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HACE 4 DÍAS

Tokenised funds in the Cayman Islands

Last week, the Cayman Islands welcomed an influx of professionals in the digital assets space for its inaugural Cayman Crypto Week. As a jurisdiction at the forefront of innovative structuring for the digital assets space, this event was testament to the strength of the offering and experience of the professionals based here, and the increasing institutionalisation of crypto. Tokenised funds were the talk of the town, and unsurprisingly so, given the aptly timed draft legislative updates published in early February heralding a clear regulatory framework for tokenised funds set up in the Cayman Islands. What exactly is a tokenised fund? To add context, lets briefly summarise a traditional fund – an investment vehicle pooling capital from a number of investors. Investors typically will hold their interests in the fund by subscribing for shares in the fund vehicle (in the case of a company), limited partnership interests (in the case of a limited partnership), or membership interests (in the case of an LLC). The concept of a tokenised fund, fundamentally, is an investment fund which allows investors to subscribe for interests in the fund by acquiring tokens on a blockchain. The fund would mint and send tokens to an investor who has successfully subscribed for fund interests and sent capital to the fund (usually via a smart contract). Conceptually, in the ideal of a tokenised fund, the tokens issued by the fund vehicle would be the sole representation of fund interests (investors would not need to hold shares or other forms of interest), and the fund would operate entirely on-chain. In practice, due to other requirements and regulations applicable to operating an investment fund (as well as investor readiness), for now the most typical tokenised fund would issue tokens which represent or mirror the more traditional shares which are also issued. While investors in such a fund will likely consider the tokens to be the representation of their ownership interest in the fund, in reality there would be a conventional share register behind the scenes as well, which would reflect the ownership of those shares mirrored by the tokens. The Cayman Islands framework and proposed changes. Tokenised funds are not new in Cayman or the offshore world generally, and many prominent tokenised funds already operate in Cayman. That said, many such funds to date have been set up within the constraints of frameworks designed for traditional funds, with solutions to issues raised by tokenisation being developed to fit without a clear framework or certainty as to expectations of the regulator. The proposed legislative changes (once in force) will provide a definitive and clear framework allowing for certainty in setting up in Cayman, boosting confidence for both managers and investors. For reference, the proposed legislative changes mentioned relate to the Mutual Funds Amendment Bill 2026, the Private Funds Amendment Bill 2026 and the Virtual Asset Service Providers Amendment Bill 2026. Critically for offering certainty for tokenised fund launches in Cayman, the issuance; creation; sale; transfer or other disposition of tokenised equity or investment interests by regulated private and mutual funds will not constitute the issuance of virtual assets under the Virtual Assets (Service Providers) Act, and will therefore not be a regulated activity under that Act. The changes add clarifications and additional requirements specific to digital tokens to the existing funds regime. The key operational requirements and considerations to comply with the licensing regime as tokenised funds formed in the Cayman Islands are set out below: Comprehensive token records and availability to the Cayman Islands Monetary Authority. Tokenised funds must obtain and securely maintain all records of the issuance, creation, sale, transfer and ownership of tokenised interests (including any additional data the Cayman Islands Monetary Authority may require), and make them available ...

