Luxembourg Law of 22 March 2004 on securitisation in English

“Securitisation”, within the meaning of this Law, means the transaction by which a securitisation undertaking acquires or assumes, directly or through another undertaking, the risks relating to claims, to other assets, or to obligations assumed by third parties or inherent in all or part of the activities carried out by third parties, by issuing financial instruments or by contracting, in whole or in part, any form of borrowing, the value or yield of which depends on those risks.

“Securitisation undertakings”, within the meaning of this Law, are undertakings which carry out the whole of a securitisation transaction and those which participate in such a transaction by assuming all or part of the securitised risks – acquisition undertakings – or by issuing financial instruments or by entering into, in whole or in part, any other form of borrowing, intended to finance it – issuing undertakings – and whose articles of association, management regulations or offering documents provide that they are subject to the provisions of this Law.

If a securitisation undertaking finances itself in whole or in part by contracting borrowings, any reference to “issues of financial instruments” or “financial instruments issued” or “financial instruments to be issued” is also to be understood as a reference to “entering into the borrowing” or “the borrowing contracted” or “the borrowing to be contracted”.

For the purposes of this Law, “financial instruments” means the financial instruments referred to in Article 1, point 8, of the amended Law of 5 August 2005 on financial collateral arrangements, with the exception of the claims and rights referred to in Article 1, point 8(f), of that Law.

Securitisation undertakings may be set up in the form of a company or of a fund managed by a management company.

This Law applies only to securitisation undertakings situated in Luxembourg. For the purposes of this Law, securitisation companies which have their registered office in Luxembourg and securitisation funds whose management company has its registered office in Luxembourg are situated in Luxembourg.

Securitisation companies must take the form of a public limited company (société anonyme), a partnership limited by shares (SCA), a private limited liability company (S.à r.l.), a general partnership (société en nom collectif), a common limited partnership (SCS), a special limited partnership (SCSp), a simplified joint stock company (SAS) or a cooperative company organised as a public limited company.

Article 813-9 of the amended Law of 10 August 1915 on commercial companies does not apply to securitisation companies set up in the form of a cooperative company organised as a public limited company.

The articles of association of a securitisation company may empower the management body to create one or more compartments, each corresponding to a separate part of its assets.

Securitisation funds consist of one or more co-ownerships or of one or more fiduciary estates. The management regulations of the fund must state expressly whether the fund is subject to the co-ownership regime or to the regime of trusts and fiducies.

Securitisation funds do not have legal personality. They are managed by a management company.

Securitisation funds consisting of one or more fiduciary estates are subject to the legislation on trusts and fiduciary contracts.

The provisions of the Civil Code on undivided ownership (indivision) do not apply to securitisation funds.

The rights of investors in the fund, whether they act as co-owners or as settlors (fiduciants), are represented by financial instruments issued in accordance with the management regulations.

Ownership of registered securities is established by an entry in the register kept for that purpose by the management company. They are transferred by a declaration of transfer entered in that register, dated and signed by the transferor and the transferee or drawn up in accordance with the management regulations of the fund. Bearer securities are transferred by mere delivery.

Provided that its management regulations so provide, a securitisation fund may consist of several compartments, each corresponding to a separate co-ownership or fiduciary estate.

Debt securities may be issued as liabilities of a securitisation fund or of one of its compartments.

The management regulations of the securitisation fund must contain at least the following information:

- whether the fund is set up in the form of a co-ownership or of a fiduciary estate,

- the name, object and limited or unlimited duration of the securitisation fund,

- the name of the management company,

- the specific rules of administration and management applicable to it,

- the possibility for securitisation funds to comprise several compartments,

- the cases in which the fund or one of its compartments is or may be placed in liquidation,

- the respective rights and obligations of the management company and, where applicable, of the investors,

- the rules for assuming risks and/or issuing financial instruments,

- the procedures for amending the management regulations.

