Approval for UK Firms to be granted by professional investors

On 11 October 2019, the Luxembourg supervisory authority, the Commission de Surveillance du Secteur Financier (the CSSF) published the press release 19/48 with respect to mandatory notifications required by the CSSF based on the assumption that the UK leaves the EU without concluding a withdrawal agreement pursuant to Article 50(2) of the Treaty on the European Union (Hard Brexit).

This follows the CSSF press releases 19/41 and 19/43. For more information please see our previous articles regarding the Opening of the E-desk Portal and the Mandatory Notification to the CSSF for UK Firms and UCIs and their Managers.

1. UK Firms which HAVE NOT notified the CSSF

As of 1 November 2019, in the event of a Hard Brexit, UK firms that are currently authorised AIFMs (UK Firms) will be considered as “third-country firms” and will lose the benefit of their existing passporting rights under the Directive 2011/61/EU (the AIFM Directive).

The transitional regime will not be applicable to these UK firms.

a. Approval by the investors of the UK firms as “third-country firms”

UK Firms that manage Luxembourg alternative investment funds (AIFs) which direct and indirect investors are professional investors¹ and/or well-informed investors² (the Professional Investors) may continue managing those AIFs provided that the Professional Investors have approved these UK firms as “third-country firms” in accordance with the conditions required to amend the constitutive documents of the relevant AIF.

In this case, and before 31 October 2019, the following documents will have to be sent to the CSSF:

• a confirmation from the UK Firms that all direct and indirect investors of the AIFs qualify as Professional Investors; and
• evidence of the approval of the Professional Investors or, in case of a delay, a copy of the convening notice and explanation justifying any delay.

b. Breach of applicable requirements as of the date of the Hard Brexit

UK Firms that have not submitted a notification or sent the required documents will be in breach of the Luxembourg legislation and a list of those UK Firms may be published.

2. UK Firms which HAVE notified the CSSF

a. Recall notification and continuation for the UK Firms as “third-country firms”

Despite their notifications to benefit of the transitional regime, UK Firms may continue as “third-country firms” of AIFs which direct and indirect investors are Professional Investors, provided that the Professional Investors have approved these UK firms as “third-country firms” in accordance with the conditions required to amend the constitutive documents of the relevant AIF.

In this case, and before 31 October 2019, the following documents will have to be provided to the CSSF:

• a confirmation from the UK Firms stating that the notification submitted through E-Desk should be rescinded;
• a confirmation from the UK Firms that all direct and indirect investors of the AIFs qualify as Professional Investors; and
• evidence of the approval of the Professional Investors or, in case of a delay, a copy of the convening notice and explanation justifying any delay.

b. Transitional regime

Otherwise, entities that have already notified the CSSF in anticipation of a Hard Brexit will continue to benefit from the transitional period.

For more information please see our previous articles regarding the Mandatory Notification to the CSSF for UK Firms and UCIs and their Managers.

¹As defined under article 3 of the AIFM Directive.
²As defined under article 2 of the Luxembourg law of 15 June 2004 relating to the investment company in risk capital, under article 2 of the Luxembourg law of 13 February 2007 regarding specialised investment funds or under article 2 regarding reserved alternative investment funds.