The Luxembourg government has submitted Bill of Law n° 8814 to parliament. The bill would amend the Luxembourg AIFM Law to allow certain Luxembourg alternative investment funds structured as a common limited partnership (SCS) or special limited partnership (SCSp) to create multiple compartments, without having to opt into one of Luxembourg's existing fund product regimes, such as a RAIF, SIF or SICAR.
Why this matters
Luxembourg SCS and SCSp vehicles are widely used for private equity, private debt, real estate, infrastructure and other alternative strategies. They are valued for their contractual flexibility, familiarity to international sponsors and compatibility with Anglo-Saxon fund documentation.
Until now, an SCS or SCSp AIF outside a product law could not benefit from a statutory umbrella or compartment structure. That has limited sponsors seeking multi-series, parallel fund, co-investment or platform structures in Luxembourg without adopting a regulated or semi-regulated product regime. The proposed reform is intended to close that gap.
Who could use the new regime?
The regime would be available only to Luxembourg AIFs established as an SCS or SCSp and managed by an authorised AIFM, established in Luxembourg or in another EU Member State, provided the relevant AIFMD management passport requirements are met. Structures managed only by a registered or sub-threshold manager, or by a non-EU AIFM, would not be covered as currently drafted.
Formalities
Core formalities would be limited to an explicit reference in the partnership agreement to the creation of compartments and the rules applicable to them. Each compartment's investment policy would also need to be disclosed to investors in accordance with article 21 of the AIFM Law. The bill does not prescribe a single form of offering document, preserving flexibility as to how AIFMD disclosures are made.
Key features
- Statutory ring-fencing — as a default, rights of investors and creditors relating to a compartment would be limited to that compartment's assets, unless the limited partnership agreement provides otherwise.
- Separate lifecycle — each compartment could be liquidated separately without automatically liquidating the AIF as a whole; only liquidation of the last compartment would liquidate the vehicle.
- Cross-investments — subject to the LPA, one compartment could invest in another of the same AIF; circular investments would be prohibited and voting rights on interests held by the investing compartment suspended.
- Reporting flexibility — a separate annual report could be prepared per compartment, provided it also includes aggregated information for all compartments.
Practical impact
An SCS or SCSp AIF using the new regime can remain outside the RAIF, SIF, SICAR or Part II UCI frameworks unless it separately elects into one of those regimes. Existing compartment rules for product-law funds would continue unchanged.
If adopted broadly as drafted, the bill should give international sponsors another Luxembourg structuring option: a compartmentalised SCS or SCSp AIF with partnership flexibility and without the additional features of a product-law fund — particularly relevant for parallel funds, co-investments, feeder/aggregation structures and multi-strategy platforms. Careful drafting remains important for ring-fencing, financing, guarantees, valuation, conflicts and reporting.
How NautaDutilh can help
NautaDutilh's Luxembourg Investment Funds team is monitoring Bill of Law n° 8814 and can help sponsors, managers and advisers assess whether the proposed regime is relevant to upcoming or ongoing Luxembourg fund structuring projects, including comparisons with RAIFs, SIFs, SICARs and non-product-law partnerships.
