I. Legal structure of a SICAR Investment Company in Luxembourg

1. Concept

A SICAR Investment Company (Société d’investissement en capital à risqué) in Luxembourg is an instrument for venture capital investments which is regulated by the SICAR law and which has legal personality separate from its investors. A SICAR Investment Company in Luxembourg is designed for the investment of its resources in high-risk assets in order to distribute the result generated therefrom to qualified investors. The said result offsets the risk borne.

2. Investment policy

The Luxembourg investment vehicle SICAR is permitted to invest in venture capital (private equity) only. This means that funding is directly or indirectly contributed to a company for assistance during its early stage, for its development or its flotation on the stock market. Investments in real estate are only permitted under certain conditions.

A SICAR Investment Company in Luxembourg is not under a duty to comply with the principle of  diversification in choosing its investments. It is therefore possible for it to invest in one or several companies active in a particularly crowded segment of the market.

3.    Investors

The Luxembourg SICAR investment vehicle is exclusively reserved for “qualified investors”, namely professional investors as well as institutional investors. Moreover, natural persons, who invest at least 125,000 EUR, are required to submit written proof of their well-informed investment status (e.g. in the form of a letter from their bank).

4. Formation

A SICAR in Luxembourg is formed either as a corporation or as a partnership (Public Limited Company (PLC., Corp./SA); Limited Liability Company (LLC., Ltd./SARL); Partnership Limited by Shares (SCA); Co-operative in the legal form of a Public Limited Company (SCOSA) and Limited Partnership (SCS).  It is not permitted to be organised in the form of a contractual Investment Fund (fonds commun de placement, FCP). A SICAR in Luxembourg may however take the structure of a Holding Fund constituted by several sub-funds, each of which being independent of the others.

The registered office and main place of central management and control of a SICAR, under its articles of association, must be located in Luxembourg. Moreover, the assets of a SICAR are to be transferred to an independent custodian (financial institute) resident in Luxembourg.  This ensures that the subscription price of shares in the company will be received on time, that transactions involving equivalent assets are transferred or paid and that the proceeds are used in accordance with its founding documents.

Furthermore, the company management and custodian of a SICAR in Luxembourg require to be sufficiently qualified and to provide proof of their corresponding experience in the area of venture capital investments. Notwithstanding this, they must not necessarily  have a “Sponsor/Promoter”.

Beginning from the date when a SICAR in Luxembourg was approved by Luxembourg's Financial Market Authority (CSSF), a SICAR must reach its subscribed share capital of at least 1 million EUR within 12 months. However, the minimum share capital is dependent on the particular business form chosen. If a SICAR in Luxembourg is formed as a corporation, the shares issued required to be fully subscribed and at least 5% of every share requires to be paid up through a cash or non-cash contribution.

5. Issuance and distributions policy

The provisions contained in the articles of association are wholly authoritative with regard to the issuance of new shares due to the SICAR law containing no specific provisions thereon. This is also the case for the regulation of the formal criteria for the distribution of dividends or other repayments to the investors. Furthermore, a SICAR in Luxembourg is not required to create reserves.

6. Supervision

A SICAR in Luxembourg is subject to the permanent supervision of Luxembourg's Financial Market Authority (CSSF). A SICAR requires a licence prior to commencing business. A SICAR may be quoted on Luxembourg's stock market directly after obtaining approval from the CSSF. Moreover, its annual accounts must be audited by an independent auditor and must be published no later than 6 months after the close of the year.

Moreover, a SICAR in Luxembourg is required to prepare a sale prospectus which must contain, among others, the founding documents in order to provide investors with the opportunity of carrying out an informed evaluation of the investment and the associated risks.

II. Tax structure of a SICAR Investment Company in Luxembourg

1. Corporate taxation

In principle, a SICAR corporation in Luxembourg is subject to corporate taxation at a rate of 29.22%. This said rate consists of the following components: corporate income tax at a rate of 21% on income exceeding 15,000 EUR (or a rate of 20% for income not exceeding 15,000 EUR); the solidarity surtax at a rate of 7% as well as the municipal business tax at a rate of 6.75%.  In contrast thereto, income from securities as well as from the sale, contribution or liquidation of its securities is exempt from income tax.

If a SICAR in Luxembourg is formed as a Limited Partnership, it is the persons carrying on business as partners and not the partnership itself that is liable to tax. The SICAR consequently remains exempt from corporate income and the municipal business tax. In contrast thereto, its investors remain liable to tax in the country in which they are resident.

2. Tax exemptions

A SICAR in Luxembourg is neither liable to the net wealth tax nor to withholding tax on the distribution of dividends to investors as well as investment income from the disposal of such investments. It is likewise exempt from the so-called “subscription tax” (Tax d’Abonnement). In addition, withholding tax does not require to be paid by non-resident investors on interest paid by a SICAR as well as on liquidation proceeds. Moreover, management services provided to a SICAR by a Management Company in Luxembourg remain exempt from value-added tax (VAT).

Due to a SICAR in Luxembourg in the form of a corporation being fully liable to tax, it is able to benefit from Luxembourg's double taxation agreements (DTA's).

Legal and Taxdevice

Our lawyers and tax experts stand ready to advise you personally and free of charge during the decision-making process and throughout the  formation/incorporation/setting up process of a SICAR Investment Company in Luxembourg. 

Please contact us by telephone through the following telephone number

00352 250 345 27

(Monday - Friday between 9am and 4pm)

or by e-mail at the following e-mail address
info(at)startup-luxembourg.com

or simply use our online contact form.

EFFECT OF REGISTRATION IN LUXEMBOURG'S TRADE AND COMPANIES REGISTER

For the formation/incorporation/setting up of a corporation in Luxembourg, a corporation (e.g. a Public Limited Company (PLC., Corp./SA) or a Limited Liability Company (LLC., Ltd./SARL)) must be registered in the Trade and Companies Register. However, in contrast to other legal systems, the said registration is entirely declaratory. This means that a corporation in Luxembourg already exists subsequent to and already has full legal capacity following the recording of its articles of association by a notary.