for capital, structuring and fund management (our consultants can assist in this matter).
| Quick Facts | |
|---|---|
| What is a SICAF? | A SICAF refers to an investment company with fixed capital (société d'investissement à capital fixe) that can be incorporated under some of the legal entities available in Luxembourg. |
|
Legal entities available for a SICAF |
Investors can set up a SICAF in Luxembourg registered under one of the following legal entities: – public limited company (societe anonyme – SA);private limited liability company (société à responsabilité limitée – SARL); – special limited partnership (société en commandite spéciale – SCSp); – partnership limited by shares. |
|
Laws regulating the SICAF |
– UCITS Law; – Part II Fund Law (with authorized and registered AIFM); – SIF Law. |
| Types of investors who can participate in a SICAF | The requirements for the investors can vary based on the law under which one will set up a SICAF in Luxembourg (for instance, UCITS law grants the right to set up this structure to all types of investors). |
| Minimum investment threshold imposed to investors |
It depends on the type of SICAF (for self-managed SICAFs, the investment must be minimum EUR 300,000 at the moment of the registration; for other types, 25% of the capital must be paid up – it requires a capital of EUR 1,250,000). |
| Appointment of alternative investment fund manager (AIFM) |
It is required for funds operating under the AIFM law. |
| Minimum share capital for a SICAF |
Investors can set up a SICAF in Luxembourg with a minimum capital of EUR 1,250,000. |
| Conditions for depositing the minimum share capital |
Upon registration, only a part of the capital must be subscribed. Investors are required to deposit EUR 1,250,000 within 6 months since the incorporation of the fund. |
| Authorization required (yes/no) |
Yes |
| Main regulator of a SICAF | Luxembourg Financial Supervisory Authority (Commission de Surveillance du Secteur Financier – CSSF). |
| Umbrella funds allowed (yes/no) |
Yes |
| Subscription tax (yes/no) |
Yes (0.01% for funds registered under the SIF Law and 0.05% for all the others) |
| Obligation to pay the corporate tax |
The SICAF is exempted from paying the income tax. |
| Intervals for reporting obligations |
– all SICAFs are required to submit reporting documents on their financial situation; – the intervals vary based on the law regulating the fund; – most SICAFs must submit semi-annual account reports and audited annual reports; – they must prepare the accounts as per the rules of the Luxembourg Generally Accepted Accounting Principles (GAAP) or the International Financial Reporting Standards (IFRS) – the latter, for listed companies regulated by the EU Regulation 1606/2002. |
| Law regulating reporting obligations for SICAFs |
– Luxembourg GAAP (Generally Accepted Accounting Principles); – IFRS (International Financial Reporting Standards); – CSSF Circular 02/81. |
The characteristics of SICAF in Luxembourg
It can be formed as a public limited company, a limited liability company, partnership limited by shares or co-operative. Besides the above mentioned aspects, the investors should know that SICAF is also represented by the following:
- the fund is set up in order to invest in securities and in otherliquid financial investments;
- the SICAF can also be registered to operate as a security fund, real estate fund or holding fund;
- the vehicle may be incorporated only by qualified investors if it is registered under the SIF regulations;
- if the fund is formed under the UCITS regulations, any type of investor is entitled to register a SICAF;
- the fund’s statutory documents, the articles of association, have to be concluded in Luxembourg;
- its registered office and place of management have to be in Luxembourg as well.
Both the SICAF and the SICAV can be formed as individual funds or as part of an umbrella fund that has a number of sub-funds. The SICAF will need a capital of EUR 1,250,000 that must be fully deposited within six months since the fund received an authorization from the local financial regulator, but this is applicable only in the situation in which the vehicle operates as a UCITS fund.
If the fund is registered under the SIF regulations, the capital may be deposited in a period of 12 months. Below, investors can discover the key features of the SICAF, which can be presented on an extensive manner by our team of financial consultants:
- the SICAF represents a corporate structure which has a fixed share capital;
- it has a separate legal personality than the one of the shareholders, and in order to increase or decrease its capital, formal decisions have to be taken, in accordance with the fund’s incorporation documents;
- its management can be established under a board of directors or board of managers, depending on the legal entity that was selected for the registration of the SICAF;
- the business forms selected for this structure are given by the 2002 Law, Part I and Part II.
Laws under which investors can set up a SICAF in Luxembourg
It is possible to set up a SICAF in Luxembourg under the provisions of various rules of law available for investment funds registered here. Investors who will open a Luxembourg fund as a SICAF have the following options:
- Part I Fund Law;
- Part II Fund Law with registered/authorized AIFM;
- SIF in Luxembourg with registered/authorized AIFM;
- RAIF in Luxembourg with authorized AIFM.
These rules of law impose different requirements in terms of shareholding, raising capital (minimum amount required), issuance of shares, distribution of dividends, etc.
What are the rules concerning the distribution of dividends?
