The default vehicle used for Luxembourg funds is the Luxembourg special limited partnership (SCSp). A Luxembourg general partner is required to set up a Luxembourg SCSp. The general partner is typically a Luxembourg private limited liability company. The incorporation of such a company must be done in front of a Luxembourg notary who verifies whether the minimum capital requirement is met. For that purpose, the notary requires a certificate from a Luxembourg bank confirming that (at least) EUR 12,000 (or its equivalent in another currency) has been wired to a Luxembourg bank account held in the name of the GP to be established.
To obtain such certificate, the fund sponsor must first be onboarded by the Luxembourg bank. Such onboarding process includes AML/KYC checks. Luxembourg banks are prudent and the process can be lengthy (4 - 8 weeks is not unusual). This may delay the fund launch: no bank account, no GP, no fund.
There are in principle two potential strategies that may accelerate the GP’s launch: (i) using a bank account provided by an electronic payment institution, which is usually more efficient in its onboarding process or (ii) opening a bank account outside of Luxembourg with a bank with which the fund sponsor has close ties. Especially the second route should be well managed; foreign bank should meet the demands of the Luxembourg notary (namely issuance of the blocking certificate). Tax lawyers concerned about Luxembourg substance may push back on the second route depending on the sponsor’s home jurisdiction. Technically there is a third alternative: the minimum capital could also be funded in-kind; in such a situation no bank account would be needed. This alternative is however rarely used for GP incorporations. All in all, opening a “classic” Luxembourg bank account remains the dominant route for GP incorporations; it is therefore key to manage the sponsor’s expectations on timing.
While the opening of a bank account for a GP is often an urgent matter, this is different for the bank account of the fund itself. The fund needs the account only when the first capital calls are made. Contrary to the GP, Luxembourg funds in the scope of the AIFM law (i.e., which have appointed an EU authorized AIFM) cannot use electronic payment institutions but are required to open an account with a “classic” Luxembourg bank.
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