US Fund Managers, What About The Confidentiality Of LPs In A Luxembourg Special Limited Partnership? – New York Office Snippet – Tax Authorities

US Fund Managers (“USFM”) usually rely on the
Luxembourg special limited partnership (“SLP”) as a fund
vehicle to raise capital in the EU. USFM often face questions on
the confidentiality of information relating to investors
(“LPs”) in an SLP. Below we will delve into Luxembourg
company law, anti-money laundering (“AML”), tax and
contractual aspects of LP confidentiality.

Company law aspects

LP information is recorded in an LP register held by the General
Partner (“GP”). LPs have access to the register, but
access rights are usually restricted to their own information. LP
information is not published with the Luxembourg Business Register
(“LBR”).

AML aspects

The SLP must disclose certain details of its ultimate beneficial
owners (“UBOs”) in an UBO register (“UBOR”)
held by the LBR. The typical example of an UBO is an individual
that ultimately owns more than 25% of the SLP. As the LPs of a
private fund vehicle are seldom individuals, LPs seldom qualify as
UBOs. The individuals ultimately owning the LPs may however qualify
as UBOs, provided they meet the more than 25% threshold. In a
private fund context it is highly unusual that such individuals are
identified. Even if a UBO would be identified in the LP chain, it
is noted that the UBOR is not accessible by the general public, but
by national authorities, professionals that are subject to AML
obligations and certain journalists.

Tax aspects

Information on LPs in an SLP is generally reported to the
Luxembourg tax authorities (“LTA”) pursuant to different
reporting frameworks such as the SLP’s income tax filings, the
FATCA and CRS reporting frameworks, and – in specific cases – the
so-called DAC 6 reporting rules. Such information is generally
subject to exchange with foreign tax authorities. DAC 6 requires
certain parties to disclose information on particular arrangements
with an EU link that have a tax avoidance potential. If the
arrangement encompasses an SLP, the reporting may include LP
details. However, SLP structures launched to raise EU capital do
typically not have such tax avoidance potential.

Contractual aspects

Like in a Delaware or Cayman LP the confidentiality of the side
letter process can be secured if an SLP is used; the exchange of
side letter terms only defines the terms, but not the LPs that
benefit from them. As per fund documentation, GPs are permitted to
exchange LP information with different actors in the fund structure
subject to confidentiality and/or data privacy conditions.

The confidentially of LPs in a private fund organized as an SLP
is well guaranteed. LP information is not published in the LBR and
is usually not published in the UBO register. The LTA collects LP
information and may share it with foreign tax authorities. Any
exchanges of LP information among actors in the fund structure is
subject to confidentiality and/or privacy conditions.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.