ALTERNATIVE INVESTMENT FUNDS
and
ALTERNATIVE INVESTMENT FUNDS MANAGER
QUESTIONNAIRE
June 2013
Page 2
1.
Definitions
1915 Law
The law of August 10, 1915 on commercial companies, as
amended;
2004 Law
The law of June 15, 2004 relating to the investment company
in risk capital, as amended;
2007 Law
The law of February 13, 2007 relating to specialized
investment funds, as amended;
2010 Law
The Law of December 17, 2010 relating to undertakings for
collective investment transposing the UCITS Directive;
AIF
Alternative Investment Fund;
AIFM
Alternative Investment Fund Manager(s), which shall either
be: (a) an external manager which is the legal person
appointed by the AIF or on behalf of the AIF and which is
responsible for managing the AIF; or (b) the AIF itself, where
the legal form of the AIF permits an internal management and
where the AIF’s governing body chooses not to appoint an
external AIFM;
AIFM-CDR
Commission Delegated Regulation (EU) No 231/2013 of 19
December 2012 supplementing the AIFM Directive with
regard to exemptions, general operating conditions,
depositaries, leverage, transparency and supervision;
AIFM Directive
Directive 2011/61/EC of the European Parliament and of the
Council on Alternative Investment Fund Managers;
AIFM Q&A
Questions and Answers issued on 23 March 2013 by the
European Commission on the AIFM Directive;
AuM
Assets under Management;
CSSF
Commission de Surveillance du Secteur Financier;
CSSF FAQs
Frequently Asked Questions issued by the CSSF on 18 June
2013 concerning the Draft Law and the AIFM-CDR;
Draft Law
Draft law n°6471 implementing the AIFM Directive;
ESMA Guidelines
ESMA Guidelines on key concepts of the AIFM Directive
(ESMA/ 2013/ 600) issued on 24 May 2013 which apply to
AIFMs and the competent authorities of the Member States;
Full AIFM Regime
The AIFM authorisation regime as set out in Annex 1 hereto;
Management
Services
Portfolio and risk management services;
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Simplified AIFM
Regime
The AIFM registration regime as set out in Annex 2 hereto;
Securitization SPV
Entities whose sole purpose is to carry on a securitization or
securitizations within the meaning of Article 1(2) of
Regulation (EC) No 24/2009 of the European Central Bank of
19 December 2008 concerning statistics on the assets and
liabilities of financial vehicle corporations engaged in
securitization transaction and other activities which are
appropriate to accomplish that purpose;
SICAR
Investment
Company
in
Risk
Capital
(Société
d’Investissement en Capital à Risque) governed by the 2004
Law;
SIF
Specialized investment Fund governed by the 2007 Law;
SCSp
Société en commandite spéciale, a new form of limited
partnership vehicle introduced by the Draft Law which will
amend the 1915 Law;
UCI
Undertaking for Collective Investment (UCI) governed by
Part II of the 2010 Law;
UCITS
Undertaking for Collective Investment in Transferable
Securities (UCITS) authorized in accordance with Article 5 of
the UCITS Directive;
UCITS Directive
Directive 2009/65/EC on the coordination of laws,
regulations and administrative provisions relating to UCITS.
2.
Background to the Questionnaire
The purpose of this questionnaire is to assist you in your assessment of whether you fall
within the scope of the Draft Law, that is expected to come into effect in Luxembourg, at
the latest, by mid July 2013.
The Draft Law lays down the rules for the authorisation, on-going operation and
transparency of AIFMs that manage and/or market AIFs in the European Union.
As such, the questionnaire shall be filled in by any potential AIFM, i.e. any legal person
established in Luxembourg, whose regular business is:
(i)
to provide at least Management Services to; or
(ii)
to market1,
one or more undertakings that qualify as an AIF within the meaning of the Draft Law,
irrespective of (a) whether such undertaking(s) is(are) located in Luxembourg, in another
EU Member State or in third countries and (b) whether such undertaking(s) is(are)
internally2 or externally3 managed.
You should note that notwithstanding the legal form of the undertaking you are
managing or marketing, a “substance over form” approach must be taken in the
assessment of whether such undertaking qualifies as an AIF. A potential AIF may
currently be regulated or unregulated and may be open or closed ended. It is only
when all the elements included in the definition of AIFs as set out in Question 2.1 in
the table below are present that an undertaking should be considered as an AIF
being subject to the full scope of the Draft Law.
You are therefore invited to carefully consider each of the criteria of the AIF definition
as set out in question 3.2 (a), (b), (c), (d) and (e), even if the legal structure of the
undertaking you are managing falls under one of the entities excluded from the scope of
the Draft Law as set out in Question 3.1.
