The Luxembourg Special Limited Partnership (SLP), or “Société en Commandite Spéciale” (SCSp), has become a preferred structure for investment funds and private equity in recent years. This vehicle offers numerous advantages for fund managers and investors seeking a flexible, efficient, and internationally recognized platform for their investment activities.
One of the standout features of the SLP is its flexibility. The SLP does not have legal personality, which means it operates under contractual freedom, allowing partners to structure the partnership agreement according to their specific needs and preferences. This flexibility extends to management, capital contributions, and profit distribution. General Partners (GPs) have the freedom to determine the governance structure and operational procedures. There are no minimum capital requirements, providing ease of entry for investors. Partners can define profit-sharing arrangements without strict regulatory constraints.
Luxembourg offers an attractive tax regime for SLPs, making it a tax-efficient vehicle for investors. SLPs are not subject to Luxembourg corporate income tax, municipal business tax, or net wealth tax, provided the SLP does not engage in commercial activities. There is no withholding tax on distributions made by the SLP to its investors. Additionally, management services provided to the SLP can benefit from VAT exemptions, reducing operational costs.
Luxembourg is renowned for its robust and investor-friendly regulatory environment. SLPs can be managed by an Alternative Investment Fund Manager (AIFM), ensuring compliance with the Alternative Investment Fund Managers Directive (AIFMD), which facilitates marketing across the European Union. The Luxembourg financial regulator, Commission de Surveillance du Secteur Financier (CSSF), provides clear guidelines and oversight, ensuring a high level of investor protection.
The SLP offers a high degree of confidentiality. The names of Limited Partners (LPs) are not disclosed publicly, safeguarding investor privacy. The SLP benefits from minimal disclosure requirements, adding an extra layer of confidentiality for investors. The legal framework governing SLPs is designed to cater to the needs of international investors. LPs enjoy limited liability, meaning they are only liable up to the amount of their committed capital. The partnership agreement can be tailored to include specific terms regarding governance, decision-making, and exit strategies.
Luxembourg’s strategic location in the heart of Europe provides significant advantages. Luxembourg’s SLPs can benefit from passporting rights under the AIFMD, allowing funds to be marketed across the EU. Luxembourg is a leading financial center with a well-established ecosystem of service providers, including legal advisors, auditors, and fund administrators. Luxembourg is recognized for its political and economic stability, offering a stable and predictable business environment essential for long-term investment planning.
Establishing a Luxembourg Special Limited Partnership offers numerous advantages, from flexibility and tax efficiency to regulatory benefits and confidentiality. For fund managers and investors looking to leverage a sophisticated and internationally recognized investment vehicle, the SLP stands out as an optimal choice. With Luxembourg’s strategic position in the EU, its robust legal framework, and a supportive financial ecosystem, the SLP is well-suited to meet the diverse needs of modern investment strategies.
If you are interested in establishing a Special Limited Partnership in Luxembourg, contact Nexfund for expert guidance and comprehensive support in setting up and managing your financial vehicle.
