Special Limited Partnership (Société En Commandite Spéciale) Introduced Under Luxembourg’s AIFMD Legislation

Luxembourg's legal framework for alternative fund structures will be significantly extended as part of the draft legislation transposing the European Union's Alternative Investment Fund Managers Directive into national law.

In addition to implementing the directive, the Luxembourg legislation introduces changes designed to make the grand duchy significantly more attractive as jurisdiction for the management and structuring of private equity, venture capital and real estate fund vehicles.

The changes involve the updating and enhancement of two existing partnership vehicles, the standard limited partnership (société en commandite simple) and partnership limited by shares (société en commandite par actions), and the creation of a new special limited partnership (société en commandite spéciale).

Bill of law no. 6471 was submitted to the grand duchy's Chamber of Deputies by finance minister Luc Frieden on August 24. It is scheduled for approval by parliament and on the statute book before the end of this year, well ahead of the deadline for AIFMD adoption of July 22, 2013.

The changes to the existing partnership vehicles and the establishment of the special limited partnership involve amendment of the laws of August 10, 1915 on commercial companies and of December 19, 2002 on the Commercial and Companies Register and corporate accounting, as well as changes to Luxembourg's Commercial Code.

They also involve changes to the February 13, 2007 law on Specialised Investment Funds (SIFs) and that of June 15, 2004 on Risk Capital Investment Companies (Sicars) to enable these types of fund to adopt the legal form of a standard limited partnership or special limited partnership.

The preamble to the draft legislation notes that the standard limited partnership is a very long-established type of company. It has antecedents in Roman law, although in its current form it dates back to contracts used in maritime trade contracts in 10th century Italy, and has also played an important role in spreading the concept of limited liability throughout corporate law, before becoming an important tool of the fund industry in recent years.

It also has deep roots in the grand duchy's commercial law as a very lightly regulated type of commercial entity, whose legislative framework has barely changed since 1915. Despite certain constraints, contractual freedom is primordial in the structuring of such an entity.

Historically limited partnerships have been little used or...