Based on your responses to the below questionnaire, you shall be either (i) out of scope
of the Draft Law; (ii) subject to the Simplified AIFM Regime and hence also subject to
the opt-in possibility4; or (iii) subject to the Full AIFM Regime.
This questionnaire has been prepared in accordance with the Draft Law, the AIFM-CDR,
the AIFM Q&A, the CSSF FAQs and the ESMA Guidelines.
1
« to market » means a direct or indirect offering at the initiative of the AIFM or on behalf of the AIFM of units
or shares of an AIF it manages to or with investors domiciled or with a registered office in the European Union.
2
Where the legal form of the AIF permits an internal management and where the AIF’s governing body chooses
not to appoint an external AIFM, the AIF itself, shall then be authorised as AIFM.
3
An external manager, which is the legal person appointed by the AIF or on behalf of the AIF and which
through this appointment is responsible for managing the AIF (external AIFM).
4
The “opt-in regime” means that an AIFM that is subject to the Simplified AIFM Regime, shall have the
possibility to opt for the Full AIFM Regime in order to benefit from the AIFM passport procedure.
3.
Type of Undertaking
3.1
Excluded Entities
Does the undertaking you manage or market qualify as any of the
following entities:
a)
Institution for Occupational Retirement Plans and other types of
pension funds
b)
Supranational institution5
c)
Yes
No
The Central Bank of Luxembourg and any other national banks
d)
National, regional and local governments and bodies or other
institutions which manage funds supporting social security and
pension systems
e)
Employee participation / savings scheme
f)
Holding Company, i.e.:
(i)
a company having shareholdings in one or more other
companies? AND
(ii)
whose commercial purpose is to carry out a business
strategy through its subsidiaries / associated companies /
participations in order to contribute to their long-term
value; AND
(iii)
a) operating on its own account and whose shares are
admitted to trading on a regulated market in the
European Union; OR
b) not established for the main purpose of generating
returns by means of divestment of its subsidiaries or
associated companies as evidenced in its annual report
or other official documents.
g)
5
Securitization SPV6
e.g. the World Bank, the International Monetary Fund, the European Central Bank, or, the European
Investment Bank.
6
The reference to a Securitization SPV should be interpreted narrowly and should not be used to circumvent the
application of the Draft Law (AIFM Q&A-ID 1157).
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h)
Family office vehicles which invest the private wealth of
investors without raising external capital
i)
Do you manage only AIF(s) where you (OR your parent, OR
your subsidiaries, OR the subsidiaries of your parent) are the
only investors in the AIF, provided that none of the above
investors is itself an AIF?
If you answered “yes” to one or more of the above questions, it is likely that you shall be
out of scope of the Draft Law and you need not further complete the below questions. If
doubts remain, on a case-by-case basis, we suggest consulting your legal advisor to obtain
a definitive conclusion.
If you answered “no” to all of the above questions, please proceed to question 3.2 below.
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3.2
Qualifying AIFs
Do you perform Management Services to or market:
a)
a collective investment undertaking, including any
compartment(s) thereof, WHICH
b)
raises capital from a number of investors; AND
c)
with a view to investing it in accordance with a defined
investment policy; AND
d)
for the benefit of its investors; AND
e)
is not authorised as UCITS under Article 5 of the 2010 Law
Yes
No
In your assessment of each of the criterion set out in section 3.2 (a) to (e) (inclusive),
please read carefully the following explanations:
“Collective Investment Undertaking” shall be considered broadly and shall include,
among others: (a) EU and non-EU regulated entities; and/or (b) EU and non-EU
unregulated entities. Under Luxembourg laws, (i) regulated entities include SIFs, SICARs
and Part II UCIs and (ii) non-regulated entities include any type of commercial company
(which may, on a case-by-case basis, also include Soparfis) governed by the 1915 Law
and which comply with each of the criterion set out in the AIF definition under the Draft
Law.
UCITS are excluded from the scope of the Draft Law.
Its purpose is to generate a return for its investors through the sale of its investments as
opposed to any entity acting for its own account and whose purpose is to manage the
underlying assets with a view to generating value during the life of the undertaking.
Specifically, the following characteristics, if all are exhibited by the undertaking, should
show that the undertaking is a collective investment undertaking within the meaning of
the AIF definition:

