Published on July 12, 2024
This Back to Basics note follows our key concepts briefings, which intend to provide high-level insights regarding funds fundamentals, funds vehicles and operational considerations, available here.
What is a SCSp?
The Luxembourg special limited partnership (société en commandite spéciale – SCSp) is a fund structure introduced in 2013 following the adoption of the law of 12 July 2013 on alternative investment fund managers (the AIFM Law). The SCSp differs from the common limited partnership (société en commandite simple - SCS) notably by the fact that it does not have legal personality.
SCSps are subject to the law of 10 august 1915 on commercial compagnies (the 1915 Law) and to the AIFM Law to the extent that it qualifies as an alternative investment fund (AIF). It can in addition be subject to a product regime when used for a regulated fund vehicle (Part II UCI, SIF, SICAR or RAIF).
Key features
Eligible investors:
There is no restriction on eligible investors for unregulated SCSps.
Eligible assets:
There is no restriction on eligible assets for an unregulated SCSp.
Structuration:
SCSps are open or closed entities.
They can only be formed as a single fund (umbrella structure not available).
Set up:
An SCSp is formed, for a limited or unlimited duration, by one or more partners with unlimited and joint and several liability for all the obligations of the partnership, and one or more limited partners who only contribute a specific amount constituting partnership interests which may but need not be represented by instruments, as provided in the partnership agreement.
The fund is set up by means of a limited partnership agreement which can be made by private or public deed and offers a large flexibility on the set up.
All Luxembourg SCSps must maintain a register of the partners. This register must be accessible to any partner, unless the limited partnership agreement disposes otherwise.
Capital requirements:
There is no minimum capital requirement for SCSps.
Liability of partners:
General partners (associés commandités) have unlimited joint and several liability for the obligations of the SCSp, whereas limited partners (associés commanditaires) are only liable up to the amount of their respective contributions or commitments. Limited partners are prohibited from carrying out any act of management vis-à-vis third parties. The general partner may act both as general partner (associé commandité) and manager (gérant) of the SCSp, hence being considered as managing general partner (associé commandité - gérant) and therefore also being held liable in its capacity as manager.
Diversification:
There are no diversification requirements for unregulated SCSps.
Marketing:
An SCSp only benefits from the European marketing passport to the extent that it falls under the scope of the full regime of the alternative investment fund managers directive (AIFMD).
Service providers:
To the extent that the SCSp qualifies as an AIF that is not self-managed and above the AIFMD threshold, the following service providers are required:
- an authorised AIFM;
- a depositary having its registered office in Luxembourg or a branch in Luxembourg (if its registered office is in another Member State of the European Union), to ensure the safe keeping of its assets;
- an authorised independent auditor with appropriate professional experience to audit the annual report;
- a central administrator which is located in Luxembourg;
- a portfolio manager in case of delegation by the AIFM.
Tax regime:
An SCSp is tax transparent for corporate income tax and net wealth tax purposes.
An SCSp qualifying as AIF is not subject to municipal business tax since it is not a business enterprise carrying out a commercial activity. The SCSp will however be deemed to be a business enterprise if its general partner is a capital company holding 5% or more of its partnership interests.
Distributions made by an SCSp are not subject to Luxembourg withholding tax.
An SCSp is generally not entitled to double tax treaties concluded by Luxembourg.
The VAT status of an SCSp will depend on the activities performed.
Main advantages of an SCSp:
The main advantages for choosing the SCSp are, inter alia, that:
- it is internationally recognised and resembles the Anglo-Saxon limited partnership structures;
- it offers a high level of contractual flexibility and most of the rules can be freely determined in the partnership agreement, as there are very few compulsory provisions in the 1915 Law;
- it can be easily and rapidly set up and is subject to very limited registration formalities, allowing short time to market;
- it is not subject to CSSF authorisation or prudential supervision;
- it is tax transparent from a corporate and tax perspective;
- it offers confidentiality, as the information published on the Luxembourg Trade and Companies Register is limited to key provisions and does not include the identity of the limited partners nor their contributions; and
- it is not subject to any minimum capital requirement or minimum investment amount.
