LUXEMBOURG LP STRUCTURES – A FLEXIBILITY THAT IS DIFFICULT TO FIND ELSEWHERE
Luxembourg’s ecosystem for both, traditional and alternative funds remains hard to match. The Grand Duchy’s toolbox and in particular its limited partnership regime are particularly attractive for private equity funds.
Adriana Boixados, Associate Partner at Ernst & Young Luxembourg, highlights the flexibility of Luxembourg limited partnership regimes which explains their wide use within a PE context to accommodate fund vehicles and (co-investment) holding strategies alike.
“The common limited partnership (SCS) and, in particular, the special limited partnership (SCSp) have just proved themselves as very useful structuring tools in the private equity business. Nowadays, there are very few private equity managers that are not using a Luxembourg limited partnership in one form or the other,” highlights Adriana.
Nowadays, there are very few private equity managers that are not using a Luxembourg limited partnership in one form or the other.
The modernisation of the Luxembourg limited partnership regime achieved with the introduction of the SCSp is still second to none. In this respect, the reforms undertaken by other neighboring fund jurisdictions of their limited partnership regimes are lagging behind Luxembourg as they benefit only those limited partnerships qualifying as fund vehicles.
“The lack of legal personality of the SCSp which is helpful to align the Luxembourg tax treatment of this vehicle with the one at investors’ and investee’s respective jurisdictions or a relaxation of reporting requirements to LPs, among other features, had been very welcome by PE sponsors,” explains Adriana.
To Adriana, Luxembourg LP regimes focus on contractual freedom paired with the Grand Duchy’s legal, political and economic stability “contributed greatly to building a one-stop shop within the EU for the private equity business which is still in the search of a competitor”.