Technical update

New partnership vehicles in Luxembourg

24 March 2015

In 2013 the Luxembourg Government introduced revised - or rather, revamped - partnerships regimes by which a new vehicle, the Special Limited Partnership, came to light.

Countries:

The new Luxembourg Partnership Regime

While preparing the implementation of the Alternative Investment Fund Managers Directive (AIFMD), the Luxembourg Government took the opportunity to enact a complete overhaul of the partnerships regimes. Hence, by the same act with which the AIFMD was implemented, the new partnership regime was introduced on 12 July 2013.

Besides revamping the existing regimes for the Partnership Limited by Shares (Société en Commandite par Actions; SCA) and the Common Limited Partnership (Société en Commandite Simple; SCS), they introduced a new form, the Special Limited Partnership (Société en Commandite Spéciale; SCSp).

SCSp: the Luxembourg Special Limited Partnership

As to the Special Limited Partnership, the clear objective was to introduce a vehicle that would appeal to the private equity industry, by providing a flexible tax transparent entity within a robust and reliable legal framework that could compete with the UK Limited Partnership.

With the introduction of the Special Limited Partnership, Luxembourg has added a highly flexible and internationally competitive vehicle to its already wide suite of vehicles.

Besides bringing a high amount of flexibility, the new partnership regime has dealt with a couple of flaws that were inhibiting the wider use of partnerships under the old regime. The new regime has provided much needed clarity and reliability, especially around the so called ‘claw back risk’ and the risks for limited partners to unintentionally obtain unlimited liability.

Adding a tax transparent and highly-flexible new partnership in the form of the SCSp resulted in a partnership regime that meets current industry requirements, as shown by the increased use and popularity of the SCSp.

Read more on doing business in Luxembourg.

Written by

Dan den Boer

Director Real Estate Investment Services

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