Family-operated (Private) Asset Management Company

A rather  broad definition of  private  equity  might  sounds like  this:  “a  professionally managed pool of money raised for the sole purpose of making actively-managed direct equity investments in private companies and with a well-defined exit strategy (sale or IPO)” (Megginson 2004). 

One may wonder why our information includes a discussion on private equity. Private equity funds are increasingly important clients of investment banks. Fruhan (2006) reports that private equity firm’s account for about 25% of total revenues for major investment banks. In 2005 about 20% of total US M&A’s volume was related to private equity. In Germany the percentage was even higher (about 35%).

In the 2001–2006 period out of the 701 US IPOs about 70% were private equity backed. Investment banks are increasingly important players of the private equity industry. Virtually all major investment banks manage some private equity funds. For example, Morrison and Wilhelm (2007) reports that Goldman Sachs has more capital invested in private equity than any other private equity player. These two reasons also explain the increasing mobility of human resources from investment banks to the private equity industry.

We like to analyze the main technical aspects of the private equity business, exploring ides of classification of the private equity activity, the agreement between the investors, who put the money, and the professionals who manage that money. Our discussions relate to how to measure the performance of private equity funds. The main features of the term sheet that regulate private equity investments. We employ standard valuation methods used by private equity professionals to decide about their investments.

Above all it gets increasingly complex in this changing economic climate to find associated who understand "Private Asset Management". You no doubt understand the importance of our structure is for this precise reason. 

Societe de Gestion de Patrimoine Familial

The SPF has existed in Luxembourg since 2007. It is the continuation model of the “Holding 1929“ which was prohibited by the European Commission – due to non-permissible state aid – and will expire.

The SPF is not a new corporate structure, but instead a new tax statute already approved by the EU.

Legal structure of the SPF (Private) Asset Management Company

  • The SPF is founded as a corporate entity – in practise, the forms “corporation” and "limited-liability company” will prevail.
  • The company name must bear the affix "SPF".
  • Nominal or bearer shares are permitted.
  • The company is not required to be headquartered in Luxembourg. In the statutes, there must be a remark included that the company is subject to ”SPF legislation".

Partners of the SPF (Private) Asset Management Company

  • Physical (actual) persons / trustees (resident or non-resident)
  • Familial groups
  • Investor groups
  • Trusts
  • Private foundations

Corporations are not permissible as partners.

Permissible activities of the SPF (Private) Asset Management Company

  • This activity is limited to the purchase, holding, administration and collection of investments in financial instruments (in a broader context), including derivatives
    i.e.: stocks, holdings, funds, futures, bonds, options, precious metals, bank accounts.
  • There are no investment limits, restrictions or minimum-stake quotas.
  • The company can grant sureties, collateral and loans to affiliated companies, as long as this occurs free of charge.
  • Advance payments on dividends are permissible.
  • The company can – to an unlimited extent – take out loans from shareholders or foreign third parties and issue securities.

Non-permissible activities of the SPF (Private) Asset Management Company

  • Any kind of commercial / trading activity
  • Direct ownership of real estate
  • Holding of patents or rights
  • Administrative activity or financial services on behalf of third parties/affiliated companies
  • Receipt of more than 5% of total dividend revenues from companies subject to a  taxation of < 11%.
  • Listing of the SPF shares (or their public offering) on the stock exchange.

However, the company can hold a stake in other structures which perform such activities.  

Taxation of the SPF (Private) Asset Management Company

  • Capital levy (1%), non-recurring, upon establishment, on the deposited capital (N / A in the year 2008)
  • Subscription tax of 0.25% annually on the deposited capital (+ issuing bonuses)
  • No DBA authorisation
  • No VAT registration
  • Complete exemption from corporate income tax, excise tax and assets tax
  • No withholding tax on interest payments (restrictions apply to individuals)
  • No withholding tax on dividend payments (non-residents)
  • No taxation of capital profit arising from the sale of SPF shares (non-residents)
  • No taxation of liquidation revenues from the SPF (non-residents)

Oversight / monitoring of the SPF (Private) Asset Management Company

  • The SPF is not subject to any type of financial-market oversight. The so-called “Administration de l’Enregistrement et des Domaines" (Administration for Domain Registration) – not the tax administration in Luxembourg - has jurisdiction over such companies.
  • The domicile agent must submit a report once annually to verify that the company’s activity remains within the legal framework.
  • The SPF is protected by the Luxembourgian bank-confidentiality regulations.