the undertaking does not have a general commercial or industrial purpose;

the undertaking pools together capital raised from its investors for the purpose
of investment with a view to generating a pooled return for those investors;
and

the unitholders or the shareholders of the undertaking (as a collective group)
have no day-to-day discretion or control. The fact that one or more, but not
all, of the aforementioned shareholders are granted day-to-day discretion or
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control should not be taken to show that the undertaking is not a collective
investment undertaking. (The AIFM must have responsibility for the
management of the AIF’s assets. The requirement to obtain the investors’
prior approval to make certain “material changes” to the investment policy
shall not be considered as an interference by the investors in the day-to-day
management of the entity.)
Raising capital: means the activity of taking direct or indirect steps to procure the transfer
or commitment of capital in the entity by one or more investors and shall involve some
kind of communication by way of business (which may or may not constitute marketing
within the meaning of the Draft Law) between the entity seeking capital or a person
acting on its behalf and the prospective investor which results in the transfer of investors’
cash or other assets to the AIF for the purpose of investing it in accordance with a defined
investment policy.
Number of investors: the approach adopted by the ESMA Guidelines to this criterion is to
ascertain whether the entity’s incorporation document (i.e. the articles of incorporation)
limits its access to only one investor. If no such limitation is mentioned, the entity will be
considered as being available to a number of investors (thus satisfying this aspect of the
AIF definition) even if, in reality, the entity has only one investor.
Defined investment policy: The AIF shall invest in accordance with the investment policy
of the AIF. To determine whether the entity has a defined investment policy, the
following criteria can be taken into account:

the investment policy is determined and fixed, at the latest, when investors’
commitments become binding upon them;

the investment policy is part of, or incorporated or referred to in the constitutional
documents of the entity;

there is a legally binding obligation for the entity to follow the investment policy,
including all changes to it;

the investment policy may contain a series of investment guidelines such as,
investing in certain categories of assets or conforming to restrictions on asset
allocation; pursuing certain strategies; investing in particular regions; restrictions
on leverage, etc..)
If you answered “yes” in each of the criteria as set out in question 3.2. a) - e) you shall
qualify as an AIFM under the Draft Law.
Please proceed to question 3.3 to determine if you shall comply with the Simplified
AIFM Regime or the Full AIFM Regime.
3.3
Exemptions for Qualifying AIFs
Are you an AIFM managing either
a)
AuM that exceed in total EUR 100 million, including assets
acquired through use of leverage, or
b)
unleveraged AuM that exceed in total EUR 500 million and which
have no redemption rights for 5 years following the date of the
initial investment in each AIF
Yes
No
To answer questions 3.3 (a) and (b), please consider the following explanation:
Assets under Management (“AuM”): means the value of assets that an AIF or an AIFM
manages on behalf of investors.
Leverage: means any method by which the AIF or AIFM uses borrowing of cash or
securities, or leverage embedded in derivative positions or by any other means.
Method to calculate the total value of the AuM7: An AIFM shall:

identify all AIFs for which it is appointed as the external AIFM or the AIF for
which it is the AIFM where the legal form of the AIF permits internal
management, in accordance with Article 4 of the Draft Law;

identify, for each AIF under management, the portfolio of assets and determine in
accordance with the valuation rules laid down in the law of the country where the
AIF is established and, as the case may be, or in the AIF rules or instruments of
incorporation the corresponding value of AuM, including all assets acquired
through use of leverage8;

