The SOPARFI is a typical incorporated corporation subject to the general legal and tax-related regulations set forth by the Luxembourg law dated 15 August 1915 on commercial companies as amended from time to time (the “1915 Law”).

1. <br />Dr. Pierre Alexandre DELAGARDELLE<br />Partner / Ph.D. / Avocat à la Cour<br />Luxembourg, <br />a domicile of choice for “SOPARFIs” <br />The SOPARFI is a typical incorporated corporation subject to the general legal and tax-related regulations set forth by the Luxembourg law dated 15 August 1915 on commercial companies as amended from time to time (the “1915 Law”). <br />The aim of a SOPARFI consists in general in the taking of financial participations in resident or foreign companies. It may as well carry out commercial activities, provided the required authorizations are obtained.<br />SOPARFIs can take advantage of Luxembourg’s network of double taxation treaties. As such, in addition to owning and controlling shares, a SOPARFI can perform activities related to the management of its holdings, as well as undertake any commercial activity that is directly or indirectly connected to the management of its holdings. Thus, SOPARFIs can, under certain circumstances, benefit from tax reduction of share-related income and undertake a commercial activity that is subject to income tax and VAT.<br />Entity type<br />SOPARFIs can take the legal form of one of the following entities:<br />a public company limited by shares (société anonyme, S.A.);<br />a private limited liability company (société à responsabilité limitée, S.à r.l.);<br />a corporate partnership limited by shares (société en commandite par actions, S.C.A.);<br />a co-operative company;<br />a co-operative company organised as a public company limited by shares;<br />a taxable resident company incorporated under the laws of a state that is not a member of the EU;<br />a taxable resident entity having a legal form mentioned in the annexe to article 2 of the EU parent-subsidiary directive; <br />certain permanent establishments of companies established abroad.<br />In practice, SOPARFIs are only set up under the legal form of a public company limited by shares, a private limited liability company or a corporate partnership limited by shares.<br />Procedure to incorporate<br />The articles of incorporation of a SOPARFI must be prepared in the form of a deed. This deed should include:<br />The name of the person(s) wishing to form the corporate entity;<br />The address of the registered office;<br />The amount and currency of the authorised and issued share capital;<br />Type of shares and classes;<br />Amount of capital paid up;<br />Voting rights and shares;<br />Names, addresses and nationalities for the proposed directors and auditors.<br />A certificate of name acceptability issued by the Luxembourg trade and companies register is required, together with a certificate of blockage produced by the proposed company's Luxembourg bankers confirming that the paid capital has been deposited with them. These documents and information must be presented before a notary public by the proposed company's appointed representative. After incorporation, the notary public lodges the articles of incorporation with the Luxembourg trade and companies register. The articles of incorporation are then published in the Official Gazette.<br />Eligible investors<br />There are no restrictions in this respect. The SOPARFI regime is available to sophisticated and non-sophisticated investors.<br />Eligible assets / Strategies<br />SOPARFIs are not restricted to any specific types of investments.<br />Risk diversification requirements<br />SOPARFIs are not subject to risk spreading rules.<br />Supervision <br />SOPARFIS are not regulated by the CSSF and have no obligation to entrust the custody of their assets with a depositary.<br />Corporate governance<br />The management structure depends on the legal form of the SOPARFI. Some corporate forms such as the public company limited by shares and the corporate partnership limited by shares may opt for a one-tier or a two-tier management structure combined with internal or external supervision management committees, advisory committees and managing directors can be appointed.<br />Segregated sub-funds<br />Not applicable.<br />Calculation of NAV<br /> Not applicable.<br />Substance in Luxembourg <br />The head office of a SOPARFI must be in Luxembourg.<br />There are no nationality / residency requirements for directors / managers.<br />Required service providers in Luxembourg<br />Depending on size of company and/or number of employees, independent auditors may be required.<br />Capital (fixed / variable)<br />Fixed capital.<br />Minimum capital / net assets requirements:<br />Upon incorporation:<br />S.A./S.C.A.: EUR 31,000;<br /> S.à r.l.: EUR 12,500;<br />SCoSA: no requirement.<br />Structuring of capital calls and issue of shares <br />Capital calls may be organised either by way of <br />capital commitments; or <br />trough the issue of partly paid shares (S.à r.l. and SCoSA cannot issue partly paid shares).<br />Existing shareholders of an S.A., S.C.A. or S.à r.l. have a pre-emptive right of subscription in case of increase of capital by way of cash contribution, except if waived by shareholders’ meeting.<br />Issues of shares require an amendment of the articles of incorporation before a public notary.<br />Distribution of dividends<br />For FCPs and SICAVs<br />There are no statutory restrictions on payments of (interim) dividends (except for compliance with minimum net assets / capital requirement).<br />For SICAFs<br />Distributions may not reduce the SICAF’s assets, as reported in the last annual reports, to an amount less than one-and-a-half times the total amount of the SICAF’s liabilities to its creditors.<br />Interim dividends are subject to statutory conditions.<br />Financial reports / consolidation<br />An audited annual report may be required if the SOPARFI exceeds a certain size in terms of turnover, total assets and number of employees.<br />Tax regime<br />SOPARFIs are fully taxable companies, subject to an aggregate corporation tax burden.<br />However, SOPARFIs benefit from exemptions to corporation tax for dividends received from share-holdings, capital gains made on the sale of share-holdings and gains made on liquidation of companies in which shares are held.<br />Exemption is granted on the following conditions:<br />Dividend and liquidation gains exemption on share-holdings of at least 10% or the acquisition cost of at least EUR 1,2 million provided such qualifying share-holding is held for at least 12 months;<br />Capital gains exemption of shareholdings of at least 10% or an acquisition cost of at least EUR 6 Mio provided such qualifying shareholding is held for at least 12 months.<br />A 15% withholding tax will be applied on the gross amounts of dividends paid by the SOPARFI (subject to tax treaties and EU parent-subsidiary directive).<br />No withholding tax is levied on liquidation payments.<br />INFORMATION SOURCES<br />www.cssf.lu;<br />The Commission de Surveillance du Secteur Financier (Luxembourg Financial Supervisory Commission).<br />www.alfi.lu <br />The Association of Luxembourg Fund Industry.<br />