hace 4 días

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10 min
31/10/2025

Private equity funds investing in property

I regularly act for residential and commercial property investors and those who lend to them and I also have a (probably) slightly unhealthy interest in Rightmove's sold property prices. What better credentials do I need? With a real estate property magnate in the White House and the increase in property investment generally, the real estate sector is ripe for international private equity fund managers to tap into. According to The Lawyer's Global 200: Real Estate 2017 Report and data provided by Private Equity Real Estate magazine, the world's top 50 private equity real estate funds raised a combined US$271 billion between 2011 and 2016. Fundraising for global funds declined in 2016 after 5 years of year-on-year growth. PERE reports that this was due in part to a lack of funds closing - 25 per cent fewer funds closed in 2016 than in 2015. Those who attended MIPIM in early March will have been aware of the positive view of the property sector. Investment in the London commercial property market continues to be popular for High Net Worth Individuals and Family offices, as well as for larger global private equity funds. Asian and Middle Eastern investors still look to London for their property investment and particularly in some of the more distinctive buildings which now pepper London's skyline - from the City to Canary Wharf (the Cheese Grater, the Shard et al). All good signs for onshore and offshore lawyers servicing this market. Pan European real estate funds are becoming increasingly popular, with London and Germany proving preferred markets for commercial property investment. According to The Lawyer's Real Estate Report, portfolio deals involving particular asset classes (logistics, student accommodation, build to rent and private rented and hotels) are standing out further than single asset investments. In our experience of acting for investors in these sectors, offshore fund vehicles are just the ticket for investment in real estate portfolios - and for good reason. Whether the investor is looking for a simple offshore company to hold the property assets in his own name or that of a nominee, or a more complex structure involving holding companies and an onshore, midshore or offshore funds vehicle, the legislative regimes in both the British Virgin Islands and in the Cayman Islands provide solid, predicable yet flexible frameworks for private equity investors. In both jurisdictions, depending on the proposed exit strategy, the investment vehicle may be established as a regulated entity or as a more straightforward unregulated, closed ended funds vehicle or in conjunction with an onshore or midshore fund. Exit strategies will and do vary, depending on the appetite in the market. Private sales of whole property funds or some of their assets, redemptions of holdings or IPOs are all options, although the first two are probably more common of late. Other drivers such as tax and the domicile of the key investing parties will also be relevant. If you act for investors or lenders who like to finance commercial property investments, and an offshore structure is under consideration, do let us know, we would be delighted to talk through the options. Sales pitch over, I leave you with a couple of quotes about property investment which I quite like. "Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world." -- Franklin D. Roosevelt, US President "Buy land, they're not making it anymore." -- Mark Twain, writer and humorist

31/10/2025

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4 min
09/10/2025

Tax amnesty heralds increased demand for Offshore Funds in the LATAM region

After a highly educational trip down to Buenos Aires at the end of last year, I couldn't help but be encapsulated by everything that was going on in Argentina. It absolutely felt like a country that was finally moving in the right direction and the Tax Amnesty was a large part of that. On that basis, I took the time out to interview the head of our Montevideo Office, Horacio Woycik to gauge his views on how 2017 is playing out: Thanks for taking the time to speak to me Horacio. I noted that on 31 March 2017, Argentina concluded one of the world's most successful tax amnesties, something of which you must be very proud of as a native Argentinian. Could you tell our blog readers a little more? Thanks Phil. Although the Argentina Government was cautiously optimistic when announcing the Tax Amnesty on various assets[i] a year ago, the results exceeded all expectations, with $116.8 billion assets declared in total. This is impressive, particularly compared to the $1.7 billion declared under the former government's Tax Amnesty programme between 2013-2015. That's a truly incredible result. What do you put it down to? Some may attribute this success to investor confidence in Argentina's new Government, led by Mauricio Macri, but in my opinion, this only partially explains the results. Another deciding factor in the Amnesty's success was the unanimous consensus from local legal, tax and financial advisors that sooner rather than later, there would no longer be a safe place for undeclared assets and they actively encouraged all of their clients to participate. The Amnesty was seen as a "last chance" opportunity for taxpayers to regularise assets before the unprecedented flow of financial information amongst Tax Authorities following the implementation of the OECD's Common Reporting Standard (CRS) in September 2017. That's interesting as clearly the CRS has been a huge topic of conversation down there for a while. Has it made that much of an impact? Absolutely. CRS, FATCA and FATCA's bilateral Intergovernmental Agreements (IGAs) are reshaping the international financial system, and compliance with local tax obligations will soon be monitored by financial institutions more closely than ever before. In this context, tax amnesties are just another preliminary step in a coordinated global effort. As a matter of fact, Argentina's Amnesty programme is only one of many Tax Amnesty programmes taking place simultaneously worldwide. Chile successfully closed its Tax Amnesty programme in December 2015 with $18.7 billion in assets declared. Meanwhile, Brazil recently extended its Amnesty programme until 31 July 2017, with $54 billion in assets declared to date. Additionally, countries like Colombia, Peru and Mexico have ongoing Tax Amnesty programmes. So this is absolutely going to be become the norm. What can we expect after these various tax amnesties take place? The high adherence to the different tax amnesties will likely trigger a wave of asset restructurings by high net worth individuals, with tax efficiency as the main driver. It's likely that there won't be a "one size fits all" solution for the structuring needs of clients from different countries, as structuring will be very dependent on local tax legislation, and solutions will vary from country to country. Accordingly, private clients' increased use of fund structures for tax and estate planning purposes is likely to drive growth in Latam's fund industry. That's very interesting and I'm our funds blog readers would like to know a little more about why that is. I can see three obvious reasons why: Funds are a natural vehicle for asset repatriation. Tax residents in Latam are disclosing billions of dollars through the ongoing tax amnesty programmes, most of which are held abroad. Some of those assets are likely to return to their investors' countries of residence once the "invisible barrier" of being undeclared is lifted. It could be expected that investment funds will channel a signifi...

