The Luxembourg law dated June 15 2004 introduced a new form of investment vehicle called a Société d'Investissement en Capital à Risque (SICAR), which is to be used for private equity or venture capital structures.
Before this legislation, promoters wishing to set up an undertaking investing in venture capital or private equity under Luxembourg law could either establish a regulated or a non-regulated vehicle. So promoters wishing to establish non-regulated vehicles adopted unregulated traditional forms of commercial companies subject to the provisions of the law of August 10 1915 on commercial companies, as amended. If promoters preferred regulated types of vehicles, undertakings for collective investment (UCIs) could be created either as commercial companies or common funds under Part II of the law of December 20 2002 on UCIs, which has replaced the law of March 30 1988 on UCIs.
The new vehicle introduced by the law is subject to a much more liberal regime than that governing UCIs under part II of the Law of December 20 2002, but is nevertheless supervised by the Luxembourg supervisory authority.
The corporate purpose of a SICAR must be the investment in risk capital by direct or indirect investment in entities to be launched, developed or listed with the aim of offsetting the high levels of risks taken by investors by expecting higher than average return. The term risk capital is to be understood in its widest sense and as including venture capital as well as any kind of private equity investment, including buy-off, bridge financing, mezzanine financing, convertible debt and other financing instruments or exit strategies. Investments in SICARs are restricted to institutional, professional or sophisticated investors.