Luxembourg is one of the most established and trusted jurisdictions for wealth management and holding vehicles. The SOPARFI (Financial holding company or sociéte de participations financières) and the SPF (Family Wealth Management Company or société de patrimoine familiale) are well established solutions, that continue to be very popular.
The Special Limited Partnership (SLP or SCSp) has been a highly successful addition to the existing wealth management tools.
What is the SLP?
The SLP is a highly flexible fund vehicle. The limited partnership agreement (LPA) is the main document organizing the functioning of the SLP, which gives the fund and its promoters the contractual flexibility to organize the structure of the fund. The SLP is not restricted to any asset type, has no minimum capital requirements and is not subject to any risk diversification rules.
Who manages the SLP?
The SLP must appoint a general partner (GP), typically a private limited liability company (Société à responsabilité limitée or S.àr.l.) established in Luxembourg, to manage the fund on behalf of the limited partners (LPs). The SLP must at all times have a GP, who has unlimited liability for the debts and obligations of the SLP, the reason why the GP is typically another corporate entity.
What are the main advantages of the SLP?
The main advantages of the SLP are:
- Speed: The SLP can be quickly established by private deed, as there is no requirement to form the SLP in front of a notary. The SLP can therefore be formed through the approval and signing of the LPA by all LPs and the GP.
- Confidential: There is no obligation to publish the LPA. Only certain information must be published in the public register, such as the identity of the GP, the identity of the managers and the corporate purpose of the SLP. The identity of the LPs can remain confidential.
- Contractual freedom: The functioning of the SLP is governed by the terms agreed in the LPA. Matters relating to the issuance of the partnership interests, the distribution of profits or different share classes and voting rights can be freely agreed on without the need to disclose this information.
- No Minimum Capital Requirements: The SLP is not subject to any capital contribution requirements, making the SLP a cost-efficient structure to establish. Contributions of the partners can be in cash or in kind.
- Tax Transparency: The SLP is tax transparent to Luxembourg income tax and net wealth tax.
Why Luxembourg?
Luxembourg offers a variety of solutions to establish wealth management structures, such as funds and companies. This flexibility has made Luxembourg a globally leading domicile for funds, the premier wealth management centre in the European Union, the second largest investment fund centre in the world after the United States and the largest fund domicile in Europe with currently more than EUR 5 trillion of assets under management.
The country is a politically and financially stable EU country and is constantly given a AAA-Rating by all major rating agencies. It is also a cross-border centre for financial structuring and more than 125 banks are based in Luxembourg.
Luxembourg has concluded a high amount of double tax treaties and bilateral investment protection treaties, offering HNWI with many solutions to protect their European and global assets.
What other wealth management solutions can be used in conjunction with the SLP?
In many cases, the SLP is used in conjunction with other Luxembourg investment vehicles. This may be for organizational or optimization purposes.:
- SOPARFI: Due to its flexible financing policy, its structural benefits, its lack of investment restrictions and its advantage in accessing treaty benefits, the SOPARFI has taken on a central role in the structuring of cross-border private equity transactions around the world and is used by multinational corporations, sovereign wealth funds, investment funds, as well as family offices.
- SPF: The SPF is a holding and investment company intended for the management of financial assets and enables individuals to structure their assets in a flexible, simple and tax-neutral way.
Fund or company for a wealth management structure?
Whether to choose a fund or company form in wealth management is a difficult question and depends on the overall structure of the transaction. Luxembourg has the advantage of being able to offer an interesting regime for the fund establishment, as well as for the corporate structure, depending on the requirements of the client.
How long will it take to establish the SLP in Luxembourg
The length of establishment typically depends on whether an investment fund or company is a supervised or non-supervised vehicle. The SLP can be set up within 2 weeks, a SOPARFI and the SPF can be set up in a shorter time frame. Please note that the SLP is managed by a GP, which is a corporate entity, to be incorporated at the same time as the SLP, if it is not already incorporated.
What are the main features of the SLP?
Special Limited Partnership:
- No minimum capital required
- Establishment within 2-3 weeks
- No regulatory approval for the launch required
- Unsupervised
- No Custodian required,
- Tax transparent
- Can invest in any asset type
- High contractual flexibility
What are the costs of establishing an SLP in Luxembourg?
Setting up the SLP which is not supervised, is significantly less costly than a supervised fund.
The GP can be incorporated within only 2-3 days after opening the bank account and depositing the minimum share capital of EUR 12,000. The notarial fees typically amount to EUR 1,600 – EUR 1,800. Upon incorporation before a notary the GP has legal personality and can enter immediately into legally binding agreements. Once the GP is incorporated, the LPA can be signed and the SLP can be constituted and registered with the authorities. This can be also done within a few days. The SLP cost would then only depend on the form of constitution (private deed or notarial deed). Once the LPA is executed, it can be registered with the Luxembourg Trade and Companies’ Register.
Reach out to us, to learn more about using the SLP in wealth management structures.
