Special Purpose Acquisition Companies (SPACs) have become a popular alternative to traditional Initial Public Offerings (IPOs) in recent years. A SPAC is a shell company that is created specifically to acquire a target company with the intention of taking it public.
I. What are SPACs?
- SPACs are publicly-traded investment vehicles created to raise capital for the purpose of acquiring an operating company.
- They provide a strong alternative to the traditional IPO process and are now considered an asset class attracting interest from global investors.
- The main goal of SPACs is to raise funds and list the acquired company on a stock exchange. They are allowed to have their shares traded publicly, allowing investors to enjoy the benefits of listed companies.
II. Why establish a SPAC in Luxembourg?
- Luxembourg is an attractive location for SPAC sponsors due to its business-friendly ecosystem and stable legal framework.
- It is a politically and financially stable jurisdiction with a triple-A rating and a center for investment funds.
- The accessibility of the CSSF and the investor-friendly listing framework provided by the Luxembourg Stock Exchange make it a desirable location for establishing a SPAC.
III. Types of fund companies for SPACs in Luxembourg
- SIF (Specialised Investment Fund)
- Authorized and supervised by the CSSF for private equity investments with relaxed regulations compared to UCIs.
- Reserved for qualified investors and may qualify for the AIFMD passport.
- SICAR (Société d’Investissement en Capital à Risque)
- Created for qualified investors with a focus on risk and improvement of the target company.
- Supervised by the CSSF and may qualify for the AIFMD passport.
- RAIF (Reserved Alternative Investment Fund)
- Offers a non-regulated alternative investment fund platform with investor protection.
- Requires an authorized AIFM and has a simplified process and shorter time to market.
- SOPARFI (Société de Participations Financières)
- Committed to holding and financing activities within Luxembourg with a focus on participation and dividends.
- Not supervised by the CSSF and has a large network of anti-double taxation treaties.
- Limited Partnership (SCS) and Specialized Limited Partnership (SCSp)
- Offers the highest level of contractual freedom and structuring flexibility.
- Not restricted to any asset type and is tax transparent.
IV. Considerations when establishing a SPAC in Luxembourg
- Determine whether to choose a fund or company form.
- The most popular financial holding company for IPOs and acquisitions is the SOPARFI in the form of a public limited company (Société Anonyme).
- The Special Limited Partnership (SCSp) is becoming a popular choice for fund structures due to its flexibility and quick establishment time.
The time of setup will depend on whether the Luxembourg structure is supervised or non-supervised. A non-supervised structure can be established within 2 weeks, while a supervised structure can take around 2-4 months. This will depend on the intricacy of the structure and the time it takes to get approved by the Luxembourg regulator.
Luxembourg’s outstanding regulatory corporate and listing law frameworks have turned the country into a primary potential hub, which is likely to become one of Europe’s preferred destinations for SPAC projects.
For the establishment of your SPAC (SICAR, SIF, RAIF, SOPARFI, SLP, or other ), or to set your investment fund in Luxembourg, let’s go ahead and contact your Damalion expert now.
