The investment fund sector: ‘all in’ on Luxembourg
Frank van Kuijk, Partner and Tax Adviser, explains how regulatory and tax developments have impacted the global investment management industry in recent years.
Regulatory and tax developments in recent years have impacted the global investment management industry, and cleared the path for this industry to go “all in” on Luxembourg.
Investment managers committing to Luxembourg fund vehicles and investment structures also opt for a strong Luxembourg footprint. Back office functions are in-sourced to Luxembourg-based in-house teams, and more and more front and mid office functions are relocated to Luxembourg. Relocation of functions and responsibilities may require the relocation of people from abroad to Luxembourg as well. As Luxembourg offers a very good standard of living and demonstrates a welcoming approach towards foreigners moving in, relocation of people became a relatively easy sell.
Going “all in” also means that the variety of legal services the industry requires expands rapidly. As legal counsel with a focus on the investment management industry, we generally identify the following stages in the lifecycle of an investment fund. Each stage has its specific need for legal services.
- Structure design: identifying the optimal Luxembourg fund vehicle and governance model meeting investors and management demands. All with a close eye on regulatory, tax and commercial considerations.
- Fund establishment: establishment of the fund. Assistance with all the dealings with the Luxembourg financial regulator (CSSF), if need be.
Implementing management and advisory models: implementing the investment advice and investment management arrangement between the fund, its general partner, the management and advisory body.
- Fund marketing: assistance with licence application of the fund or its registration. Advice on the prospectus, offering memorandum, investors solicitation and marketing process of the fund. Investor due diligence: assistance with negotiating management or multi-management mandates. Comforting investors through due diligence processes on all legal and regulatory aspects of the fund structure.
- Fund financing: assistance with subscription facilities, long-term and liquidity/bridge financing and capital calls and the push down of the funds into the investment structure.
- Allocation of functions: assisting with the optimal allocation of resources (employees, office space, office infrastructure) to the various entities part of the fund structure whereby regulatory, tax commercial and employment law considerations play a relevant role.
- Investing: assisting with the tax and legal due diligence on targets, assistance from the tax and corporate law side with acquisitions, joint ventures, funding and the allocation of deal fees.
- Compliance: assisting with the internal and external reporting process by the fund, the management company and the investment structure. Assistance with Luxembourg tax filings and tax reporting processes.
- Exits: assisting from the tax and corporate law side on a sale to a buyer in the context of e.g. a strategic sale, a secondary buyout or an initial public offering and the subsequent reinvestment or repatriation of the sale proceeds to investors.
To accommodate all these stages and workflows the industry clearly demands for integrated and cross-border legal teams that have the skills to manage all the stages and the different workflows thereof. A feel for market trends and understanding of the industry is key.
Our investment management team encompasses members with the expertise to meet these demands. The team integrates within a single point of contact all the required technical capabilities (regulator, legal, tax, VAT, commercial and employment law) which secures that the advice is the best result combining the considerations from these various areas of law. We do not stop where a solution fits just one legal discipline, it must be a fit for all relevant disciplines.
The team regularly organises seminars in Luxembourg which typically deal with the recent key questions with which the industry is confronted. These seminars have a pragmatic approach and have demonstrated to be very appealing for the industry.
Read the original article by Paperjam online.
Frank van KuijkPartner Tax Adviser / Attorney at Law / Avocat
Frank van Kuijk, partner, is a member of our Investment Management and Tax practice groups in our Luxembourg office. He focuses on the structuring and regulatory work for alternative investment fund managers. Frank heads the Tax team integrated within the Investment Management Practice.T: +352 466 230 330 E: [email protected]