ALFI is working on a draft bill to improve Luxembourg attractiveness for hedge funds and to work out...
ALFI is working on a draft bill to improve Luxembourg attractiveness for hedge funds and to work out new legislation for venture capital funds. However, exact details of what will be included in the bill is yet to be finalised, writes Joanne Frearson.
Although legislation already exists for venture capital to be set up under the Undertaking for Collective Investment March 1998 law, it is extremely restrictive.
The legislation does not allow for venture capital to be set up under a limited partnership. This limits the type of hedge fund or venture capital can be sold from Luxembourg. The new bill will propose rules outlining the sale of limited partnerships in Luxembourg, with a view to increasing the number of these types of investment in the jurisdiction.
Additionally, the bill will outline tax issues not previously addressed. Investors of hedge funds, private equity or venture capital will be taxed directly on the products and there will be complete transparency of the tax on these type of products.
Other areas the bill will cover is the establishment of rules determining who will be qualified to become an investor in these types of products. These funds will be only made available to institutional or professional investors. Also, the minimum investment of these funds must be a certain level so as to only attract HNWIs.
The bill also proposes to establish rules to outline how these funds will be authorised from Luxembourg.
The bill will be ready before the end of the year when it will be put forward to parliament. Robert Hoffmann, general manager of Alfi, is not sure when the bill will be passed but expects it will around summer time next year.
He says: 'The political parties are in favour of the initiative.
'It is ideal for companies to set up private equity and venture capital funds in Luxembourg as we have already have a strong financial and fund administration structure in place.'
Once legislation is in place it is hoped it will attract new investment in this area to the region.
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