09/10/2025

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8 min
04/03/2024

Continuing obligations of a Cayman Islands registered private fund

This guide sets out the continuing obligations under Cayman Islands law of a closed-ended fund registered with the Cayman Islands Monetary Authority (CIMA) under the Private Funds Act (Private Funds Act). Part A of this guide covers the ongoing obligations of a private fund that is registered under the Private Funds Act, as well the various FATCA and CRS requirements, and anti-money laundering compliance. A private fund, registered with CIMA under the Private Funds Act, can be structured as an exempted company, limited partnership, limited liability company or unit trust, each of which also have ongoing obligations. Part B applies to a fund that is an exempted company incorporated with limited liability and an authorised share capital. If the fund is an exempted limited partnership see also Part C. If it is a limited liability company incorporated under the Limited Liability Companies Act (LLC Act) see also Part D and if it is an exempted trust, see also Part E. Please see our guide to private funds in the Cayman Islands for more details of the closed-ended fund structures and requirements under the Private Funds Act. Administrative Fines CIMA has the power under the Monetary Authority Act (MA Act) to impose significant administrative fines of up to CI$1 million (US$1.2 million) for each breach of certain provisions of the Anti-Money Laundering Regulations and other Cayman regulatory laws and regulations, including the Private Funds Act and Securities Investment Business Act. The level of an administrative fine will depend on various factors including whether the breach is committed by an individual or a body corporate and if the breach is classified as minor, serious or very serious. Compliance Calendar An overview of the annual compliance dates is set out in our compliance calendar, which can be found here. Note in particular that penalties frequently apply for late filings and so the registered office should be informed promptly of any notifiable changes to allow the appropriate filing/s to be made. Part A - Registered Private Fund obligations Annual fee Action required Timing and penalties Must be paid to CIMA. CI$3,500 / US$4,268 plus CI$300 / US$366 Fund Annual Return Fee. By 15 January of each calendar year. 1/12 of the annual fee due for each month the payment remains outstanding. Any change that materially affects any information submitted to CIMA Action required Timing and penalties A copy of such changes must be filed with CIMA. Filing fee CI$100 / US$122. Within 21 days of becoming aware of the change. Penalty under Private Funds Act of CI$20,000 / US$24,390 for failing to do so. Asset Valuation Action required Timing and penalties All private funds must conduct asset valuations. The valuation must be done on an appropriate and consistent basis, which must be at least annually, and in accordance with CIMA valuation rules for private funds. The valuation must be done by an independent third party, independent administrator, or the manager or operator of the private fund subject to appropriate operational independence and disclosure of the potential conflicts of interest to investors. Must be done on an appropriate and consistent basis, at least annually. CIMA has the power to require that the valuation is verified by an auditor or independent third party, where the valuation is not undertaken by an independent third party. Penalty under Private Funds Act of CI$20,000 / US$24,390 payable by the operator if the fund does not comply with the law. Cash monitoring Action required Timing and penalties All private funds must monitor cash flows, cash account receipts and payments to investors. The monitoring must be done by an independent third party, custodian or administrator, or the manager or operator of the private fund subject to appropriate operational independence and disclosure of the potential conflicts of interest to investors. CIMA has the power to require that the cash monitoring is verified by an independen...

