Olivier Sciales Investments Law Blog on Lawyers.com

On 15 October 2008, the Luxembourg Parliament amended the existing SICAR law of 15 June 2004 with the aim to make the SICAR regime more attractive to private equity and venture capital investors.

The main amendments that have been voted are briefly set out hereunder:

• Umbrella structure

The new SICAR law has introduced the possibility to create multiple compartments. The principle of compartment segregation already well known for SIFs, securitization vehicles and UCITS funds is now also applicable to the SICAR. Compartment segregration means that the liabilities of the SICAR can be split into different compartments each of which are treated as separate entities making distinct transactions. The rights of investors and creditors are limited to the risks of a given compartments's assets. Each of the compartments can be liquidated separately without triggering the liquidation of other compartments of the SICAR. The main advantage of the umbrella SICAR is that it can issue several tranches of securities corresponding to different collateral and providing different values, yields and redemption terms. It is important that the constitutional documents of the SICAR expressly provide for the possibility to have multiple compartments and expressly outline the rules that are applicable to them. The issue document must outline the investment policy of each compartment. The shares of the umbrella SICAR may be of different value.

• Minimum capital

The share premium (if any) will be taken into account for the computation of the minimum capital. The share capital increased by the share premium must be at least 1,000,000 Euro to be reached within a period of 12 months from its authorisation by the CSSF.

• No requirement to publish the NAV

Under the initial SICAR law it was required to provide the net asset value to the investors every 6 months. This provision has been abolished.

• Valuation of assets

The valuation of the assets of the SICAR must be based on the fair market value (rather than the foreseeable sales price estimated in good faith).

• Reduction of the duties of the custodian

The SICAR law has reduced substantially the duties of the custodian. More in particular, the following duties do not need to be fulfilled by the custodian under the new SICAR law:

- control that the subscription price for the securities of the SICAR has been received within the time limits set forth in the constitutive documents;

- control that in transactions involving the assets of the SICAR, a consideration is paid or delivered to it within the customary time limits;

- control that the income of the SICAR is applied in accordance with its constitutive documents.

The abolition of the above control duties previously imposed on the SICAR will certainly reduce the annual costs charged by the custodian of a SICAR.

• Annual report

The annual report must be provided to investors within a period of 6 months after the end of the financial year rather than be "published" as was required under the initial SICAR law.

• Limited partnership (societe en commandite simple)

The SICAR can now be set up as a societe en commandite simple (limited partnership) with a variable share capital.

Chevalier & Sciales is a Luxembourg law firm mainly focused on Investment Funds (UCITS and SIFs), Securitizations, Corporate Law and Private Equity. For more information please visit our website at www.cs-avocats.lu or contact Olivier Sciales at oliviersciales@cs-avocats.lu