The Luxembourg Special Limited Partnership (“société en commandite spéciale in French” or SCSp) is a type of investment vehicle designed for individuals or institutions who want to launch their investment funds in Luxembourg to lead a specific business or project without taking on the risks associated with managing it.
It works as a type of limited partnership, where a group of investors join forces and combine their capital to invest in a specific project or asset. This legal structure provides a flexible and efficient vehicle for managing investments in Luxembourg.
The SCSp is an attractive option for those interested in private equity, venture capital, real estate, cryptocurrencies, funds of funds, and other alternative investments. It offers several advantages, including limited liability for limited partners and flexibility in terms of governance and investment management.
Investors in an SCSp are classified as either limited partners or general partners.
Purpose of the Special Limited Partnership (SCSp)
The purpose of the Luxembourg Special Limited Partnership (SCSp) is to provide a legal structure that enables investors to pool their capital and invest in a specific project or business.
- This investment vehicle offers several benefits, including the ability to invest in high-risk, high-return ventures such as private equity, venture capital, real estate development, or other alternative investments.
- The SCSp can also function as a feeder fund vehicle, allowing for customized investments to accommodate the unique needs or obligations of one or multiple investors.
- In addition to its investment benefits, the SCSp may also offer tax benefits for its partners. These tax benefits may include reduced tax rates, deferral of taxes, or other tax incentives, making it an attractive option for those seeking to optimize their tax position.
Overall, the Luxembourg Special Limited Partnership is a versatile investment vehicle that provides investors with a flexible and efficient legal structure for investing in a variety of high-yield ventures.
The Luxembourg Special Limited Partnership (SCSp) Tax Regime
The tax regime of the Luxembourg Special Limited Partnership (SCSp) is one of the main reasons for its popularity among investors. The SCSp is considered a tax-transparent entity in Luxembourg, which means that it is not subject to corporate income tax on its profits.
The profits generated by the SCSp are distributed among the partners, so each partner is then subject to taxation based on their individual tax status and share of the profits.
While the SCSp is generally not subject to corporate income tax, it may be subject to limited tax liability on certain income derived from Luxembourg sources.
Benefits of Setting Up a Special Limited Partnership in Luxembourg
Setting up a Special Limited Partnership (SLP) in Luxembourg offers several benefits for investors, including:
- Limited liability: it provides limited liability protection to the limited partners, which helps to mitigate risk and protect their assets.
- Flexibility: this legal structure can be tailored to fit the specific requirements and objectives of the partners, providing them with a high degree of control over the management and operation of the partnership.
- Fast incorporation: it can be registered and made active on the market in a short period, allowing for quick implementation of investment strategies.
- Professional management: SLPs are managed by a general partner who is responsible for making investment decisions and managing the partnership. This allows limited partners to benefit from the expertise of the general partner and reduces the burden of managing the partnership.
- Privacy: SLPs can provide a level of privacy for the partners, as they are not required to publicly disclose information about their operations or investments.
To whom is the Luxembourg Special Limited Partnership (SCSp) addressed?
The Luxembourg Special Limited Partnership (SCSp) is primarily targeted at investors seeking to invest in alternative asset classes such as private equity, real estate, and other similar opportunities.
- It is also suitable for sophisticated and institutional investors who are seeking a flexible investment vehicle that provides limited liability and tax transparency,
- it is used by private equity and real estate funds, venture capital funds, and other alternative asset managers who want to raise capital from investors and invest it in a diversified portfolio of assets.
- It is also commonly used by family offices and high-net-worth individuals who want to invest in private markets.
It’s essential to note that the SCSp is mainly ntended for professional and institutional investors who have the knowledge and resources to conduct their due diligence and make informed investment decisions.
The Special Limited Partnership (SCSp): Legal Framework
The legal framework for the Luxembourg Special Limited Partnership (SCSp) may differ depending on the jurisdiction in which it is established. However, in most cases, the SCSp is created by submitting a partnership agreement to the appropriate regulatory body.
In addition to the partnership agreement, the SCSp must have a distinctive company name specified in its deed of incorporation. This name will be used to identify the partnership in all legal and regulatory matters.
Special Limited Partnership (SCSp) Investment Policy
The investment policy of the Luxembourg Special Limited Partnership (SCSp) is unrestricted, meaning it can invest in a wide range of assets. The specific investment policy of an SCSp will vary based on the objectives and preferences of its partners.
The investment policy of the SCSp is created with the goal of achieving the partnership’s investment objectives while also managing risks and complying with regulatory requirements. This ensures that the partnership makes informed investment decisions and safeguards the interests of its partners.
The administration of a Special Limited Partnership (SCSp)
The administration of a Luxembourg Special Limited Partnership (SCSp) company is tailored to the specific requirements outlined in the partnership agreement and local laws and regulations. Here are some common administrative components of an SCSp:
- General Partner: The general partner is responsible for managing the partnership’s day-to-day operations and making investment decisions.
- Limited Partners: in a Luxembourg Special Limited Partnership, limited partners are typically passive investors who do not play an active role in the day-to-day management of the partnership.
- Board of Directors: SCSp companies may have a board of directors to supervise the general partner and offer strategic guidance.
- Registered Office and Agent: it must maintain a registered office and agent in the jurisdiction where it is established.
- Reporting and Compliance: it must comply with local laws and regulations regarding reporting and disclosure. This may involve filing annual reports, providing information to regulatory authorities, and adhering to tax requirements.
- Record Keeping: it must maintain valid and up-to-date records of all transactions and activities.
Why Open an SCSp in Luxembourg
If you’re considering establishing a Special Limited Partnership (SCSp), Luxembourg is an ideal location for several reasons:
- Tax advantages: Luxembourg offers a favorable tax environment for investment funds and vehicles, including the SCSp.
- Flexible legal structure: it is a flexible legal structure that allows investors to customize the partnership to meet their specific needs.
- Top-rated investment vehicle: it can be used for a wide range of investment purposes, including master-feeder investments, joint ventures, venture capital, real estate, and private equity.
- Fast and easy incorporation: the process of forming an SCSp in Luxembourg typically takes less than 30 days.
- Limited liability: in a Luxembourg Special Limited Partnership (SCSp), limited partners benefit from limited liability for the partnership’s debts and obligations.
To learn more about SCSp company formation in Luxembourg, please contact your Damalion experts today.