04/03/2024

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1 h y 14 min
30/10/2025

Offshore fund vehicles - A transparent guide to making the right choice to maximise your fund's potential

One of the most common scenarios we encounter is a US-based manager who initially establishes a domestic fund to attract US taxable investors. With the performance going in the right direction, the manager begins to think about US tax-exempt investors, such as charities, pension funds and university endowments, as well as investors based outside of the US, who like the track record and want to invest. They have probably then been made aware that they will need an offshore vehicle and now have the task of working out why, where, and how much they need to spend. Why do I need one of these? US tax-exempt and non-US investors will want to avoid potential US tax exposure that could result from direct investment into your US vehicle and so they will want to come into an offshore "blocker" vehicle. To ensure you can take in their capital, you will need to add at least one offshore structure to form either the traditional "master-feeder" or the "mini-master". What is a master-feeder? Here, we will create two new offshore vehicles. Your existing US fund will then contribute its assets into the offshore master fund upon the launch of the new structure. The offshore feeder vehicle will then be available to take in US non-taxable investors and the non-US investors and "feed" into the offshore master fund as well, allowing for a co-mingling of all of the invested capital in the most tax efficient manner. Sounds good, so what about the minimaster? In a mini-master structure, a single offshore fund is established which is taxed as a corporation to benefit US tax-exempt investors and block UBTI for non-US investors. Adding a single offshore vehicle saves cost and therefore has proven popular with startup and emerging managers. The offshore fund invests directly into the existing US fund, which will then act as the master fund (whilst remaining the fund into which the US taxable investors will continue to invest). This provides an additional benefit of not requiring the ownership of the assets of the domestic fund to be transferred. This reduces the administration around the restructuring and subsequently the cost as well. While there are some tax consequences to be discussed (and some investors may not want to invest even indirectly into a US vehicle), it has proved to be appealing to those looking to keep it as simple as possible to begin with. Okay, so I need one of these structures. Where do I choose to set it up? The British Virgin Islands and the Cayman Islands are both highly suitable and well-regarded offshore fund jurisdictions that have been used for many decades and always strive to meet the requisite international standards. We have long-standing clients who elected to use one or the other for different and highly sensible reasons at the time of their first launch. But there are differences, and a number of our clients have fund vehicles in both jurisdictions to maximise the advantages that they each offer. Understood. But how do I choose the best one for my fund? Cayman is the world's most popular offshore funds jurisdiction. We estimate that Cayman has over 70 per cent of the world's offshore funds and so is the well-trodden path. Although the BVI has around 15 per cent, managers who opt to establish their funds in the BVI sometimes encounter the additional question from institutional investors of "Why BVI?". Whilst there are very reasonable and logical answers, the selection of Cayman removes this additional query in the DDQ. But I am also looking to minimise cost… In terms of corporate and regulatory costs, Cayman is a significantly more expensive jurisdiction than the BVI, both upon formation and for the annual maintenance of the vehicle(s). This is then compounded by the greater regulatory requirements in Cayman, which result in the cost differential for the jurisdictions being substantial. For this reason, many fund managers who are operating with a relatively low level of AUM prefer to establish their offshore fund in th...

