Explanations concerning the authorisation procedure of a “chapter 16 management company”

Articles 125 and 126 of the law of 17 December 2010 (“2010 law”), relating to undertakings for collective investments, establish the legal requirements which must be respected in order to obtain authorisation to act as a management company under chapter 16 of the 2010 law.

The procedure to be followed in order to obtain authorisation to act as a management company under chapter 16 of the 2010 law is detailed in point 2 below. 

1. Legal requirements 

Legal form

A management company may take the form of a public limited company (société anonyme), a private limited company (société à responsabilité limité), a cooperative company or a cooperative company set up as a public limited company or a corporate limited partnership. The capital of the company must take the form of registered shares.

Corporate purpose

The activities of the management company must be limited to the management of UCI / SIF, the administration of its own assets being only an ancillary activity.

The management company must manage at least one UCI / SIF subject to Luxembourg law. 

Capital requirements

Authorisation of a management company is subject to having a fully paid-up initial capital of at least 125,000 euros.

The capital must be fully paid up in cash. In principle the CSSF does not permit any form of contribution other than cash neither at the date of constitution of the management company, nor for any subsequent capital increases.

Depending on its programme of activities, the management company must have sufficient financial resources at its disposal to perform effectively its functions and meet its responsibilities.

Infrastructure

The management company must have an adequate human and technical infrastructure in order to fulfil its functions.

The application file must include a description of the organisation structure of the management company.

In this context it is reminded that both the head office and the registered office of the management company must be situated in Luxembourg. The application file therefore must include sufficient information to allow the CSSF to conclude that the management company complies with this requirement. 

Shareholders

Both natural and legal persons are eligible to become shareholders or members of a management company. Authorisation is subject to communication to the CSSF of the identity of reference shareholders or members of the management company.

A reference shareholder, within the meaning of the CSSF, refers to any direct or indirect holding in a management company which, although not representing necessarily a controlling interest in the management company, is nonetheless of sufficient importance that de facto the major decisions cannot be taken without its approval.

Authorisation is subject to the condition that the ownership structure, whether direct or indirect, of the management company is transparent.

Professional standing and professional experience

In order to obtain authorisation, the directors (“dirigeants”) of the management company must be of sufficiently good repute and have the professional experience required for the performance of their functions.

Dirigeant refers to those persons who, by virtue of the law or the constituting documents, represent the management company and who effectively determine the conduct of business of the management company.

Professional reputation should be assessed not only on the basis of police records but also on all factors which may establish that the concerned persons are of good repute and provide all the guarantees of an irreproachable business activity.

In order to assess if the above mentioned persons are of the required professional repute, the persons concerned must submit to the CSSF a declaration of honour which may be downloaded from the CSSF internet site, a copy of their identity card / passport, a signed and dated curriculum vitae as well as a recent extract of their police records.

The dirigeants must be authorised to effectively determine the direction of the company and must have already acquired an adequate level of professional experience through the performance of similar activities at a senior level in terms of responsibility and independence.

The principle of independence of the management company from the depositary bank of the UCIs under management implies that the dirigeants cannot be employees of the depositary bank.

External audit 

Authorisation is subject to the condition that the management company entrusts the audit of its annual accounting documents to one or more réviseurs d’entreprises agrée(s) (approved statutory auditor(s)) who can provide proof of an adequate professional experience.

2. Procedure to be followed

The application for authorisation must be delivered by the interested party (respectively a mandate of the party or of the new management company) to the CSSF. The latter approves the application after examination of the application file and control of the legal requirements.

The duration of the authorisation is in principle unlimited and the management company (in the case where the latter continuously respects all legal obligations) may commence its activity once approval has been given.

The applicant is requested to submit an application file to the CSSF which contains at least the following information:

The identity of the reference shareholders or members of the management company indicating the number of shares held and where applicable an organisation chart of the group.

Information relating to the “dirigeants” of the management company:

• copy of their identity card / passport
• signed and dated curriculum vitae
• recent extract of their police records
• declaration of honour (cf. model declaration of honour form available on the CSSF internet site under the heading “Forms”)

Details of the structure and organisation of the management company:   

• Presentation of the management company (denomination, legal form, initial capital);
• Reasons for establishing business in Luxembourg;
• Programme of activities (details of the UCI/SIF universe managed and functions performed, distinguishing between UCI/SIF under Luxembourg law and UCI under foreign law; 3 year commercial and development plans);
• Draft articles of association of the management company;
• Description of the organisation structure of the management company (human and technical resources);
• Description of the activities delegated to professionals and of the activities performed internally by the management company;
• Draft contracts concluded with the delegatees;
• Description of the controls performed by the management company on the delegatees;
• Information on the distribution network put in place by the management company: countries of distribution, intermediaries in charge of the distribution, target client base;
• Where the management company intends to perform the central administration for the UCI / SIF, the information available under the section “PSF- Authorisation procedure – List of further information required for approval as central administration of a UCI” is to be provided;
• Description of the management of potential conflicts of interests;
• Name of the réviseur d’entreprises agrée (approved statutory auditor);
• Where applicable, the name of the company responsible for maintaining the management company’s accounting records;
• A description of the remuneration policy put in place by the management company in accordance with the Circular CSSF 10/437;

The applicant seeking authorisation may add all information which he deems useful and necessary for the presentation and clarity of understanding of his application file.

Furthermore, the CSSF may request additional information which is necessary in order to complete the assessment of the application file.