| Newsletter : April 2020 Cayman on Blacklist - limitations on the deduction of payments made to blacklisted countries
Cayman funds are moving to Luxembourg following the recent change to the European Union blacklist which saw the addition of Cayman Islands to the list of countries to which payments of interest and royalties paid or due to associated enterprises will be refused. This decision further strengthens the need for fund manager and companies to redomicile Cayman structures to other onshore jurisdictions like Luxembourg. This can be made through a simple process which can be enacted within a matter of days. For instance, the Cayman company or investment fund will transfer their seat of incorporation in Luxembourg in order to become an entity duly incorporated under Luxembourg law. This would then avoid any limitation of payment of these interest and royalties. The redomiciliation may give the fund or the SPV new advantages like the benefits of the double tax treaties; at least being established in a fully tax compliant onshore environment. Discover how to use our redomiciliation services to Luxembourg please contact us
Swing Pricing for Luxembourg Funds due to Covid-19 Manager, don’t let redemption paid before reading this. As of 20th March, the CSSF has updated its information regarding swing pricing and dilution levy mechanisms by Luxembourg funds further to the questions received from industry participants in the context of the financial market developments around COVID-19. The updated implies the that the Luxembourg Funds can increase the swing factor/dilution levy up to the maximum level laid down in their issuance documentation without prior notification to the CSSF. A swing factor aims to compensate the fund for the amount of charges or costs that it incurs due to (massive) redemption requests received from investors. For example the fund manager can apply a anti dilution fees equivalent to the costs of selling the underlying assets to create the liquidity in the fund to proceed with the reimbursement of investors. This compensate the loss incurred by the fund (and the remaining investors) due to the disposal of such assets. The CSSF clarifies that, when the prospectus formally provides for such possibility, the manager may increase the applied swing pricing factor/dilution levy beyond the maximum percentage laid down in the issuance documentaiton on a temporary basis and in accordance with the provisions of the prospectus, provided that such a decision: -
is duly justified; -
is the result of a robust internal governance process and is based on a robust methodology (including market/transaction data based analysis) that provides for an accurate NAV which is representative of prevailing market conditions; -
takes into account the best interest of the investors; and -
is communicated to the relevant fund' s current and new investors through the usual communication channels as laid down in its documentaiton.
The CSSF further clarifies that, given the current exceptional market circumstances involved by the COVID-19, the above position is also applicable, on a temporary basis, in the case where such documentation does not formally provide for such possibility to apply the swing pricing factor/dilution levy beyond the maximum level laid down in the documentation. In this case, in addition to the above mentioned conditions, the fund’s documentaiton will have to be updated at the earliest convenience in order to formally provide for such a possibility to go beyond the maximum level under certain predefined conditions. The CSSF further clarifies that, given the current exceptional market circumstances involved by the COVID-19, the above position is also applicable, on a temporary basis, in the case where the prospectus does not formally provide for such possibility to apply the swing pricing factor/dilution levy beyond the maximum level laid down in the prospectus. Please contact the Fund Department to discuss this matter in details if redemptions may affect negatively the NAV of your Fund
Tokenization of intellectual property via securitization
Intellectual property and royalty management has become a Luxembourg specialty. Indeed Luxembourg is an extremely favorable legal and fiscal environment for artists, writers, companies, inventors and engineers to create, maintain and domicile their Intellectual property rights in a Luxembourg entity which will be managing their royalty income. Some promoters are also using Luxembourg securitisation entities. The rationale for such securitisation lies in the opportunity issuing a note, a bond or a certificate representing the future cash flow linked with the IPR and obtaining the NPV (Net present value) of such future income streams today. Transforming the future income streams into an immediate cash flow by selling to third party investors part of their future rights. Such Note can also be tokenized and sold/exchanged on the blockchain. In the case of tokenization, the Luxembourg SPV will issue tokens linked directly with the licenses, patents, trademarks, brand or author’s right. Investors would subscribe into the SPV in order to obtain the dedicated tokens. The Distributed Ledger Technology has become viral these last years in Luxembourg and a proper management of intellectual property on the blockchain is now considered as a must have for promoters and investor worldwide. In order to find out more about the tokenization of Intellectual property please contact us
Our Creatrust Previous News Please find out about our previous publications here - Crypto-Fund, Cryptocurrency, ICO, Blockchain & Token in Luxembourg
- Hedge Fund and Fintech - The limits of Machine Learning and Artificial Intelligence and why human oversight is still important
- Create your own Tracker Certificate in Luxembourg
- Bond Listing Markets in Luxembourg
- Sustainable, Responsible and Impact investing
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