Luxembourg To Amend The SPF Law

A draft bill to amend the law of 11 May 2007 on the Luxembourg « SPF» has been introduced on 15 July in order to comply with the principles of both the Treaty on the Functioning of the European Union and the Agreement on the European Economic Area (EEA).

As a replacement for the traditional Holding 1929 companies, a law establishing a new private asset management vehicle – the Société de gestion de Patrimoine Familial («SPF») - was passed by the Luxembourg Parliament.

The current SPF regime

Drafted to answer the needs of private investors, the law on the creation of the SPF was passed by the Parliament on 11 May 2007 ("The SPF Law") and aimed at establishing a legal framework for the management of private assets. According to article 1 of this law, the legal form of a SPF precludes any form of partnership. As a result, a SPF can only be set up under the form of an S.àr.l. (Société à responsabilité limitée – limited liability company), an S.A. (Société anonyme – limited liability company by shares), a COOPSA (Société cooperative organisée sous forme de SA – cooperative company organised as a limited liability company by shares) or an SCA (Société à commandite par actions – limited liability partnership company). Its shareholders and investors are either individuals managing their personal assets or entities acting on behalf of such individuals. A SPF may acquire, hold, manage or dispose of financial assets but is not allowed to conduct any type of commercial activity. Thus, a SPF benefits from the limited liability of the legal person. The private nature of the company allows the investors to choose how they want the assets to be managed and thereby gain more freedom from the principle of risk diversification imposed on Undertakings for Collective Investment ("UCI"). SPFs are allowed to invest in any kind of equities and other transferable securities, bonds and other debt instruments, forward contracts, swaps, options and structured products. With respect to the minimum social capital of a SPF, the Law of 2007 is silent. Accordingly the statutory Law of 1915 on commercial companies as amended applies, that is to say, EUR 31,000 for the SA and EUR 12,500 EUR for the S.à r.l..The statutory law also applies as regards the paids-up capital. From a Luxembourg tax perspective, the SPF is exempted from corporate income tax, municipal business tax and net wealth tax according to the article 4(1). However a SPF that receives more than 5% of its total...