aggregate the determined values of AuM for all AIFs managed and compare the
resulting total value of AuM to the relevant threshold laid down in questions
3.3(a) and 3.3(b).
To calculate the total value of AuM, each derivative instrument position, including any
derivative embedded in transferable securities shall be converted into its equivalent
position in the underlying assets of that derivative.
Periodicity of the calculation/ On-going monitoring
The AIFM shall determine a threshold calculation date and apply it in a consistent
manner, at least annually, by taking into account the time and frequency of the valuation
of the AuM. In addition, AIMFs shall establish, implement and apply procedures to
7
Article 2 of the AIFM-CDR.
Where an AIF invests in other AIFs managed by the same externally appointed AIFM, such investment may be
excluded and where one compartment within an internally or externally managed AIF invests in another
compartment of that AIF, that investment may also be excluded.
8
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monitor on an on-going basis the total value of AuM.
If you answered “no” to both of the above questions 3.3 (a) and (b) you fall under the
scope of the Simplified AIFM Regime as set out in Annex 2 hereto with the possibility
to “opt-in” to the Full AIFM Regime as set out in Annex 1 hereto.
If you answered “yes” to either question 3.3 (a) or 3.3 (b) you fall under the scope of
the Full AIFM Regime as set out in Annex 1 hereto.
3.4
Supplement: Important Tax Implications for AIFM / AIF
The Draft Law contains strong tax incentives to AIFMs wishing to relocate in Luxembourg as
follows:

75% tax exemption for the personal income of Luxembourg resident managers of
AIFMD-regulated funds for up to 11 years;

exemption from the capital gain constituting part of the private wealth of the
AIFM (i.e. not taxed as a salary);

existing tax-optimization routes (stock options, expatriate regime) could be
combined for the personal income of the Luxembourg resident AIFM;

