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Dear Sirs,
We refer to your query concerning the subject matter above.
We understand that you wish to form a platform for private equity investments established as a partnership limited by shares (Société en commandite par actions, “SCA”) under Luxembourg law.
We are asked to give our legal advice on whether the British Private Equity and Venture Capital Association (“BVCA”) clause regardingthe transfer of interests in a SCA (the “Clause”) could be adapted to the SCA as to be valid under Luxembourg law (I) and whether this Clause should be reflected in the articles of incorporation or in a separate shareholders agreement (II).
The clause provides for rules regarding the transfer of the general partner’s interests (I.1), the situation of a “special limited partner” (I.2) and thetransfer of the limited partners’ shares (I.3).
As a preliminary remark, it has to be noted that the SCA is governed by section V of the law on commercial companies dated 10 August 1915 (the “Law of 1915”) which states that the provisions regarding the limited company (Société anonyme, “SA”) will apply, unless there is a specific provision regarding the SCA .
As far as the transfer of shares andinterests are concerned there are no specific provisions in Section V of the Law of 1915.
I. Validity under Luxembourg Law
1. Transfer of the general partner’s interests
The Clause provides that the general partner can in principle freely assign its shares (i.e. without the consent of the limited partners) but that in case of private equity or venture capital funds some constraints might apply(in some cases). Therefore, there are several questions arising:
are the shares of a general partner freely negotiable;
can the right of the general partner be limited (if the answer to the first point is yes);
on which conditions (if the answer to the second point is yes).

Because of its unlimited liability the general partner of an SCA has a status similar to the unlimited interestholders of a Société en comandite simple (“SCS”) which interests are in principle non-freely transferable (with some limitations). Therefore, some Luxembourg authors consider that the similarity of the SCA with the SCS and the unlimited liability prevent the general partner to freely assign its shares.
However, considering that the Law of 1915 provides for the SCA the status of a shareholder andthat the essence of a share is that it can be freely transferable , it could be argued that the general partner can freely assign its shares .
Consequently, it can be concluded that the general partner can in principle freely transfer its shares and that the Clause allowing the general partner to assign its shares without the consent of the limited partners is valid under Luxembourg law.However that may be, the shareholders of an SCA can decide to limit the free transferability of the shares in some circumstances (in the articles of incorporation or in a partnership agreement). Such limitation will be valid if :
it is provided for a fixed reasonable period ; and,
if it is justified by the interest of the company.
The notion of “fixed interest period” should be analysed on a caseby case basis and will highly depend on the interest of the company.
In the case at hand and as far as the private equity and venture capital funds are concerned:
their aim and interest depends on a combination of capital (e.g. limited partners) and the experience of the private equity executives (usually the person initiating/managing the fund). The limited partners will decide to invest ornot depending on the person of the general partner);
and the return on investment will only be available after the realisation of the investment.
This explains the necessity, for the good outcome of the investment, that the transfer of the general partner’s share is subject to conditions (or even impossible for a certain period). A condition could be the consent of the limited partners or the...