On Wednesday Luxembourg’s parliament transposed the Alternative Investment Fund Managers (AIFM) directive into national law – just 12 days prior to the directive’s go-live date.
The law does not differ materially from the draft bill that put before parliament in September. It provides buyout firms using Luxembourg SICAR or SIF vehicles, the two most popular structures for pan-European private equity acquisitions in the country, both an AIFM compliant and non-AIFM compliant option.
The two regimes are similar, but AIFM compliant funds are subject to higher reporting requirements and must use a depository for the safekeeping of investor documents. As expected, the bill allows GPs to use non-bank depositories to meet the directive's custodian requirement.
The bill also modernizes the country’s limited partnership law by introducing a structure more similar to the Anglo-Saxon model, one without legal personality and full tax transparency. “The new type of partnership that has been created is in essence trying to transpose an English law partnership model,” said in a previous interview Marc Seimetz, who oversees law firm Dechert’s Luxembourg office.
Luxembourg also provided much needed clarity for private equity fund managers that do not yet want to adhere to the directive. Luxembourg’s regulator, the Commission de Surveillance du Secteur Financier (CSSF), published a set of frequently asked questions (FAQs) that detail its position on providing a transitional period.
The EU permits member states to provide fund managers an extra year of compliance, meaning that private equity and hedge fund managers would not need to be in full compliance with the directive until July 2014.
Luxembourg’s transitional provisions apply only to managers of funds that have been launched before July 22. Fund advisors that can make use of this extra period can also launch new funds after July 22 without the need for full AIFM compliance.
Luxembourg’s private placement regime will remain in place for both EU and non-EU fund managers until July 22, 2014.