The distribution of dividends in a SICAF can be influenced by the law under which the structure has been incorporated as well as the law regulating the respective fund type.
For instance, in the case of a SICAF registered under the Part II Law, which is incorporated as a public company or as a partnership limited by shares, the distribution of dividends will be made in accordance with the rules prescribed by the Commercial Law – the restrictions of Article 72-3 of this rule of law must be observed in this circumstance.
Paid up capital requirements
The minimum paid-up capital is also influenced based on the rule of law applicable to this entity, as well as the business form selected for incorporation. For instance, a paid up capital of at least 25% is necessary for a SICAF incorporated as public company or as a partnership limited by shares under the Part I Law, Part II Law.
Different requirements are imposed under the rest of the laws applicable to this structure, in which case the investors need to deposit at least 5% of the capital.
What are the rules for the issuance of new shares?
In all cases, those who will set up a SICAF in Luxembourg must know that, regardless of the applicable law and the company type selected during the registration, the investors (shareholders) have pre-emption rights when new shares are issued. Issuing new shares must be made in accordance with the rules prescribed in the constitutive documents.
Please address our team for further information on the issuance of shares for other types of structures (we can assist if you want to open a SICAV in Luxembourg or if you want to open a SIF in Luxembourg).
Taxation principles and supervision for funds in Luxembourg
The Luxembourg Financial Supervisory Authority (CSSF) is the main regulator for investment funds in the country. Any fund, including the SICAF, will need to obtain its approval before being able to commence any activities. The institution will approve the fund’s constitutive documents, its management strategy and even its directors.
The distribution of dividends in a SICAF must be done in such a way that it will not decrease the assets to an amount less than half of the fund’s liabilities to its creditors. The fund will also need to comply with annual accountancy and financial reporting requirements. Our financial experts in Luxembourg can help you manage your fund in such a way that it complies with the accepted accounting and reporting principles.
The SICAF in Luxembourg is exempt from the income tax, the net wealth tax or the value added tax. While some double tax treaties can apply, Luxembourg has certain restrictions when it comes to double taxation for investment funds in other countries. Our financial representatives can advise on which double tax treaties apply in case of SICAFs. Below, we invite you to read our infographic on how to open a SICAF in Luxembourg:
What are the main taxes applicable to Luxembourg SICAFs?
A SICAF in Luxembourg is liable to the payment of a subscription tax applicable at a rate of 0.05% from the net worth of the fund (calculated on a yearly basis). In the case of SICAFs that are registered under the SIF law, the annual subscription tax is imposed at a rate of 0.01%.
The provision of services can be imposed with the standard value added tax (VAT) rate, but a full exemption is applicable in the case of the services offered by management companies in Luxembourg to investment funds.
What are the reporting requirements for Luxembourg SICAFs?
Foreign investors who want to open an investment fund in Luxembourg registered as a SICAF are legally required to follow the provisions prescribed by the Luxembourg Financial Market Authority (CSSF). The CSSF is the main institution that provides licenses for investment activities in this country and this type of document is also needed when investing here through a SICAF.
Further on, during the financial activity of the fund, CSSF will permanently supervise the activity of the vehicle; investors must also consider that the fund manager’s need to be licensed by the CSSF, and this is also necessary in the case of fund advisers. The fund is also subjected to audit procedures, that are carried out by independent auditors.
The main reporting requirements applicable to a SICAF in Luxembourg refer to the fund’s accounts. They have to be prepared at the end of each half of the financial year, but the fund is also obliged to complete an annual account. The SICAF has to deposit such documents in a given period of time, which depends on the structure of the fund.
Thus, in the case of a SICAF registered under the UCITS regulations, the accounts have to be published in a period of four months since the end of the financial year. When referring to a Luxembourg SICAF registered as a SIF, the accounts can be published in a period of six months.
The fund has to prepare a sale prospectus, an exemption in this sense being granted to investment funds in Luxembourg that are registered as closed-ended UCITS vehicles. Our team of financial consultants can provide more information on the documents that have to be prepared during a financial year by a local SICAF.
Does the fund need to appoint a custodian in Luxembourg?
Yes, according to the applicable legislation, a SICAF in Luxembourg is obliged to appoint a custodian bank, which will be in charge with the assets of the fund. Amongst the obligation of the bank handling the fund’s assets is to verify if such assets are used in accordance with the provisions stipulated in the fund’s incorporation documents.
It is necessary to know that the custodian bank can become liable to the fund (and to the fund’s shareholders), in the situation in which it did not handle the fund’s assets in a proper way, in accordance with the duties it had towards the respective vehicle.
Below, businessmen can watch a short presentation on the main aspects related to the Luxembourg SICAF:
You can also contact us if you want to learn more about the conditions that investors must respect upon the incorporation of a SICAR in Luxembourg or if you want to open a SPF in Luxembourg. We also assist in private equity in Luxembourg. For advice on other investment vehicles, such as the SOPARFI in Luxembourg, please contact our team.