Securitisation instruments in the SPV
Definition
Securitisation is considered the transferral of a pool of assets (primarily financial assets of any value, in any form) held by an organiser to a special-purpose company established for this express purpose, which then issues securities (which, in turn, are collateralised by the transferred asset values and the resulting cash flows).
Legal Structure
An SPV can take on either of the following two legal forms:
- Public company, limited partnership (association limited by shares), limited liability company.
- Securitisation funds without a legal personality (in such a case, the establishment of a separate administrative company with a legal personality is required by law).
The SPV can be divided into one or several partial assets, which each merely correspond to a specific asset class and are financed by various securities issuances.
Progression of a securitisation structure
A securitisation transaction takes place in two steps:
- the purchase of the assets on which it is based (risks)
- issuance of securities to investors
With that, the securitisation structure can simultaneously purchase securities, as well as issue them for the financing of the assets.
Die performance and profits generated from these securities are based on the assets on which the securities, in turn, are established.
Oversight
As a rule, securitisation structures in Luxembourg are not regulated – unless the particular structure ”regularly” issues securities for ”public distribution”. In this case, the structure requires a licence to be issued by the oversight board for financial services, and is monitored by this agency.
Asset classes
For the categories of assets which are subject to securitisation, there is no limitation. Securitisation transactions can be made directly with material or immaterial assets (i.e., receivables, patents, aircraft, real estate, diamonds, etc.).
Also those risks associated with the ownership of material or immaterial assets can be subject to securitisation.
Investor protection
- The Luxembourg law provides for special contractual conditions with limited regress options, a subordination clause for claims on the part of investors and creditors, along with the protection of the securitisation organism from insolvency proceedings initiated by its originator.
- The insolvency risk involved with a securitisation organism is quite low, since the assets are protected against all insolvency risks borne by the securitisation organism, the originator, the service providers or the guaranty.
- A trustee expressly appointed as an advocate for investors’ interests and creditors’ claims can be named.
- Assets in the form of securities, along with liquid assets, are to be coffered by a Luxembourg-based bank.
Taxation
Securitisation organisms established as corporate entities are subject to:
- the capital-gains tax of max. 29.63% of the net book profits. However: all obligations arising from investor compensation can be deducted in their entirety.
- A corporate tax on bank deposits/capital contributions in the amount of max. EUR 1,250.00.
- the Luxembourgian double-taxation agreement.
They are not subject to:
- the capital-gains tax,
- the withholding tax on dividend payouts.
Securitisation organisms established as securitisation funds are not subject to:
- the capital-gains tax,
- the “tax d'abonnement“ (subscription tax),
- the withholding tax on dividend payouts.