30/10/2025

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7 min
29/10/2025

Establishing a Closed-Ended Fund in the BVI

Are you thinking of setting up a closed-ended investment fund in the BVI? This document provides an overview of the closed-ended funds industry in the BVI and why the BVI is such an attractive jurisdiction for private equity, venture capital and other closed-ended fund managers. We explain the regulatory regime in the BVI, the fund structures available and how we can support you from the initial structuring and planning conversations, all the way through to the launch and ongoing support. Closed-ended funds in the BVI are regulated by the Financial Services Commission (the Commission). The primary legislation which governs the industry is the Securities and Investment Business Act 2010, as amended (SIBA), and the Private Investment Funds Regulations 2019 (the PIF Regulations). This guide focuses on the closed-ended fund industry, but it should be highlighted that the BVI does have a separate regulatory regime for hedge funds and other open-ended funds - these are discussed in a separate legal guide. Do let us know if you would like further details. What factors determine whether a closed-ended fund must be regulated in the BVI? Generally, an entity will be considered to be a closed-ended fund and will be subject to regulation as a Private Investment Fund (or PIF) if it falls within the following definition of a "private investment fund": It collects and pools investor funds for the purpose of collective investment and diversification of portfolio risk, and The equity interests that it issues entitle the holder to receive an amount calculated by reference to the value of a proportionate interest in the whole or a part of the net assets of the fund The BVI Private Investment Fund Regime BVI closed-ended funds falling within the definition of a "private investment fund" are generally required to be regulated by the Commission as a PIF. However certain entities, including but not limited to single investor funds, single asset funds, joint venture companies and special purpose acquisition companies do not require regulation as a PIF. The PIF is a flexible, cost-effective and lightly-regulated fund product which is suited for everyone from the start-up manager to established institutional private equity houses with billions under management. The characteristics of the PIF are set out below. Private investment fund Interests in a PIF may be distributed on either a 'private' or a 'professional' basis. There is no minimum investment amount for a PIF distributed on a private basis. If distributing on a 'private' basis the PIF is restricted to either: Having no more than 50 investors, or Making an invitation to subscribe for or purchase fund interests on a private basis only If the PIF interests are being distributed on a 'professional' basis, they may only be made available to "professional investors" and the minimum initial investment by each professional investor must not be less than US$100,000 (or other currency equivalent), unless the investor is an "exempted investor" in which case there is no minimum initial investment. A "professional investor" is a person: Whose ordinary business involves, whether for that person's own account or the account of others, the acquisition or disposal of property of the same kind as the property, or a substantial part of the property, of the fund; or Who, whether individually or jointly with their spouse, has a net worth in excess of US$1,000,000 (or other currency equivalent) which does include the primary residence An "exempted investor" means: The manager, administrator, promoter or underwriter of the fund, or Any employee of the manager of the fund A PIF is required to issue an offering document or term sheet (although in certain circumstances the Commission can provide an exemption from this requirement). A PIF is required to maintain a clear and comprehensive policy for the valuation of its assets (Fund Property) with procedures that are sufficient to ensure that the valuation policy is eff...

29/10/2025

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17 min
24/09/2025

Adding an offshore vehicle to your fund structure

Ready to launch your fund? Jump straight into our streamlined process by completing our intuitive questionnaire, designed to help you make informed choices about your offshore fund. Get started Get started

