All type of assets can be securitised among which receivables, loans, real estate, intellectual property,… by issuing note, bonds, certificates,… or even tokens on the DLT.
Creatrust services are defined by our in-house knowledge of all the major regulatory and development issues, a commitment to sourcing the most appropriate solutions for establishing and managing securitisation vehicles.
Definition
Securitisation is the conversion of an asset, a risk, a future cash flow, into marketable securities, typically for the purpose of raising fund, creating liquidity, or transferring a risk by selling the securities to external investors.
Securitisation Vehicle
Under Luxembourg law, a securitisation vehicle can be constituted either as a company or a fund.
A securitisation company is usually a limited company by shares. It can create one or several compartments corresponding to a distinct part of its assets.
A securitisation fund is a contractual relation similar to a mutual fund managed by a Luxembourg based management company. The fund can also be formed for one or several fiduciary segregated portfolios.
Only the securitisation undertakings which continually issue securities on a continuous basis to retail investors must be approved and supervised by the regulator. Therefore if the securitisation vehicle does not issue to the public, it may remain unregulated and not subject to supervision.
Securitisation vehicle can issue any type of securities (shares, note, bonds or any other type of securities)
The securitisation provides for bankruptcy remoteness, segregation of assets, limited recourse, non-petition clause and many more features to protect the interests of the investors.
As of 9th February 2022, the Securitisation Law of 2004 has been amended and allows active management of Securitisation vehicles as long as the securitised assets are debt instruments linked to private placement and consisting of repackaged debt.
This modification also provides Luxembourg Securitisation vehicles the ability to refinance existing debt by issuing loans instead of securities which was mandatory prior to the Law amendment.
A securitisation company previously had to take the form of public limited company, a joint stock company, a private limited company or a cooperative with limited liability, now following the recent amendments to the Law, new corporate forms have become available:
- Special limited partnership (société en commandite spéciale) (“SCSp”)
- Common limited partnership (société en commandite simple) (“SCS”)
- General corporate partnership (société en nom collectif) (“SNC”)
- Simplified joint stock company (société par actions simplifiée) (“SAS”)
The Securitisation Company can create one or several compartments corresponding to a distinct part of its holdings.
A securitisation fund has no legal personality and must be managed by a management company, which itself has to be a commercial company. It is formed from one or several joint ownership organisations or one or several fiduciary estates. In the former case, the fund is under a co-ownership regime or the latter is governed by trust and fiduciary contract legislation.
Furthermore, since the new Law has been passed, securitisation funds will now have to register with the Luxembourg register of trade and companies and therefore will be able to benefit from an RCS registration number.
The main goal for doing so is to facilitate certain administrative processes which require an RCS registration number but it will also provide an additional method for investors to identify the securitisation funds.
Securitisation funds will likewise have to publish their management regulations with the RCS.
Tax framework
Luxembourg tax lax attempts to achieve a regime of tax neutrality, as a securitisation vehicle should serve as a pass-through entity from the originator /debtor of the generated income straight to the investors.
The Luxembourg Securitisation Company tax regime:
- It is subject to normal corporation tax
- Any profits generated is therefore subject to tax
- However, all costs and commitments due to the shareholders / noteholders are considered as tax deductible expenses. This means that only the remaining profits of the Luxembourg securitisation company will be considered as taxable profit in Luxembourg (subject to limitation by ATAD).
Dividends, interest (whether variable or fixed), coupons, options, or any other financial advantages that a third party may receive from the securitisation company will be tax exempt, and will not suffer any withholding taxes in Luxembourg (subject to the EUSD in some cases).
A Luxembourg Securitisation Fund tax regime
- Is considered tax transparent (Fonds Commun de Placement) and is therefore not subject to any taxation in Luxembourg. (The fund is not taxable itself and there is no withholding tax on payment to share or bond holders)
- The Luxembourg law ensures the tax neutrality of securitisation funds which are treated as investment funds and the investors are only taxed according to the rules in force in their country of residence
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