The SICAF in Luxembourg refers to a type of investment company that must have a fixed capital. The SICAF (investment company with fixed capital) can be incorporated following the regulations applicable for UCITS (undertakings for collective investments in transferable securities) or under the rules of law available for SIFs (specialized investment funds). Investors interested in how to start a fund in Luxembourg as a SICAF will need to appoint a management company, as the vehicle is not considered a legal personality.
Types of business forms of SICAF in Luxembourg
The SICAF company in Luxembourg will act as an investment fund, registered under one of the following legal entities:
- public limited company;
- special limited partnership;
- limited partnership;
- partnership limited by shares;
- private limited company.
Investors who want to know more about how to start an investment fund as a SICAF vehicle may set up the fund in one of the following domains:
- security funds;
- real estate funds;
- money market funds;
- holding funds.
Registration requirements for a SICAF in Luxembourg
The SICAF can be registered by both local and foreign investors who are interested in starting a hedge fund or any other type of investment vehicle. To incorporate it, the following conditions must be met:
- the chosen structure must meet the requirements of the Luxembourg Company Law;
- it must have a registered address in the Grand Duchy;
- its management must also be located in Luxembourg.
After registration, it must designate a Luxembourg custodian. This must be a local bank that will safeguard the income generated by the SICAF and the manner it is used to ensure the profits of the investors.
If you want to know how to start a fund in Luxembourg, in our magazine you will find several articles on this subject.
Share capital requirements for SICAFs in Luxembourg
The share capital requirements to be met by a SICAF must reflect the activities of the investment fund it was created for. The minimum amount required to register a SICAF in Luxembourg is EUR 1.25 million. The money must be raised as follows:
- within a maximum period of 6 months from obtaining the license from the Luxembourg Financial Regulator in the case of UCITs funds;
- within a maximum of 12 months in case the SICAF was used to create a SIF.
The capital can also be raised through the issuance of shares by the investment fund. This is possible in the case of UCITs.
Authorization requirements for SICAFs in Luxembourg
Investors may set up a wide range of investment funds in Luxembourg, including a hedge fund startup. All types of funds registered here will need to be approved on the local market by the Commission de Surveillance du Secteur Financier (CSSF).
In the case of a SICAF vehicle registered under the UCITS regulations, the fund can be approved if the company will hire the following:
- an investment manager;
- an administrator;
- a custodian;
- a legal advisor;
- a tax advisor;
- domiciliation agents;
- distributors.
The investment fund will be authorized on the local financial market by the CSSF, once the investors have provided a set of legal documents, including the company’s constitutive documents, at the CSSF office.
Also, the investors will need to raise a minimum share capital of EUR 1,250,000 in a period of six months since the date in which the fund was authorized by the CSSF.
The SICAFs registered under the UCITS regulations do not prescribe any type of restrictions related to the company’s investors. However, SICAFs registered under the SIF regulations may be incorporated only by qualified investors.
Taxation and accounting requirements of SICAFs in Luxembourg
When it comes to the taxation of SICAF companies in Luxembourg, they must pay an annual subscription levy. It is applied as follows:
- 0.05% of the net assets in the case of UCITs funds;
- 0.01% in the case of SIFs.
From a taxation point of view, this structure also benefits from exemptions from the corporate and withholding taxes on dividends.
When it comes to the accounting requirements it must adhere to, the SICAF must appoint an independent auditor and file audited accounts every year.
Should you need more information on how to start an investment fund, you can discover information on other countries as well. One of them is the Cayman Islands, where you can use the Segregated Portfolio Company to launch a fund.
How many investment funds operate in Luxembourg?
According to the latest data compiled by Statista.com, at the level of 2023:
- there were a total of 3,274 investment funds operating in Luxembourg;
- 1,127 were stand-alone funds;
- the other 2,147 were umbrella funds.
Luxembourg is the largest investment fund center at European level, and the second one at worldwide level.
Businessmen are invited to address our team of affiliates in Luxembourg for more details on the registration of a SICAF.