24/09/2025

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20 s
10/10/2025

Tax amnesty heralds increased demand for Offshore Funds in the LATAM region

After a highly educational trip down to Buenos Aires at the end of last year, I couldn't help but be encapsulated by everything that was going on in Argentina. It absolutely felt like a country that was finally moving in the right direction and the Tax Amnesty was a large part of that. On that basis, I took the time out to interview the head of our Montevideo Office, Horacio Woycik to gauge his views on how 2017 is playing out: Thanks for taking the time to speak to me Horacio. I noted that on 31 March 2017, Argentina concluded one of the world's most successful tax amnesties, something of which you must be very proud of as a native Argentinian. Could you tell our blog readers a little more? Thanks Phil. Although the Argentina Government was cautiously optimistic when announcing the Tax Amnesty on various assets[i] a year ago, the results exceeded all expectations, with $116.8 billion assets declared in total. This is impressive, particularly compared to the $1.7 billion declared under the former government's Tax Amnesty programme between 2013-2015. That's a truly incredible result. What do you put it down to? Some may attribute this success to investor confidence in Argentina's new Government, led by Mauricio Macri, but in my opinion, this only partially explains the results. Another deciding factor in the Amnesty's success was the unanimous consensus from local legal, tax and financial advisors that sooner rather than later, there would no longer be a safe place for undeclared assets and they actively encouraged all of their clients to participate. The Amnesty was seen as a "last chance" opportunity for taxpayers to regularise assets before the unprecedented flow of financial information amongst Tax Authorities following the implementation of the OECD's Common Reporting Standard (CRS) in September 2017. That's interesting as clearly the CRS has been a huge topic of conversation down there for a while. Has it made that much of an impact? Absolutely. CRS, FATCA and FATCA's bilateral Intergovernmental Agreements (IGAs) are reshaping the international financial system, and compliance with local tax obligations will soon be monitored by financial institutions more closely than ever before. In this context, tax amnesties are just another preliminary step in a coordinated global effort. As a matter of fact, Argentina's Amnesty programme is only one of many Tax Amnesty programmes taking place simultaneously worldwide. Chile successfully closed its Tax Amnesty programme in December 2015 with $18.7 billion in assets declared. Meanwhile, Brazil recently extended its Amnesty programme until 31 July 2017, with $54 billion in assets declared to date. Additionally, countries like Colombia, Peru and Mexico have ongoing Tax Amnesty programmes. So this is absolutely going to be become the norm. What can we expect after these various tax amnesties take place? The high adherence to the different tax amnesties will likely trigger a wave of asset restructurings by high net worth individuals, with tax efficiency as the main driver. It's likely that there won't be a "one size fits all" solution for the structuring needs of clients from different countries, as structuring will be very dependent on local tax legislation, and solutions will vary from country to country. Accordingly, private clients' increased use of fund structures for tax and estate planning purposes is likely to drive growth in Latam's fund industry. That's very interesting and I'm our funds blog readers would like to know a little more about why that is. I can see three obvious reasons why: Funds are a natural vehicle for asset repatriation. Tax residents in Latam are disclosing billions of dollars through the ongoing tax amnesty programmes, most of which are held abroad. Some of those assets are likely to return to their investors' countries of residence once the "invisible barrier" of being undeclared is lifted. It could be expected that investment funds will channel a signifi...

10/10/2025

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8 min
16/06/2025

The Hong Kong OFC. Maybe, Maybe Not?

But will the OFC and proposed tax changes really entice Hong Kong based hedge fund managers to set up funds in Hong Kong? Much of the talk of the "advantage" for a Hong Kong manager in setting up an OFC over a Cayman domiciled fund relates solely to a requirement for dealing only with the Securities and Futures Commission (SFC) and not also the Cayman Islands Monetary Authority (CIMA). This seems to me a little simplistic. As a starting point, with a Hong Kong manager directly managing a Hong Kong fund, and without any offshore manager, there will be no opportunity for any management or performance fees to be earned at the Cayman level and tax-deferred. Moreover, hedge funds are cross-border by their very nature. Most hedge funds have investors from a lot of different countries and have investments in a lot of different countries. Accordingly, managers will already need to be considering the securities laws of various countries. All the investors in a hedge fund will have their own local tax obligations, so as a very base condition a manager is seeking to domicile their fund somewhere with no additional taxes. However, this is not enough. A manager also needs to domicile their fund somewhere that provides investors from a lot of different countries the relevant level of comfort to place their investments in such a vehicle. There are some very important factors that are considered by the type of sophisticated investors that invest into hedge funds in determining this comfort level. Such factors that a jurisdiction must exhibit include the absolute rule of law, respect for property rights and access to a sophisticated judiciary free from political interference. The Cayman Islands is a jurisdiction that fulfils these requirements and has reliably proven itself to do so over decades. As a result, over 85 per cent of the world's hedge funds are domiciled in the Cayman Islands. Hong Kong is a jurisdiction that some might consider is rapidly being subsumed into the People's Republic of China. Even when you drill down into more of the minutiae of the OFC regime it appears that the Cayman Islands remains a clear leader. The level of prescription and oversight which is contemplated by the OFC regime, whilst it may be familiar to operators of Hong Kong retail funds, is far more than would be familiar to hedge fund managers, or than applies to private Cayman funds. The OFC's governing document is required to contain certain prescribed provisions, including the kinds of property in which the OFC can invest. Any change to this governing document will require the SFC's approval. There are no restrictions imposed by the Cayman regime on investment strategies of Cayman funds or their use of leverage. A Cayman fund does not have prescribed provisions in, and CIMA's approval is not required for any changes to, its memorandum and articles of association. The appointments of the directors of an OFC are subject to the SFC's approval, and the SFC will require the directors to be appropriately qualified and experienced. By contrast, CIMA requires directors to register via a web portal but does not impose an approval process nor any requirements as to qualifications, experience or independence. An OFC must appoint a custodian approved by the SFC which meets the eligibility requirements set out. In practice, many hedge funds appoint one or more prime brokers, and many prime brokers may not, and may not wish to, meet these eligibility requirements. A Cayman fund sold in Hong Kong by private placement is not required to appoint a custodian. The OFC regime requires that the valuation and pricing of the OFC's property is the investment manager's responsibility. This is inconsistent with the typical hedge fund model, where valuation and pricing is typically delegated to the fund's administrator. Any change of name of an OFC is subject to the SFC's approval. No approval is required to a change of name of a Cayman fund. Transfers of OFC shares will be subj...

