By Raymond Krawczykowski, David Capocci, Jean-Philippe Drescher and Bernard David

On 21 February 2008, the Luxembourg government submitted to the Chamber of Representatives measures aimed at improving the legislative framework of Luxembourg’s financial sector. Most significant are provisions dealing with the venture capital investment company regime (“SICAR” or Société d'Investissement en Capital à Risque).

In an amendment long awaited by the industry and advisors, the proposal introduces the possibility of creating multiple “compartments” within a SICAR, thereby allowing umbrella funds to be established. A segregation of assets and the liabilities also will be possible if so provided in the constitutional documents of the overall SICAR. The prospectus must mention the investment policy of each compartment. Securities issued by each compartment of the SICAR may have a different par value or no nominal value. Additionally, investors’ and debtors’ rights will be limited to the compartment they belong to and each compartment can be separately liquidated. These principles will apply provided the constitutional documents do not stipulate otherwise.

Other notable modifications are as follows:

With this reform, the SICAR regime will offer greater flexibility and competitive solutions to private equity investors, undoubtedly increasing the number of SICAR structures in use and the assets managed through such vehicles.

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