Luxembourg has introduced in June 2004 a new law on funds dedicated to venture capital and private equity, the Risk Capital Investment Company or SICAR. Already a leading financial centre for investment and pension funds, Luxembourg is thereby expanding its range of regulated undertakings for collective investment (UCI). The new vehicle meets the demands of specialised promoters, who are not necessarily eligible to promote traditional investment funds, but who nevertheless want to set up ad hoc investment vehicles in Luxembourg.
The new SICAR combines liberal and protective characteristics, bringing together the demand for a regulated UCI while allowing for the flexibility essential to venture capital and private equity investments. As for the well known SICAV investment funds, the SICAR is subjected to the supervision of the financial regulator CSSF. Once approved, a SICAR can be listed on the Luxembourg Stock Exchange without any additional requirements. At the same time, the SICAR does not impose similar investment restrictions or risk diversification rules as applicable for other UCIs. In return, the Luxembourg Law on Risk Capital Investment Companies dated 15 June 2004 limits investments in a SICAR to institutional, professional and other sophisticated investors.
The SICAR can be set up either with fixed or variable share capital. The latter option allows for particular flexibility for subscriptions, redemptions and distribution policies of shares in a SICAR. Asset valuation rules can be freely determined in the articles of incorporation offering flexibility in the choice of its frequency. SICARs have to publish annual accounts. The tax regime of the SICAR is adapted to the specificities of venture capital investments. Promoters can opt either for a fiscally transparent limited partnership or a public limited company that fully benefits from the application of Luxembourg bilateral tax treaties. A number of SICARs have already been incorporated in Luxembourg since the law was adopted, confirming the competitive framework it offers to promoters as well as investors.
Luxembourg is a leading international financial centre making available a complete range of commercial and investment services both to private and institutional investors. At the end of 2004, the balance sheet total of the 162 banks established in Luxembourg reached EUR 695 billion. At the same date, 1 968 UCIs representing 7 876 compartments were incorporated in Luxembourg with total net assets of EUR 1 106 billion.