What is Special Limited Partnership?
The law of the 10th of August 1915, on commercial companies defines the Special Partnership Company as a company with a time-limited or unlimited duration, consisting of one or more associated partners,
who manages the company but are subject to a responsibility and unlimited liability scheme, and one (or more) associated sponsor(s), whose liability is limited to the amount contributed.
The Legal Framework
Via the Law of 12 July 2013, Luxembourg transposed the European Directive AIMFD into national law and introduced the Special Limited Partnership LU (Société en Commandite Spéciale – SCSp). It combines a competitive tax environment with little regulation and great corporate flexibility.
The objective is for Luxembourg to compete with the most attractive common law legal structures (Ireland, Scotland, Caymans, etc.). SLPs were designed to be very attractive for investors and fund managers, in particular in the fields of private equity, hedge funds and the real estate funds industry. The SLP combines high contractual freedom regarding the placement of private equity funds and favorable tax treatment for the managers of this fund.
Management Scope of SCSp
The SCSp is deprived from legal personality. The GPs’ liability is indefinite, joint and several while the LP’s liability is limited to their contribution under certain conditions. The SCS/SCSp may be unregulated, or regulated, and as such be
governed by the regulations applicable to the SIF or SICAR law (if the SIF or SICAR are structured under an SCSp). A SICAR or SIF established under the form of an SCSp is regulated and supervised by the CSSF.
Tax Treatment for SCSp in Luxembourg
The Luxembourg tax authorities confirmed the treatment of SCS/SCSp in a Circular L.I.R. n°14/4 dated January 9th 2015:
Both the SCS and SCSp enjoy a full tax transparency and tax neutrality.
The SCS/SCSp is exempt from corporate income tax, as well as net wealth tax.
The profits of an SCS/SCSp are exempt from municipal business tax under certain conditions. The unregulated SCSp does not need to prepare annual accounts.
An SCSp may be set up with only two partners: at least one GP and at least one LP, for a limited or unlimited duration, does not require the intervention of a notary and is effective at the date of signature. There is no minimum capital requirement.
Contributions may be made in cash, industry or in kind, and contributions in kind are not subject to a valuation report from an independent auditor.
The SCSp must be registered at the Luxembourg Trade and Companies Registry (RCS). Confidentiality is guaranteed as there is no Memorial C publication requirement (excerpts of the LPA must be published) and the share capital, names and contributions of LPs, as well as financial statements are not subject to publication.