Luxembourg has become a top performer in the alternative investment fund sector in recent years. As of March 2022, the net assets managed by regulated Luxembourg funds totaled EUR 5,557,342 billion. This is an exceptional growth rate of more than 11 per cent over the previous two years.

Luxembourg is the largest investment fund centre in Europe and the second largest globally, after the United States. This is due to its established legal and regulatory framework, which allows for some degree of fund design flexibility.

Luxembourg is a significant financial hub with strong investment fund regulation. The Commission de Surveillance du Secteur Financier (CSSF) has the authority to approve and regulate undertakings for collective investments (UCI). 

This article aims to give a general overview of the fund regime particularly on open-ended funds in Luxembourg. 

What is an open-ended fund? 

An open-ended fund is a pooled, diversified portfolio of investor funds with an unrestricted capacity to issue shares. The sponsor of the fund sells and redeems shares directly to investors. The current net asset value (NAV) of these shares determines their daily prices. Open-end funds include some mutual funds, hedge funds and exchange-traded funds (ETFs).  

How open-end fund operates 

As long as there is demand, an open-ended fund will issue shares. It is known as an open-end fund since it is always accepting investments. Moreover, investors can combine their money and buy a diversified portfolio. This reflects a certain investment objective using an open-ended fund, which is a simple, affordable option. The funds may focus on making investments in particular industries and jurisdictions like Luxembourg. An open-ended fund is often available to investors of all experience levels because entry requirements are typically not expensive. 

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Types of investment funds in Luxembourg 

The following are the main types of investment funds in Luxembourg: 

  • Undertaking for Collective Investments (UCI) 
  • Undertakings for Collective Investment in Transferable Securities (UCITS) 
  • Alternative Investment Funds (AIFs) 

The EU implemented two regulatory frameworks; the Alternative Investment Fund Managers Directive (AIFMD) and the Undertaking of Collective Investment in Transferrable Securities Directive (UCITS). These regulatory frameworks aim to provide high levels of investor protection appropriate for professional and retail investors, respectively.

A unified EU regulatory framework applies to UCITS, which are open-ended funds that invest in transferrable securities like shares and bonds. Investment funds receive a “passport” allowing them to freely promote themselves across the EU if they meet the UCITS requirements. 

UCITS does not apply to investments in real estate, private equity, venture capital, hedge funds or debt funds. However, the AIFMD governed these activities, which also applies to the managers of non-UCITS investment funds. Authorised AIF managers have access to a “passport” that enables them to reach professional investors within the EU. 

As one of the first EU members to implement the AIFMD, Luxembourg was also the first to enact UCITS into national law. The success of Luxembourg’s investment fund business is a result of these actions. 

Legal forms for UCI in Luxembourg 

When registering a vehicle as UCI in Luxembourg, foreign investors can set up their funds in the form of three legal structures with different characteristics. In this situation, investors can select from the following Luxembourg investment funds:  

  • Common investment fund or FCP (Fonds Commun de Placement) – this is a type of fund with no legal personality and listed as an open-ended mutual fund. 
  • Investment company with variable capital or SICAV (Société d’Investissement à Capital Variable) – capital is controlled by investors and SICAVs do not have a fixed number of shares that are traded in the public market, like open-end mutual funds. 
  • Investment company with fixed capital or SICAF (Société d’Investissement à Capital Fixe) – may be established as public limited company, a limited liability company, partnership limited by shares or co-operative.  
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Other fund structures used in Luxembourg

  1. SICAR (Société d’investissement en Capital À Risque) 

Established on 15 June 2004, the SICAR is an investment company for risk capital investments. In addition, SICAR must have the CSSF’s approval as a regulated fund entity before launching. It is the traditional form for private equity and venture capital investments, although it can also participate in opportunistic real estate projects if it qualifies as risk capital. It is possible to set up the SICAR as a multi-compartment fund structure.  

  1. SIF (Specialised Investment Fund) 

Just like the SICAR, SIF is also a regulated fund which needs approval by the CSSF before launching. The SIF is a fund created in accordance with the law of 13 February 2007, and it may be used to invest in any asset class, including any kind of alternative asset. Further, the SIFs may be set up as multi-compartment funds, but they must adhere to the diversification rule that prohibits investing more than 30 per cent in one single asset.  