16/06/2025

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5 min
11/02/2022

Luxembourg: Modernisation of the securitisation law

On 9 February 2022, the Luxembourg Chamber of Deputies (Chambre des Députés), adopted the law modernising the Luxembourg law of 2 March 2004 on securitisation, as amended (the New Securitisation Law). The New Securitisation Law enhances legal certainty and flexibility of the Luxembourg securitisation regime, while ensuring and increasing effective protection for investors. The New Securitisation Law has modernised the following main aspects. New sources of funding The financing of a securitisation transaction is no longer limited to the issuance of securities but is open to the issuance of any type of financial instrument. Furthermore, in addition to the issuance of any financial instruments, securitisation undertakings can have recourse, in whole or in part, to the conclusion of any type of loans, whose yield or repayable principal depends on the risks acquired (eg profit participating loans, asset-backed loans). New legal forms The legal forms that can be used for securitisation companies are now broadened by: The unlimited company (société en nom collectif) The common limited partnership (société en commandite simple) The special limited partnership (société en commandite spéciale) The simplified limited company (société par actions simplifiée) New authorisation and supervision requirements A securitisation vehicle must be subject to the authorisation and supervision of the CSSF, when it issues to the public on a continuous basis. Only securitisation vehicles issuing more than three times per year (on an all compartments basis) non-private placements with a denomination below €100,000 per each unit issued to non-professional investors need to be authorised and supervised by the CSSF. New rules governing the accounting treatment of equity-financed compartments The accounting treatment and distribution of profits and losses of equity financed compartments shall now be done on a compartment basis unless the articles of the securitisation entity provide otherwise. Where compartments are equity-financed: The balance sheet and the profit and loss account prepared for each compartment shall be approved only by the shareholders of that compartment, unless the articles of the securitisation entity provide otherwise Limitations to the distribution of profits and other distributable reserves may be determined by reference to each compartment, without regard to the global situation of the securitisation entity, unless the articles of the securitisation entity provide otherwise The legally required reserve according to the Luxembourg law of 10 August 1915 on commercial companies, as amended, shall be determined on a compartment basis without regard to the global situation of the securitisation entity, if this is provided for by the articles of the securitisation entity Holding of securitised assets A securitisation entity can now: Directly own the assets generating the cash flows that are securitised Acquire such assets or risks to be securitised indirectly, either through a subsidiary or via the acquisition of an entity holding these assets or risks Security interests A securitisation vehicle can now grant security interests over its assets to parties that are involved in a securitisation transaction but are not direct creditors of the securitisation vehicle. Active management Active management of securitised assets is now allowed for Luxembourg securitisation vehicles but only where the following conditions are met: The pool of securitised risks is made up of debt securities, claims or debt financial instruments The securitisation entity is not financed by issues to the public Ranking/legal subordination The following default waterfall of payments/order of priority in respect of debt and equity instruments issued by a securitisation vehicle is now applicable to securitisation entities unless otherwise agreed: The units of a securitisation fund are subordinated to the other financial instruments issued by, and loans contracted by, s...

11/02/2022

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7 min

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