The risk capital investment company, or société d'investissement en capital à risque (SICAR), was created by the Law of 15 June 2004 (as modified) to provide a tailored made vehicle for private equity and venture capital investment.
A SICAR invests its assets in securities representing risk capital in order to provide its investors with a capital gain in return for the risk incurred. By investment in risk capital is understood the direct or indirect contribution of capital to companies with a view to their launch, development or listing on a stock exchange.
The investments made by a SICAR are required to meet two critera: they must be opportunistic or high risk (which might be due to poor liquidity, since the company is not listed) and there must be an underlying intention to develop the company.
The second criterion can be satisfied in many different ways, such as restructuring, modernisation, product development or by measures aimed at improving the allocation of resources.
The law does not impose any investment diversification rules. Hence, a SICAR may focus its investments on one company operating in a particularly narrow sector such as biotechnology or geological prospecting.
A SICAR may be incorporated in five different forms: a partnership limited by shares (société en commandite par actions - SCA), a private limited company (société à responsabilité limitée - Sàrl), a public limited company (société anonyme - SA), a limited partnership (société en commandite simple - SCS) or a cooperative company organized as a public limited company (société cooperative organisée sous forme de société anonyme - SCoSA).
A SICAR may adopt an open ended or closed ended structure. The minimum capital depends on the legal form selected.
Each of the legal forms creates a legal entity that is distinct from its investors. The name of the company must be followed by the acronym SICAR.
A SICAR is entitled to create multiple investment compartments, thus permitting a private equity house to group different investment strategies, or meet the demands of different investors, within one legal structure.
Typically, a SICAR has a limited lifespan and must identify the mechanism by which its shareholders can redeem their holdings in the company. Investment in a SICAR is limited to qualified investors.
A SICAR is authorised and regulated by the financial sector regulatory authority, the Commission de surveillance du secteur financier (CSSF).