  1. RAIF (Reserved Alternative Investment Fund) 

The RAIF is an indirectly regulated fund. The RAIF law entered Luxembourg’s legal and regulatory system in July 2016 after a speedy rollout and without requiring regulatory approval. The Luxembourg funds market can now quickly provide a product with complete fund flexibility that is not under CSSF supervision.  

  1. SCSp (Special Limited Partnership) 

The Special Limited Partnership is an unregulated fund. Moreover, it is the most popular of the three partnership structures available in Luxembourg for structuring alternative funds, with almost 4,000 entities established since its launch in 2013.

The SCSp is a non-incorporated entity because it does not have its own legal personality unlike the common limited partnership and the partnership limited by shares, or the SCS and the SCA. It gives the General Partner the highest level of flexibility in determining the structuring of the partnership. There is no such requirement for the SCSp. Meanwhile, there is a requirement for regulated and indirectly regulated funds to appoint either a depositary or an AIFM. 

Bolder Group Luxembourg 

Bolder Group is one of the few fund administrators in Luxembourg which offers fund administration services for open-ended funds. Our fund experts provide a wide range of services to local and foreign business owners looking to establish a fund in Europe’s leading investment fund centre.  

Are you considering establishing your next fund or relocating your funds to Luxembourg? Contact our team or visit our Luxembourg office today. 

A small Western European country, Luxembourg (officially the Grand Duchy of Luxembourg), is one of the most alluring business hubs in the region. From its competitive business location to its emerging industries, Luxembourg is an ideal place to set up your next business venture. We discuss some of the reasons for you to start doing business in Luxembourg. 

Strategic business location

Luxembourg is bordering European Union countries with major economies such as Belgium, France and Germany. Its central European location has direct access to its neighbouring markets. From Luxembourg, about 60 per cent of the Union can be reached in less than half a day, making it a strategic location for doing business. In addition, existing infrastructure makes it possible for Luxembourg to penetrate cities such as Brussels, Frankfurt, Amsterdam and Paris, all in just a few hours.  

The Grand Duchy provides for an ideal operational and logistical hub with its central position in the region. Regardless of its relatively small size, its geographical setting serves as an advantage for those who are planning on doing business in Luxembourg. 

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Valuable international relations

Complementing its favourable location, Luxembourg maintains good international relations with various jurisdictions. As a result, the Grand Duchy has an active presence in the formation of foreign policies. It is a proponent of international diplomacy and multilateralism. Luxembourg is a member of several international unions and organisations, some of which are: 

  • Benelux Union 
  • European Union and the eurozone 
  • UN Human Rights Council (2022-2024 term) 

Businesses established in Luxembourg have full access to the European Union’s internal market. This opens an opportunity to tap into 27 countries, translating to 445 million consumers.  

Moreover, Luxembourg ranked first globally in terms of social globalisation, according to the 2019 KOF Globalisation Index. In terms of social globalisation, the index measures “personal contacts, information flows and cultural globalisation.” Luxembourg also ranked fifth as the most globalised economy in the world. This segment includes trade and financial flows.  

A large pool of diverse human resources

Luxembourg benefits from its diverse and multi-national roster of human resources. Its central location provides for a diverse human capital in terms of talent, experience, culture and language.  

Multinational teams are a common sight for companies doing business in Luxembourg. The bridging of cultures and business standards is made possible as 74 per cent of the Grand Duchy’s workforce consists of foreign and cross-border professionals. 

The country’s human resources can provide valuable local experiences and networks, as well as share diverse knowledge. Its cross-cultural teams also break down language barriers, advantageous for companies serving international customers.  

What’s more, Luxembourg placed third for the second time in a row in the 2021 series of the World Talent Ranking of the Institute for Management Development (IMD). IMD’s World Competitiveness Center used a three-fold factor in evaluating talent in economies, namely, Investment & Development, Appeal, and Readiness.  

Favourable fiscal programs and grant schemes

The Luxembourg government has put into place an attractive fiscal environment for businesses. In fact, the country ranked fifth on the International Tax Competitiveness Index in 2020 and 2021. The index measures a country’s adherence to the crucial aspects of tax policies, namely, competitiveness and neutrality. If a country ranks highly in the index, its tax code is deemed to have the ability to promote sustainable economic growth and investment opportunities. Luxembourg’s tax regime is a contributing factor to the country’s successful business start-ups. 

