The SICAR (Société d’Investissement en Capital à Risque) is a regulated, fiscally efficient structure designed for private equity and venture capital investments in Luxembourg or abroad.
Summary
The risk capital investment company, or société d'investissement en capital à risque (SICAR), was created by the Law of 15 June 2004 (as amended in 2013) to provide a bespoke vehicle for private equity and venture capital investment.
A SICAR invests its assets in securities representing risk capital in order to provide its investors with a capital gain in return for the risk incurred. Investment in risk capital is seen as direct or indirect contribution of capital to a company, which will enable its launch, development or listing on a stock exchange.
The investments made by a SICAR are required to meet two criteria: (1) they must be opportunistic or high risk (which might be due to poor liquidity, since the company is not listed) and (2) there must be an underlying intention to develop the company.
The second criteria can be satisfied in many different ways, such as restructuring, modernisation, product development or by measures aimed at improving the allocation of resources.
The law does not impose any investment diversification rules. Hence, a SICAR may focus its investments on one company operating in a particularly narrow sector such as biotechnology or geological prospecting.
A SICAR may be incorporated in five different forms: a partnership limited by shares (SCA - Société en Commandite par Actions), a private limited company (LTD - Société à Responsabilité Limitée), a public limited company (PLC - Société Anonyme), a limited partnership (SLP/SCS - Société en Commandite Simple) or a cooperative company organised as a public limited company (Coopsa - Société Cooperative organisée sous forme de Société Anonyme).
A SICAR may adopt an open ended or closed ended structure. The minimum capital depends on the legal form selected.
Each of the legal forms creates a legal entity that is distinct from its investors. The name of the company must be followed by the acronym SICAR.
A SICAR is entitled to create multiple investment compartments, thus permitting a private equity house to group different investment strategies, or meet the demands of different investors, within one legal structure.
Typically, a SICAR has a limited lifespan and must identify the mechanism by which its shareholders can redeem their holdings in the company.
Investment in a SICAR is limited to qualified investors.
A SICAR is authorised and regulated by the financial sector regulatory authority, the Commission de Surveillance du Secteur Financier (CSSF).
SICARs may invest directly or indirectly in securities which mainly consist of; high risk investments made for the launch of a company, a venture, a project - the development or listing on a stock exchange. The SICAR may also hold financial derivative instruments on an exceptional basis. Temporary investment in other assets is allowed during the preparation of the investments in risk capital. The SICAR may participate in development of risk projects, in mezzanine loans and private equity real estate. There are no risk diversification requirements. This means that the SICAR may invest 100% of its assets in one single investment.
There are no investment diversification rules, nor lending or leverage restrictions.
Investors
The investors in a SICAR must be "well-informed" investors:
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institutional investors;
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professional investors;
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and other investors who confirm in writing that they adhere to the status of "well-informed" investors and who either (i) invest a minimum of EUR 125,000 or (ii) have been assessed by a credit institution, an investment firm or a management company which certifies the investor's ability to understand the risks associated with investing in the SICAR.
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