FCP in LuxembourgUpdated on Saturday 09th January 2021
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A FCP in Luxembourg is the acronym from Fonds Commun du Placement, which represents a common investment fund that is registered as an open-ended mutual fund. Foreign investors who want to open a investment fund in Luxembourg should be aware that the FCP does not have a legal personality, which means that there aren’t any legal distinctions between the fund and its owners.
If you need legal assistance on the registration steps applicable to a FCP in Luxembourg, we invite you to request advice from our team of financial specialists, who can also provide consultancy services on the tax regulations and tax compliance imposed by the local legislation for this type of fund.
How many FCPs are registered in Luxembourg?
Businessmen who want to open a fund in Luxembourg as a FCP have to know that this type of vehicle represents a very popular way to develop investment activities in this country. An advantage of the FCP in Luxembourg is given by the fact that it can be incorporated under three basic laws which regulate the activities of investment funds in this country. Investors should the following:
- according to the Commission for the Supervision of the Financial Sector, the main institution which regulates the financial market in this country, in June 2017, there were 1,012 FCPs operating under the Part I (UCITS) Law;
- a FCP in Luxembourg can also be incorporated under the Part II Law, and in this case, there 171 such funds;
- FCPs regulated under the SIFs Law accounted for 386 investment vehicles;
- overall, there were 1,559 FCPs operating in Luxembourg in June 2017;
- the net assets of the Luxembourg FCPs accounted for EUR 851.1 billion.
What are the characteristics of a FCP in Luxembourg?
Each of the funds investors can register in this country has a different set of characteristics. The basic characteristic of a FCP in Luxembourg is given by its founding regime – it represents a contractual agreement that is set up between the investors of the fund and the management company which is appointed to manage the fund. The management company must always have its place of business in Luxembourg.
In a FCP, the investors hold units, not shares, and any asset belonging to the fund are legally separated by the management company which is appointed to manage the fund. Given that the FCP in Luxembourg can be incorporated under the regulations of various investment laws, different regulations may appear. In all cases, the management company is necessary for the activity of any FCP and, if the FCP is incorporated as an alternative investment fund (AIF), then the fund can be represented by an alternative investment fund manager (AIFM).
The control of a FCP is generally done by the board of directors of the management company and investors must also know that they are not required to hold shareholders’ meetings (which, in this case, are referred to as unitholders’ meetings). In most of the cases, this entity is considered a tax transparent entity, but exemptions can appear and for this, you can refer to our team of financial consultants.
In certain cases, the FCP in Luxembourg may be entitled to benefit from the provisions of the double tax treaties that are currently available in this country. From a tax point of view, the FCP is liable to the payment of the value added tax (VAT).
It must also be observed that the management regulations of the FCP in Luxembourg have to be drawn and executed by the appointed management company. FCPs which are incorporated under the Part I Law (Undertakings for Collective Investments in Transferable Securities – UCITS) operate in accordance with the European Directives with regards to UCITS.
FCPs incorporated under the Part II Law (Alternative Investment Funds – AIFs) can take the form of various types of vehicles and they can also be set up under the Specialized Investment Funds Law of February 13, 2007. Since 2016, FCPs may also be incorporated under the Law of July 23, 2016 on Reserved Alternative Investment Funds (RAIFs).
Investors interested in opening an investment fund in Luxembourg operating as a FCP have to know that the fund can be incorporated by a single investor, and that there aren’t any limitations with regards to the maximum number of investors, if the fund is registered under the SIF law.
If you need additional details on how to register a FCP in Luxembourg, we invite you to contact our team of financial experts, who can offer additional information. You can also receive advice on the types of taxes applied to this type of fund, which can vary based on the law which regulates the activity of the FCP.