Several government grants are available to businesses, especially in sectors such as information technology, environmental protection and energy efficiency. Financial support may also be granted to eligible small and medium-sized enterprises located in Luxembourg’s development areas. Locally-based businesses may avail of the National Credit and Investment Corporation’s (SNCI) medium- and long-term capital grants.  

Stable economy

Luxembourg has one of the highest GDP per capita in the world, which illustrates economic stability and a high standard of living. 

Luxembourg is one of the ten countries with an AAA rating from S&P Global Ratings, Moody’s and Fitch. This is the highest possible credit rating given to a prospective debtor. The triple-A rating reflects the Grand Duchy’s creditworthiness and state of the economy.  

Developing industries

Luxembourg reaps the benefits of its market’s diverse industries. Its banking and financial services lead the pack amongst other emerging sectors as the financial industry makes up for about a third of Luxembourg’s GDP. Some of the country’s emerging industries include: 

  • Financial technology 
  • Information and communication technology 
  • Biotechnology 
  • Automotive component sector and space 

These industries that constitute Luxembourg’s business environment provides market entry opportunities for companies and employment opportunities for professionals. The previously mentioned grants and fiscal programs supplement this opportunity, which stimulates competitiveness amongst businesses.  

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Things to keep in mind when doing business in Luxembourg

Forms of business organisation and requirements

Generally, the main types of business organisations in Luxembourg are sole proprietorship, companies, partnerships, and cooperative societies. Listed below are more specific types of legal entities that can be incorporated in Luxembourg, namely: 

  • Public limited-liability company or société anonyme (SA) 
  • Private limited-liability company or société à responsabilité limitée (SàRL) 
  • Simplified joint stock company or société par actions simplifiée (SAS) 
  • Simplified private limited-liability company or société à responsabilité limitée simplifiée (SàRL-S) 
  • Limited partnership with share capital or société en commandite par actions (SCA) 
  • General partnership or société en nom collectif (SENC) 
  • Standard limited partnership or société en commandite simple (SECS) 
  • Co-operative company or société coopérative (SC) 

The most common corporate structures are the public limited-liability company or SA and the private limited-liability company or SàRL. Here is a quick guide on the similarities and differences of SA and SàRL.

Public limited-liability company (SA) Private limited-liability company (SàRL) 
Legal personality Each company has a separate legal personality that is distinct from its partners. It has its own rights and obligations under commercial, accounting and fiscal law. Each company has a separate legal personality that is distinct from its partners. It has its own rights and obligations under commercial, accounting and fiscal law. 
Assets It holds its own assets. It holds its own assets. 
Capital Conditions A company should have a minimum of €30,000 capital fully subscribed with ¼ paid up on formation. A company should have a minimum of €12,000 capital fully subscribed and paid up. 
Company shares Registered or bearer shares/bonds or dematerialised securities are freely transferable. Company shares are registered and can be transferred under strict conditions. 
Number of partners It should have at least 1 partner. It should have between 1 and 100 partners. 
Financial Liability Liability is limited to the amount of contributions per partner. Liability is limited to the amount of contributions per partner. 
Decision-making bodies There are either a general meeting and board of directors meeting, or a general meeting, management board and supervisory board. There is a general meeting and a business manager or management board. 
Taxes The business income is directly taxable. The partners are only taxable when profit is distributed. The business income is directly taxable. The partners are only taxable when profit is distributed. 

Each legal entity varies in formation requirements, incorporation procedures and other applicable regulations. If you are planning to be doing business in Luxembourg, do not hesitate to contact our local office

Relevant legislation

The recent COVID-19 pandemic paved the way for new legislative frameworks concerning the operations and doing business in Luxembourg. The purpose of such measures was mainly to alleviate problems with liquidity and maintain employment. Such measures include state-guaranteed loans, assistance with the shift to remote work and financial support, among others. 

As one of the fastest-growing economies in the world, Luxembourg has a well-established Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) directives. Its financial sector laws are mostly based on the European Union’s regulations. Some of the key laws established to address money laundering are the Law of 5 April 1993, Law of 12 November 2004 and the Law of 27 October 2010

Luxembourg has also established the Cellule de Renseignement Financier (CRF) or Financial Intelligence Unit (FIU) within its Ministry of Justice to further strengthen its efforts against money laundering and terrorist financing risks. Corporate entities that are planning to be doing business in Luxembourg must comply with numerous AML/CTF obligations. 

How Bolder Group can help

There are many reasons to start doing business in Luxembourg. The Grand Duchy serves as an attractive location to start your next business venture. Its geographic, economic and political environment pushes its position as a competitive business hub in the region.  

