Creating and managing a fund in Luxembourg. Legal and regulatory aspects of setting-up a fund Duties of directors and their appointees

Transcription

1 Creating and managing a fund in Luxembourg Legal and regulatory aspects of setting-up a fund Duties of directors and their appointees 1

2 Part I Fund Set-up 1. Luxembourg Investment Vehicles - Luxembourg funds - Fund form - Corporate form 2. Filing with the CSSF 3. Incorporation 4. Subscriptions and Spending 2

3 Luxembourg Investment Vehicles 3

4 Luxembourg Investment Vehicles Regulated Vehicles Luxembourg Funds Retail investors Retail investors UCITS UCI Part I Part II Law of 2002 on UCIs Well-informed investors SIF SIF Law Well-informed investors SICAR SICAR Law 4

5 Luxembourg Investment Vehicles Different fund forms Corporate form - SICAV (Société à Capital Variable) - SICAF (Société à Capital Fixe) Contractual form - FCP (Fond Commun de Placement)! A Sicar cannot be set-up as a FCP 5

6 Fund Form Corporate form (SICAV) Shareholders SICAV BoD 6

7 Fund Form Contractual form (FCP) Unit holders FCP Manco BoD required! 7

8 Corporate Form 8

9 Corporate Form Corporate forms for funds Public companies Public Limited Company (SA) Association limited by shares (SCA) Private companies Limited Liability Company (SARL) Limited Partnership (SCS) 9

10 Corporate Form Corporate forms for funds UCITS SIF SICAR Variable capital SICAVs A SICAR is not a SICAV! SA Yes Yes Yes SARL No Yes Yes SCA No Yes Yes SCS No No Yes 10

11 Luxembourg Investment Vehicles UCITS, PII UCIs, SIFs and SICARs are subject to specific laws. However when these specific laws do not foresee a ruling, then for corporate forms one falls back on general company law: Laws UCITS Part II SIF SICAR ( - ) When no regulation, Law of 1915 prevails 11

12 Filing with the CSSF 12

13 Filing with the CSSF Necessary documents to be filed with the CSSF Prospectus Articles of Incorporation / Management Regulations Custodian Agreement Other counterparty agreements CVs / affidavits / honorary declarations for directors (and conducting officers) Investment manager documents if necessary 13

14 Actors - Investors - Promoter / Initiator - Custodian - Central Administration (Paying/Transfer Agent, Domiciliary) - Investment manager - Lawyers (recommended) - Notary - Auditors - Distributor - CSSF 14

15 Filing with the CSSF CSSF Approval and License Requirements UCITS / UCI SIF SICAR Start business without CSSF approval? No Yes No Approval and licensing requirements Managing Bodies Yes Yes Yes Promoter Yes No No Initiators In No Yes Yes Investment manager Yes No No 15

16 Filing with the CSSF Registration timeline Documents must be close to perfect Otherwise documents have to be changed and handed in again! Keep in mind new laws! Keep in mind CSSF internal practice Documents go to different levels: field officer, supervisor & Direction Integration of CSSF and client comments Filing Approval Liaising and revising 2 3 months 16

17 Incorporation (for corporate form) 17

18 Incorporation At the n tary Deed Articles of Incorporation Initial Shareholders Resolutions Proxies for shareholders / certificates of beneficial ownership Minimum share capital certificat de blocage ( or ) Signing and stamping deed 18

19 Subscriptions & Fund Spending 19

20 Subscriptions and Fund Spending Financial Requirements UCITS and UCIs SIF SICAR Minimum capital 1,25 Mio 6 months 1,25 Mio 12 months 1 Mio 12 months Paid down cash 100% 5% 5% 20

21 Subscriptions and Fund Spending Fund Collecting & Spending Listing Investment vehicle Eligible investments 21

22 Fund set-up Recap of Fund Set-up 1 Plan 2 CSSF Approval 3 4 Incorporation and Launch Acquisition 22

23 Part II Duties of directors and their appointees 1. General - Who are the directors? - Comparisons 2. Directors Duties - Managerial and strategic decisions - Delegation and supervision 3. Conducting Officers 4. Service Providers 23

24 General 24

25 General Possible decision-makers of a fund Directors Promoter/Initiator through directors Conducting Officers* Asset Managers * also referred to as managers outside of this presentation (Fr: dirigeants) 25

26 General Those at the top of the company BoD - Directors administrateurs Managers gérants General Partners commandités SA SARL SCS / SCA 26

27 Directors Duties 27

28 Directors Duties Directors Personal Qualities The members of the board must be of good repute and be sufficiently experienced (art 93 III L2002) 28

