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How to Open a Luxembourg SICAV-RAIF

by | Apr 25, 2022 | Corporate Structuring

Opening a SICAV-RAIF in Luxembourg

The Reserved Alternative Investment Fund (RAIF) is an investment vehicle that can invest in all asset types. It qualifies as an alternative investment fund (AIF) and is not subject to Commission for the Supervision of the Financial Sector (CSSF) authorization and supervision. In essence, a Reserved Alternative Investment Fund (RAIF) must appoint an Alternative Investment Fund Manager (AIFM). 

In case an Alternative Investment Fund Manager (AIFM) is domiciled in the European Union, a Reserved Alternative Investment Fund (RAIF) can market its units, partnership interests, and shares through a specific passport to well-informed investors across the European Union. 

Eligible Investors for SICAV-RAIF

  • Investors limited to well-informed investors, with the ability to adequately assess the risks associated with investment in such a vehicle. 
  • Well-informed investors include institutional investors, professional investors, and investors who have informed in writing that they comply with the well-informed investor status. 
  • Investors who can invest a minimum of EUR 125,000 in the Reserved Alternative Investment Fund (RAIF) and have been evaluated by a credit institution, investment firm, or management company, certifying an investor’s expertise, knowledge, and experience in adequately appraising investments in a Reserved Alternative Investment Fund (RAIF). 
  • Reserved Alternative Investment Funds (RAIFs) investing in short-term assets with distinct or cumulative objectives offering returns in line with money  market rates or preserving the value of investment must adhere with the requirements of Regulations 2017/1131 on money market funds. 

SICAV-RAIF Formation

  • From a corporate perspective, an Investment Company in Variable Capital (SICAV) has its own legal personality. 
  • A SICAV-RAIF structure may come in the form of a public limited company (S.A.), corporate partnership limited by shares (S.C.A.), common limited partnership (SCS), special limited partnership (SCSp), private limited liability company (S.A.R.L.), or a cooperative company organized in public limited liability company (SCOP).
  • Subject to the Law of 10 August 1915 on commercial companies, and therefore subject to any derogations provided by the RAIF Law. 
  • An Investment Company in Variable Capital (SICAV) is always equal to its net asset value. 
  • Capital varies as a result of redemptions and subscriptions and a consequence of the increase or decrease of the total value of its assets. 
  • Capital variations does not necessitate any corporate action. 
  • An Investment Company in Variable Capital (SICAV) does not have to publish its capital on any official publication. 

An Investment Company in Variable Capital (SICAV) may be set up as a single fund or an umbrella fund structure with an unlimited number of compartments. The fund and compartments respectively may have an unlimited number of shares and unit classes, depending on the needs of investors to whom the funds are distributed. 

The Indirect Supervision for a SICAV-RAIF

  • It must however be managed by an authorized external Alternative Investment Fund Manager (AIFM). The Commission for the Supervision of the Financial Sector (CSSF)  is informed about the activities of a Reserved Alternative Investment Fund (RAIF) through its manager which is subject to regular reporting requirements. 
  • A SICAV-RAIF is established by notarial certification. It is sufficient to certify that the Alternative Investment Fund Manager (AIFM) confirms a fund’s formation, and that this information is published in Luxembourg’s Official Gazette.  
  • A SICAV-RAIF’s constitutional documents do not have to be certified by a notary. A SICAV-RAIF may be entered in a list held by the Luxembourg Trade and Companies Register. 
  • Offering document of a SICAV-RAIF must indicate on its front page that the fund is not subject to supervision in Luxembourg. 

Capital Base of SICAV-RAIF

  • The SICAV-RAIF net asset value may not be less than EUR 1.25 million, with the minimum must be achieved within a period of twelve months following its authorization. 
  • At least 5% of the capital must be paid up upon subscription. 
  • SICAV-RAIF Disclosure of Requirements and Financial Reporting 
  • A SICAV-RAIF is not deemed to prepare a semi-annual report. 

SICAV-RAIF Appointment of Alternative Investment Fund Manager (AIFM)

  • A SICAV-RAIF must appoint an external Alternative Investment Fund Manager (AIFM), which means that they can be internally managed. 
  • The Alternative Investment Fund Manager (AIFM) can be formed in Luxembourg , in another EU member state, or in a non-EU country. 
  • If a Reserved Alternative Investment Fund (RAIF) is managed by a management company, it can be appointed as its Alternative Investment Fund Manager (AIFM). 

SICAV-RAIF Service Providers

  • A SICAV-RAIF may be self-managed or designate a management company. 
  • Self-managed SICAV-RAIF can only manage assets of their own portfolio and cannot manage assets on behalf of a third party. Central administration must be in Luxembourg. 
  • Eligible depositaries in a  SICAV-RAIF can be Luxembourg credit institutions and investment firms that fulfill certain requirements laid down by the Law of 5 April 1993 on the financial sector, as amended. 
  • It is also possible to collaborate with a professional depositary of assets other than financial instruments. 
  • Annual reporting must be audited by an authorized independent auditor with professional experience. 
  • Other service providers that can act as depositaries include lawyers, portfolio managers, transfer agents, registrars, distribution, and paying agents. 

SICAV-RAIF Taxation Scheme

Regardless of legal entity under which a Reserved Alternative Investment Fund (RAIF) is registered in Luxembourg, the fund will be deemed to pay subscription tax, which is applicable at a rate of 0.01% of the fund’s net asset value. 

Foreign investors looking to start a Luxembourg investment fund as a Reserved Alternative Investment Fund (RAIF) may also be exempt from paying subscription tax in certain conditions. 

For instance, the subscription tax is not applicable in the case of funds set up as pension funds, money market funds, micro finance funds, and funds that invest in other funds and are liable to pay subscription tax. 

As a full-service business consulting firm, Damalion is firmly positioned to help foreign investors and fund initiators in the creation of a Reserved Alternative Investment Fund in investment company in variable capital (SICAV) form. We have a global service network consisting of lawyers, accountants, advisors, and auditors working diligently to ensure you succeed in creating your preferred investment vehicle in Luxembourg. Utilizing years of expertise and experience in Luxembourg’s regulatory and legal framework, we have he skills and knowledge to help you expand your portfolios efficiently. To learn more, reach out to a Damalion expert today. 

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.