New French fund vehicle expected by summer

After French President François Hollande rammed a pro-business bill through the lower house of Parliament last month, exercising constitutional powers rarely used in the French lawmaking process, the industry is expecting a new tax-friendly fund vehicle contained in the bill to be enacted.

The so-called “Macron bill” faces an easier road to passage now that it has cleared the National Assembly and has been sent off to the more right-leaning Senate. Industry sources expect the controversial economic reform bill to come to pass as early as summer.

The bill calls for the establishment of a new type of alternative investment fund: the “société de libre partenariat” (or SLP). The main aim of the vehicle is to place non-French private equity investors on more equal tax footing with local LPs and create an equivalent to the English limited partnership, the vehicle of choice for buyout professionals.

In a client memo, law firm King & Wood Mallesons (KWM) explained that the new SLP would have separate legal personality, provide limited partners (as passive investors) with limited liability and bestow general partners with management obligations and unlimited liability.

“This vehicle will provide a tax-efficient alternative for non-French limited partners, such as for instance German investors,” says Linklaters tax partner Edouard Chapellier, who took part in drafting the SLP provisions in the law with the AFIC (the French private equity trade body).

With the right components, the new vehicle “could provide a genuine alternative to English and Luxembourg limited partnerships for fund managers,” said the KWM memo.