The investment company in risk capital (SICAR) in Luxembourg may be established under the regulations of the Law of 15 June 2004. Foreign investors interested in how to start an investment fund in Luxembourg as a SICAR structure should know that the vehicle can be used for private equity and venture capital investments.
| Quick Facts | |
|---|---|
| Applicable legislation | SICAR Law of June 2004. |
|
Legal forms available for the registration of a SICAR |
– private and public limited liability companies, – partnerships, – cooperatives. |
|
Share capital requirements for a SICAR |
EUR 1 million, out of which 5% must be paid upon incorporation. The total capital must be reached in maximum 2 years. |
| Registration requirements for SICARs |
– local address, – Luxembourg-based manager, – local custodian. |
| Authorization requirements for SICARs in Luxembourg |
A Luxembourg SICAR must be authorized by the Financial Supervisory Commission. |
| Authorization documents |
– the incorporation papers, – details about the fund manager, – the local custodian's details. |
| Types of funds to be created through a SICAR |
Alternative Investment Funds (AIFs). |
| Possibility to use SICAR to create umbrella funds (YES/NO) |
Yes, the Luxembourg SICAR can be organized as an umbrella fund. |
| Investors addressed by SICARs |
Qualified investors. When accepting other types of investors, they must file a declaration stating they are aware of the risks they are subject to. They must also commit to investing at least EUR 125,000. |
| Types of assets to invest in |
– securities, – venture capital, – equity, – real estate, etc. |
| Possibility to operate abroad (YES/NO) |
Yes, under the AIFM regulations. |
| Taxation of SICARs in Luxembourg |
The SICAR will pay the corporate tax and the municipal tax at a rate of 29.22%. |
| Availability of tax exemptions (if any) |
– VAT exemptions for management services, – net wealth tax exemptions. |
| Appointment of auditor requirements (YES/NO) |
Yes. |
| Access to double tax treaties for the SICAR in Luxembourg | Yes, SICARs can benefit from Luxembourg's network of double tax treaties. |
Characteristics of SICAR in Luxembourg
A société d’investissement en capital à risque (SICAR) is a type of investment company created to facilitate investments in venture and private equity. It usually meets the criteria for an alternative investment fund (AIF) and is dedicated to knowledgeable investors. SICARs in Luxembourg can also operate under EU regulations, and thus benefit from the Alternative Investment Fund Manager (AIFM) Directive. Such companies that have appointed an EU AIFM can use passporting rights to sell their shares or interests to investors within the EU.
If you want to create a SICAR in Luxembourg, our local affiliates are at your disposal with more information on this type of enterprise.
The SICAR in Luxembourg is a type of vehicle that is used for fundraising and investments in risk-bearing capital. Those who are interested in how to start a fund as a SICAR may also list the company’s shares on the local stock exchange, but only if certain conditions are met.
Also, the SICAR vehicle can be set up as a fund with multiple compartments, following the regulations imposed by the local authorities in 2008, when new modern provisions were added to further improve the quality of investment activities carried out through this vehicle. This regulation allows investors to carry multiple investment strategies at the same time.
SICAR: types of investors in Luxembourg
The SICAR vehicle is addressed to several categories of investors, as mentioned below:
• high net worth individuals;
• institutional investors;
• other types of investors.
Under the regulations of the Law of 15 June 2004, the SICAR may issue shares for the investors who are considered qualified investors. A qualified investor refers to the following categories:
• professional investors;
• institutional investors.
Moreover, the directors of a SICAR in Luxembourg are required to have a high level of expertise in the field. The regulation is also available for the company’s managers. If you want to know how to start a fund using a different type of entity, our partners in the Grand Duchy will assist you.
Legal entities for SICAR in Luxembourg
The SICAR must always be set up as a corporate entity with fixed or variable share capital, in contrast to other fund types that can be established in contract form. The main aspect to consider is that the Articles of Association must be written in order to create such a corporate body.
A single fund or an umbrella structure with several compartments can also be used to set up a Luxembourg SICAR. In such cases, the fund and its compartments may each contain an infinite number of share classes, depending on the requirements of the investors.
Investors interested in starting a hedge fund in Luxembourg or a SICAR vehicle can benefit from the same regulations applicable to local businessmen. Foreign businessmen can set up one of the legal entities available under the local legislation, as there are no restrictions in this sense.
The SICAR may be set up under one of the following legal entities:
• public limited company;
• private limited company;
• partnership limited by shares;
• limited partnership;
• special limited partnership;
• cooperative company operating as a public limited company.
We also invite you to read more about this topic in our infographic below:
If you are interested in another jurisdiction in which the creation of an investment fund is as well-regulated as Luxembourg, we recommend the Cayman Islands. There, the Cayman SPC (Special Purpose Company) is one of the best suited investment enterprises.
Capital requirements to open a SICAR in Luxembourg
Just like in other types of investment companies, such as the Luxembourg SICAV, the SICAR must also comply with specific share capital requirements. In its case:
- at the time of subscription, at least 5% of each issued share must be paid up;
- within a year of obtaining CSSF approval, the subscribed share capital, including share premiums, if any, must reach EUR 1 million.
Our affiliates can advise on the minimum share capital imposed to SICARs in Luxembourg and how to start a hedge fund in this jurisdiction through it.
CSSF authorization for a SICAR
Before beginning its activities, a SICAR must obtain approval from the Commission de Surveillance du Secteur Financier (CSSF). The authority then continues to oversee it through reporting requirements.
Usually, a bank in Luxembourg as well as lawyers, auditors, and/or other professionals can assist in drawing up the documents and information before filing them with the CSSF. A one-time fee must be paid before the SICAR, or additional sub-funds can be approved.
The following documents must be filed with the CSSF for authorization:
- the SICAR’s Articles of Association and prospectus;
- the information about the depositary chosen;
- details of the directors and/or managers of the SICAR;
- details of the auditors.
The directors of the SICAR and the depository must be of appropriate standing and have the necessary expertise to carry out their duties in the area of venture capital and private equity.
Once the Luxembourg SICAR is authorized, it will be listed with the CSSF. As soon the approval has been given, the investment fund set up under it may begin its operations. Our local partners can also advise on how to start an investment fund in this country.
SICAR management in Luxembourg
Depending on the company’s legal structure, the management body of the SICAR oversees its operations. An Alternative Investment Fund Manager (AIFM) must be chosen if the SICAR qualifies as an authorized Alternative Investment Fund (AIF) and unless the SICAR is self-managed as an authorized AIFM.
Self-managed SICARs are not allowed to manage assets on behalf of a third party, only assets inside their own portfolio. Also, a SICAR must have its legal office in Luxembourg. We also have a video on this subject below:
Investment funds in Luxembourg in 2023
According to data, in March 2023:
- there were 3,345 investment funds operating in Luxembourg;
- out of these, 2,188 were multiple-compartment funds, while 1,157 were stand-alone structures.
Foreign businessmen may address further questions on the SICAR vehicle to our team of affiliates in Luxembourg. They will remain at your disposal with details on starting a hedge fund.