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Luxembourg Introduces New Limited Partnership


Luxembourg Introduces New Limited PartnershipIn July 2013, Luxembourg enacted new corporate legislation tailored to private equity and real estate fund clients. The new legislation was included in the same law as that which transposed the EU’s Alternative Investment Fund Managers Directive (AIFMD) and has significantly enhanced the limited partnership regime in Luxembourg for regulated fund and non-regulated investors.

New Limited Partnership Framework

The new limited partnership framework adopted the best features of other models that have proved successful in other jurisdictions.

The two main changes implemented were:

  1. Modernisation of the existing “Common Limited Partnership” (“CLP”); and

  2. Introduction of a new limited partnership structure referred to as the “Special Limited Partnership” (“SLP”).


Luxembourg is a high income OECD country and was listed as the richest country in world in 2012 by the International Monetary fund (IMF).

Luxembourg’s economy benefits from moderate growth, low inflation rates, and a high level of innovation. The banking and finance sector make Luxembourg a popular place for investment and make it a particularly attractive jurisdiction for fund managers.

Choice of Two Partnership Structures

The key difference between the limited partnerships relates to their legal personality. The CLP has separate legal personality, similar to the Scottish LP, while the new SLP has no legal personality, similar to the English LP and standard Channel Islands LP.

A choice now exists between the Luxembourg CLP with legal personality and the new SLP without legal personality.

7 Key Features Of The SLP & CLP

1. Formation

Both the SLP & CLP require at least one general partner and one limited partner. There is no minimum capital requirement from the partners.

2. Limited Liability for Limited Partners

The liability of limited partners is limited to their contribution to the LP, provided that they follow the correct procedures set out in respect of the management function.

3. Limited Partners May Act as Managers

The traditional restriction on limited partners participating in the management of the partnership is mitigated in the Luxembourg legislation, as limited partners are permitted to manage certain aspects that are internal to the partnership.

Limited partners may also be appointed as managers of the SLP & CLP. In this case, the act of management by the limited partner will not risk liability, provided that they have disclosed that they acted in their capacity as manager of the partnership.

4. Confidentiality

The details of the limited partner and their contribution, if any, are not disclosed to the public. Their anonymity is protected.

5. Flexibility – Contractual Freedom

The new legal framework is deliberately non-restrictive. For example, the rules for admission and exclusion of partners, allocation of profits, transfer of partnership interests etc. are determined by the partnership agreement.

6. Taxation – Transparency & Neutrality

Full direct tax transparency and neutrality apply to the CLP and SLP, under the following conditions:

  • The general partner(s) is a Luxembourg limited company and holds less than 5% of the partnership interest; and

  • The activity of the partnership is limited to private wealth management.

When the above conditions are met, the income of the partnership will not be treated as business income of the partnership. Non-resident partners will not be subject to Luxembourg taxation on the income received from the partnership.

7. Accounting & Reporting

An unregulated SLP (not subject to regulations of a fund) has considerably fewer obligations than a CLP with regards to the preparation, filing, registration, format and publication of the annual accounts.

Unregulated SLPs are not required to file accounts with the Registry or other regulatory bodies. The requirement to prepare accounts is set out in the partnership agreement and the accounts are for internal partnership records only.

Luxembourg Now A Location Of Choice For Wealth Management

The revamp of the limited partnership regime in Luxembourg is likely to attract interest from investors and fund managers.

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