29 Directors Duties Directors Duties in a Fund I. Management Must conduct Fund s business correctly Make strategic decisions Promote corporate object Act in shareholders interests II. Delegation and Supervision Responsible for delegating tasks to conducting officers and service providers Responsible for adequate supervision 29

30 Directors Duties I. Management Directors must conduct the Fund s business correctly Convening of - Annual shareholders meeting - Extraordinary shareholders meeting Approving management reports and financial statements Prevention of and reporting to the shareholders meeting on conflicts of interest Representing the company in legal proceedings in corporate law of

31 Directors Duties I. Management Strategic Decisions and Corporate Objective Analyses trends and responsible for investment strategy Determines necessary actions for realising the corporate objective Makes sure actions are compliant with the law, regulations and prospectus Makes own annual program 31

32 Directors Duties Digression Competencies Board of Directors Shareholders Meeting If powers are not explicitly reserved to the Shareholders Meeting, then the Board of Directors is responsible (art 53 L1915) 32

33 Directors Duties Digression Powers of the Shareholders Meetings Ordinary SM Election and discharging of B.o.D. Election of auditors Approval of annual reports Approval of distributions Extraordinary SM Amendments to the articles Dissolutions and restructuring Change of nationality unanimously 33

34 Directors Duties II. Delegation and Supervision (example UCITS) Directors Duties re. Conducting Officers: Selection of qualified Conducting Officers Delegation of - Daily management - Representation - Supervision of SPs Directors Duties re. Service Providers: Selection of SPs with necessary resources Supervision and intervention when necessary 34

35 Directors Duties: Supervision within a UCITS SICAV with a designated Manco (simplified) SICAV BoD Manco BoD conducting officers 3 tasks Service Providers delegation supervision reporting 35

36 Directors Duties: Supervision within a UCITS Self-managed SICAV (simplified) SICAV BoD conducting officers Service Providers delegation supervision reporting 36

37 Directors Duties Civil Liability of the directors Art 59 Law of 1915: Wrong action or Omission Infringement of law or articles or mismanagement Fault No exculpation No liability exclusion No contractual liability exemption (exemption for gross negligence or willful misfeasance not allowed) Liability Provided no obligation of company to step in first Please note that pre-requisites vary from claim to claim. 37

38 Directors Duties Service Provider and Director Mistakes a) director compensation b) no compensation BoD BoD mistake! In v Indemnificatio n claim! In v no claim Service Providers mistake! Service Providers 38

39 Conducting Officers 39

40 Conducting Officers Qualities and duties of conducting officers Must be honorable and experienced Should be at least two conducting officers because of four-eyesprinciples Can represent the fund (no restrictions in representation power against third parties) Ensure correct operation of the manco or fund; monitor service personnel, technical infrastructure and procedures Can take appropriate measures against SPs at all times Making reports on their monitoring duties to the Board Art 60 L1915 Art 27, 91, 93 L2002 Conducting Officers must act within their mandate Page 40

41 Conducting Officers Three general duties of conducting officers 1. Monitoring Duties check compliance & risk management procedures regarding investment management monitor service providers, etc. 2. Reporting periodic Duties reports, reports on day-to-day management, AML reports to BoD/CSSF/auditors/etc. 3. Co-operation Duties co-operation with BoD/CSSF/auditors/etc. Page 41

42 Directors Duties Civil Liability of the conducting officers Liability is more restrained than that for directors Conducting officers are only responsible for the execution of their mandate liable for breach of contract Page 42

43 The Service Providers 43

44 The Service Providers General Conditions Service providers cannot interfere with the supervision of the Board Service Provider must be qualified and possess sufficient resources Board and conducting officers can intervene at all times in work of SP Delegation does not affect the liability of the manco or fund at all 44

45 The Service Providers The three service providers of a fund Central Administration Asset Management Distribution Page 45

46 The Service Providers 1 Central Administration - NAV calculation - Administers the register - Accounting - Order execution (issues and redemptions) - Ensures market timing / AML procedures - Provides investors with investment information - Contact for client - Domiciliation 46

47 The Service Providers 2 Asset Management Must manage fund assets according to the investment policy observing investment restrictions - In charge of day-to-day investment management - Buys and sells assets - Carries out portfolio actions and administration - Must be experienced - Must have license in country of origin and CSSF approval (if UCITS) - Must have internal controls and risk management procedure 47

48 The Service Providers 3 Distribution - Provides distribution network and coordinates local representatives - Prevents late trading and market timing - Compliance with AML procedures 48

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