As a global fund administrator, Bolder Group can provide you with the expertise that you need in your middle and back-office needs. We can also help you enter the Luxembourg market to grow your business internationally.  

Contact our Luxembourg office to learn more. 

Companies and other legal entities need to register at least one UBO. A company’s owners or executives are known as UBOs (Ultimate Beneficial Owners). The UBO register, a portal used for owner registration, aids in the prevention of financial and economic crimes like corruption, tax fraud, and money laundering. It is evident who receives money from the register. So, it is impossible for someone to use a corporation as a cover for any potential financial crimes. 

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A natural person is deemed to be a beneficial owner by the Financial Action Task Force (FATF) if they fulfil any of the following requirements: 

  • Owns 25% of the stock or capital of an entity 
  • Has at least 25% of the voting rights in a body 
  • Is the legal guardian of a customer who is a minor 
  • Has legal authority over the client 
  • Is a corporation stockholder who holds anonymous bearer shares 
  • Is a corporate director hired intentionally to hide a true owner

Additionally, if your enterprise is a subsidiary of a holding company, the UBO is the holding company’s owner. 

The FATF advises service providers to gather several fundamental pieces of information, including ‘at a minimum’ specifics about the company’s ‘legal ownership and control structure,’ to ascertain beneficial ownership. The FATF also emphasised the necessity for service providers to be able to identify UBOs swiftly and effectively, stressing the importance of ‘the widest possible range of international cooperation.’ 

There is a requirement for numerous organisations to register their UBOs starting on September 27, 2020. It is illegal for a company to use unregistered business objects (UBOs). 

UBO Registration Compliance in Different Jurisdictions 

Globally, UBO registries are used to keep track of who owns and controls legal entities. However, specific compliance procedures vary greatly from country to country, which is challenging for multinational corporations. 

Bolder Group provides full UBO compliance services, including registration, to keep these procedures effective wherever you conduct business. 

UBO in the US 

The US approved the Corporate Transparency Act in 2020, requiring businesses all around the nation to publish beneficial ownership information to the government. Due to administrative hiccups in 2021, the bill was not set to take effect on 1 January 2022, as originally planned. However, the act is expected to become law at some point this year, and industry experts anticipate the publication of an update to this regulation by 2022, though the exact date is open to interpretation. 

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UBO Reporting Requirements 

The Corporate Transparency Act fits best into the registry approach category when compared to the FATF’s Best Practices on Beneficial Ownership for Legal Persons. The FinCEN requires the following information:  

  1. The complete legal name of a beneficial owner 
  1. The birthdate of a beneficial owner. 
  1. The current residential or commercial street address of a beneficial owner 
  1. A unique identification number issued by the government and allocated to that beneficial owner from a valid form of identification (such as a passport, driver’s license, or other document issued by a U.S. state). 

The registry will not be accessible to the public, but police enforcement and financial organisations may access the data (with customer consent). 

The definition of a beneficial owner under the Act is clear: A beneficial owner is any natural person who, directly or indirectly, through any agreement, arrangement, understanding, connection, or other arrangements: 

  1. Has significant controlling influence over a corporation or limited liability business; 
  1. Possesses at least 25% of the ownership stake in a corporation or limited liability company; 
  1. Receives significant financial advantages from a corporation’s or limited liability company’s assets. 

The punishment for providing inaccurate or fraudulent UBO information is up to $10,000 in fines and two years in prison. 

UBO in The Netherlands 

As of 27 March 2022, more than 1.5 million organisations in the Netherlands are mandated to register their UBOs. 

Bolder blog: UBO registration in the Netherlands
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Dutch legal entities required to register UBOs 

UBO registration in Holland depends on the type of business entity. The following organisations must register UBOs: 

  • unlisted private companies and unlisted public limited companies 
  • foundations 
  • associations with full legal capacity 
  • associations with limited legal capacity but with business activity 
  • mutual insurance companies 
  • cooperatives 
  • partnerships: professional partnerships, general partnerships and limited partnerships 
  • shipping companies 
  • European limited liability companies (SE) 
  • European cooperative societies (SCE) 
  • European economic interest groupings that have their registered office in the Netherlands according to their statutes (EEIG) 

UBO registration is also essential for denominations and churches. When this becomes feasible—which is yet uncertain—the churches will be notified. 

