Why Luxembourg remains a jurisdiction of choice for private equity
Luxembourg has for many years provided corporate structures favoured by the private equity industry. In 2013 the Luxembourg companies law was amended to simplify and modernize the limited partnership regime (société en commandite simple) and to create a new type of partnership, the special limited partnership (société en commandite special). The special limited partnership is without legal personality but, like the société en commandite simple is generally fully tax transparent. Characterized by a prevailing freedom of contract and the absence of formalism, the special limited partnership provides a true alternative to promoters to establish their regulated funds as well as their unregulated structures in Luxembourg.
Since then, the Luxembourg government has pledged to make Luxembourg the prime on-shore center for private equity by 2020. The Reform Bill (dated 10 August 2016) (the "Law") which came into force on 23 August 2016 was another step forward in achieving this aim. The Law amended Luxembourg companies laws and introduced key changes in the context of cross-border private equity transactions. New tools were introduced which help private equity investors to facilitate private equity transactions structured through Luxembourg. This latest legislative update reflects Luxembourg's continued efforts to offer a broad range of flexible and pragmatic vehicles for cross-border transactions and, in particular, for private equity and other alternative asset managers. Existing companies incorporated in Luxembourg will have a transitional period of 24 months within which to implement changes to their articles of association where such changes are necessary to achieve compliance with the new legislation.
Here, we consider some of the new features of the Law applicable to private limited liability companies (SARLs), public limited liability companies (SAs) and partnerships limited by shares (SCAs) and which are of importance to the private equity sector.
The August changes to the Law, once again highlight why Luxembourg is often the jurisdiction of choice for private equity investments. Please contact any member of our European private equity team to discuss Luxembourg private equity structures.
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