different tax-optimization opportunities for the treatment of the carried interest.
In addition, the Draft Law introduces a new form of Luxembourg common limited partnership
without legal personality (“SCSp”). Therefore, it becomes possible to carve the AIFMs'
carried interest entitlement into a special limited partnership interest in the SCSp without tax
drawbacks.
If properly structured, the AIFM could, upon disposal by the SCSp of its investments, be
viewed as having directly realised a capital gain on the shares of the foreign company sold by
the SCSp, with the consequence that such gain would be exempt in the hands of a
Luxembourg resident.
***
For further information feel free to contact:
Alex SCHMITT (aschmitt@bonnschmitt.net)
Corinne PHILIPPE (cphilippe@bonnschmitt.net)
Chantal KEEREMAN (ckeereman@bonnschmitt.net)
Marcus PETER (mpeter@bonnschmitt.net)
Follows:
Annexes 1 and 2
Christine MARC (cmarc@bonnschmitt.net)
Matthias PONS (mpons@bonnschmitt.net)
Aisling WHELAN (awhelan@bonnschmitt.net)
Kevin McKeon (kmckeon@bonnschmitt.net)
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ANNEX 1
THE FULL AIFM REGIME
_______________
Information to be filed with the CSSF for Authorisation as an AIFM
The access to the activities of AIFM under the Draft Law is subject to an authorisation
granted by the CSSF, which necessitates the submission of the following information
to the CSSF (the “Full AIFM Regime”):
I.
Concerning the AIFM:
a) information on the persons effectively conducting the business of the
AIFM;
b) information on the identities of the AIFM’s shareholders or members,
whether direct or indirect, natural or legal persons, that have qualifying
holdings9 and on the amounts of those holdings;
c) a programme of activity setting out the organisational structure of the
AIFM, including information on how the AIFM intends to comply with its
obligations under the Draft Law10;
d) information on the remuneration policies and practices under the Draft
Law;
e) information on arrangements made for the delegation and sub-delegation to
third parties of functions in line with the provisions of the Draft Law;
II.
Concerning the AIF(s):
a) information about the investment strategies including the types of
underlying funds if the AIF is a fund of funds, and the AIFM’s policy as
regards the use of leverage, and the risk profiles and other characteristics of
the AIFs it manages or intends to manage, including information about the
Member States or third countries in which such AIFs are established or are
expected to be established;
b) information on where the master AIF11 is established if the AIF is a feeder
AIF12;
9
« qualifying holding » means a direct or indirect holding in an AIFM which represents 10% or more of the
capital or voting rights, in accordance with Articles 9 and 10 of Directive 2004/109/EC, taking into account the
conditions regarding aggregation of the holding laid down in Articles 12(4) and (5) thereof, or which makes it
possible to exercise a significant influence over the management of the AIFM in which that holding subsists.
10
Obligations as set out in Chapter 2, 3 and 4 and as the case may be, Chapter 5, 6, 7 and 8 of the Draft Law.
11
« master AIF » means an AIF in which another AIF invests or has an exposure in accordance footnote 18.
12
“feeder AIF” means an AIF which:
 invest at least 85% of its assets in units or shares or another AIF (the “master AIF”);
 invest at least 85% of its assets in more than one master AIFs whether those master AIFs have identical
investment strategies; or
 has otherwise an exposure of at least 85% of its assets to such a master AIF.
Page 12
c) the rules or instruments of incorporation of each AIF that the AIFM intends
to manage;
d) information on the arrangements made for the appointment of the
depositary in accordance with the Draft Law for each AIF that the AIFM
intends to manage;
e) any additional information to be communicated to the investors of the AIF
prior to their investment in the AIF in accordance with Article 19 of the
Draft Law for each AIF that the AIFM manages or intends to manage and
any substantial modifications.
III.
Conditions to obtain the AIFM agreement:
The CSSF shall grant authorisation to an AIFM subject to the following
conditions:
a) the CSSF considers that the AIFM satisfied to the conditions lay down in
the Draft Law;
b) the AIFM has an initial capital or own funds in conformity with the Draft
Law13
c) the persons who effectively conduct the business of the AIFM are of
sufficient good repute and are sufficiently experienced also in relation to
the investment strategies pursued by the AIFs (identity of those persons
shall be provided to the CSSF and the conduct of the business shall be
decided by at least 2 persons meeting such conditions),
d) the shareholders or members of the AIFM that have qualifying holdings14
are suitable taking into account the need to ensure the sound and prudent
management of the AIFM; and
e) the head office and the registered office of the AIFM are located in
Luxembourg.
IV.
Filing exemptions applicable to Chapter 15 ManCos:
Where a management company of UCITS is authorised pursuant to Chapter 15
of the 2010 Law (“Chapter 15 ManCo”) and applies for authorisation as an
AIFM, the CSSF will not require the Chapter 15 ManCo to provide
information or documents which it has already provided when applying for
authorisation as a Chapter 15 ManCo under the 2010 Law, provided that such
information or documentation remains up to date.
13
Article 8 of the Draft Law provides that an internally managed AIFM shall have an initial capital of at least
EUR 300,000 and an externally managed AIFM shall have an initial capital of at least EUR 125,000. In addition,
for the externally managed AIFM, when the value of the portfolios of AIFs managed by the AIFM exceeds EUR
250 million, the AIFM shall provide an additional amount of own funds which shall be equal to 0.02% of the
amount by which the value of the portfolios of the AIFM exceeds EUR 250 million but the required total on the
initial capital and the additional amount shall not, however, exceed EUR 100 million.
14
See footnote 18.
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ANNEX 2
THE SIMPLIFIED AIFM REGIME
_______________
Information to be filed with the CSSF for Registration as an AIFM
AIFMs who fall below the thresholds as set out in Question 3.3 (a) and (b) are exempted from
complying with the Full AIFM Regime but are required, nonetheless, to file an application
with the CSSF to be registered as an AIFM (the “Simplified AIFM Regime”).
The Simplified AIFM Regime requires such AIFM to:
a) be registered with the CSSF;
b) identify themselves and the AIFs that they manage to the CSSF at the time of
initial registration15;
c) provide information on the investment strategies of the AIFs that they
manage16;
d) provide the CSSF with information (both at the time of initial registration and
regularly thereafter) on the main instruments in which they are trading and on
the principal exposures and most important concentrations of the AIFs that
they manage in order to enable the CSSF to monitor systemic risk effectively;
and
e) inform the CSSF if they no longer meet the conditions allowing it to avail of
the exemption available to sub-threshold AIFMs as referred to in Question 3.3
of the questionnaire.
Exemptions applicable to Chapter 16 ManCo:
In the case of a management company authorised pursuant to Chapter 16 of the 2010 Law
(“Chapter 16 ManCo”) which manages one or more AIFs where the total AuM are below the
thresholds referred in Question 3.3, such Chapter 16 ManCo will not be required to comply
with the Simplified AIFM Regime as its Chapter 16 authorisation will be considered
sufficient, however it will still be required to comply with information and reporting
obligations towards the CSSF as provided for in article 125-1 of the 2010 Law.
***
15
As part of this requirement, Article 5(1) of the AIFM-CDR provides that the AIFM shall communicate to the
CSSF, the total value of AuM as set out in Question 3.1 and 3.2.
16
AIFM shall provide for each AIF they manage, the offering documents of the AIF which include the main
categories of assets and the geographical sectors or markets in which the AIF may invest as well as a description
of the AIFs borrowing or leverage policy (Article 5(2) of the AIFM-CDR).