Organisations without registration duty 

If you have one of the following organisations, you are exempt from registering your UBOs: 

  • sole proprietorships/sole traders 
  • listed private companies and listed public limited companies 
  • 100% subsidiaries of listed companies 
  • owners’ associations 
  • legal structures in formation 
  • associations with limited legal capacity and without commercial activities 
  • legal entities under public law 
  • other private bodies, including historical legal entities such as guilds and courtyards 

UBO registration must be maintained in each EU member state. Your UBO is registered with the Chamber of Commerce (KVK) in the Netherlands. The UBO register must have at least one UBO entered by each organisation that must register. Registering requires authorisation from a signatory inside your organisation. When new businesses register with the Chamber of Commerce or a civil-law notary, they must also register as UBOs. 

When it comes to foreign UBO registration, you must add a foreigner to the UBO registry if they have an interest in your Dutch firm as indicated. It doesn’t matter if they are a Dutch citizen or not, or whether they reside in the Netherlands or elsewhere. 

On foreign legal entities, the ultimate beneficial owners of foreign corporations with only branch offices in the Netherlands are not required to be registered there. An Ltd. or GmbH should file their UBOs with the local UBO registry. 

If you need personalised advice on UBO registration in the Netherlands, you may contact Bolder Launch for a free consult. 

UBO registration in Luxembourg 

A law enacted on 13 January 2019, went into effect in Luxembourg on 1 March 2019, introducing new disclosure requirements with respect to ultimate beneficial owners of legal organisations. By means of this statute and in compliance with EU law, Luxembourg has established a national register for UBOs, imposing requirements and obligations on any legal body operating under Luxembourg law. 

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Data entered in the UBO Register 

The UBO Register requires the following information from each UBO: 

  • Full name 
  • Date and place of birth 
  • Nationality/ies 
  • Country of residence 
  • Private or professional address 
  • National (Luxembourg or foreign) identification number (as applicable) 
  • Details of the nature of, and the extent of, the beneficial interest held in the relevant entity 

Board of manager members may occasionally be recognised as UBOs. Despite the Luxembourg Chamber of Commerce’s criticism, the Law does not explicitly say that the information contained in the UBO Register is to be restricted to the members of the board of managers for investment funds with a corporate nature. 

Entities involved 

The following entities (the “Obliged Entity”), who are listed in the Luxembourg Trade and Companies registry, will have information about them in the UBO Register. 

  • Almost all commercial companies, such as private limited liability company (Sàrl), public limited company (SA), partnership limited by shares (SCA) 
  • General corporate partnership (SNC), common limited partnership (SCS), special limited partnerships (SCSp), cooperative company (Coop), European company (SE) 
  • Economic interest groupings 
  • European economic interest groupings 
  • Civil law companies 
  • Non-profit organisations 
  • Foundations 
  • Pension savings associations (ASSEP) 
  • Agricultural associations 
  • State and municipal public institutions (établissements publics) 
  • Mutual insurance associations 

In contrast to the original version of the Bill, the Luxembourg lawmaker expanded the list of the Obliged Entities by including mutual funds (Fonds Commun de Placement, FCPs) and branches of foreign entities (commercial or civil companies, economic interest and European economic interest groupings subject to other European regulations). 

The UBO Register covers publicly traded firms that are listed on a regulated market in Luxembourg, another member state of the European Economic Area, or in a different third country with comparable international criteria. Only the market on which they are listed must be disclosed by these businesses. 

Bolder blog: UBO registration in Luxembourg
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Bolder Group as your UBO service provider 

UBO registries are used by jurisdictions across the world to keep track of who is the ultimate beneficiary and to assemble and manage their knowledge of who controls local legal organisations. 

Global UBO compliance, like registration, is extremely challenging due to the enormous variations in the specific compliance procedures across different jurisdictions, including legal definitions, information requirements and reporting deadlines. 

Regardless of where you are, Bolder Group can handle all your UBO compliance responsibilities. We have thirteen locations across the globe and more than 200 in-house professionals in corporate secretarial management and worldwide governance. We gather, store, manage and register the data required to satisfy the unique legal specifications of any number of different countries using our own strong UBO services platform. 

As a leading fund administration and compliance service provider, we assist our clients in safe international investment and business operations. No matter how many borders you operate over, we have the business-critical support you need to expand, run, and grow everywhere while staying in compliance. 

Contact our experts today to know more about our regulatory compliance solutions and business support services.