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SCS and SCSp facilitate Private Equity growth in Luxembourg

In July 2013, alongside the transposition of AIMFD (Alternative Investment Fund Managers Directive), Luxembourg took steps to modernise its regulatory framework. It introduced a new regime regarding carried interest, modernised its SCS ("société en commandite simple" or limited partnership) regime and introduced the SCSp ("société en commandite spéciale" or special limited partnership). 

The SCS and SCSp are inspired by the Anglo-Saxon "limited partnerships" which are the dominant vehicles used for private equity, particularly in Delaware, Jersey and Guernsey. The SCS and SCSp are based on a Limited Partnership Agreement (LPA) that defines obligations and responsibilities between the General Partner (GP) and the Limited Partners (LP), and are adjusted to the respective needs and objectives of fund promoters and investors. The new legal framework applicable to the SCSp allows greater flexibility, while also providing increased legal certainty: a simple formation process, freedom of contract and greater transparency. Luxembourg therefore allows the creation of a vehicle that is extremely flexible and custom-made for the alternative investment fund industry. The SCSp tax regime has been clarified by the circular published by the Luxembourg tax authorities on 9 January 2015. The SCS and SCSp are tax-neutral and VAT is not charged on management fees, making them even more attractive. 

In practical terms, the flexibility of these structures stems from the fact that they can be set up quickly (as a notarised deed is no longer being required), they can be validly constituted through a private agreement, and they exist as soon as the memorandum and articles of association are executed. The main difference between the SCS and SCSp is that the SCSp is not vested with legal personality, but like the SCS, it offers the possibility of creating regulated or unregulated vehicles (SIF and SICAR). 


An unregulated SCSp with an AIFMD-compliant investment policy may be qualified as an AIF (alternative investment fund) and must...(Read more)