Securitisation funds made up of several compartments may lay down, in separate management regulations, the characteristics of and the rules applicable to each compartment.

The management regulations and any subsequent amendments to them must be filed with the Trade and Companies Register (RCS), and they are published in the Recueil électronique des sociétés et associations (RESA, the electronic gazette of companies and associations) by means of a notice of the filing of that document, in accordance with Title I, Chapter Vbis of the amended Law of 19 December 2002 on the Trade and Companies Register and on the accounting and annual accounts of undertakings.

The terms of these regulations are deemed to be accepted by the investors of the securitisation fund by the very fact of acquiring financial instruments issued by the fund.

Subject to Article 62, investors in a securitisation fund are liable for the debts of the securitisation fund only up to the amount of the fund’s assets and in proportion to their holding.

The securitisation fund is liable only for the obligations expressly placed on it by its management regulations or entered into in accordance with those regulations. It is not liable for the debts of the management company or of the investors.

The placing in liquidation of a securitisation fund is filed with the Trade and Companies Register and is published by the management company in the RESA in accordance with Title I, Chapter Vbis of the amended Law of 19 December 2002 on the Trade and Companies Register and on the accounting and annual accounts of undertakings and in at least two newspapers with adequate circulation, one of which must be a Luxembourg newspaper, within fifteen days, by the management company.

From the time the securitisation fund is placed in liquidation, the issue of any financial instrument is prohibited, on pain of nullity, except for the purposes of the liquidation.

Subject to the preceding paragraph, the liquidation is enforceable against third parties only from the day of its publication in the RESA, unless the securitisation fund proves that those third parties were previously aware of it. Third parties may nevertheless rely on a liquidation that has not yet been published.

The management company is a commercial company whose object is to manage securitisation funds and, where applicable, to act as fiduciary of funds set up in the form of one or more fiduciary estates.

The management company draws up the management regulations of the securitisation fund.

Subject to the powers conferred, where applicable, on a fiduciary-representative (représentant-fiduciaire), the management company acts on behalf of the securitisation fund and its investors vis-à-vis third parties. It represents them in all legal proceedings, whether as claimant or as defendant, without having to disclose the identity of the investors, the mere statement that the management company is acting in that capacity being sufficient. For as long as they are represented, the investors may no longer individually bring actions falling within the competence of the management company.

The management company must perform its duties independently and exclusively in the interest of the securitisation fund and of the investors. It may not use the assets of the securitisation fund for its own purposes and is liable to the investors and to third parties for the proper performance of its duties.

The creditors of the management company or of the investors have no recourse against the assets of the securitisation fund.

The functions of the management company in relation to the securitisation fund come to an end:

- in the event of the resignation or removal of the management company, provided that it is replaced by another management company, authorised in accordance with this Law where applicable;

- where the management company has been declared bankrupt, has been granted a composition with creditors (concordat), a suspension of payments, controlled management or a similar measure, or has been placed in liquidation;

- where, in the case of an authorised undertaking, the Financial Sector Supervisory Commission (CSSF) withdraws the management company’s authorisation;

- in all other cases provided for in the management regulations.

Securitisation undertakings which issue financial instruments offered to the public on a continuous basis (“authorised securitisation undertakings”) must be authorised by the Financial Sector Supervisory Commission (hereinafter the “CSSF”) in order to carry on their activities.

Securitisation undertakings which issue on a continuous basis, within the meaning of this Law, are those which carry out more than three issues of financial instruments offered to the public during a financial year. The number of issues corresponds to the total number of issues carried out by all the compartments of the securitisation undertaking during that period.

An issue of financial instruments offered to the public, within the meaning of this Law, is an issue:

1. which is not intended for professional clients within the meaning of Article 1, point 5, of the amended Law of 5 April 1993 on the financial sector;

2. whose denominations are less than 100,000 euros; and

3. which is not distributed by way of private placement.

A securitisation undertaking is authorised only if the CSSF approves the articles of association or the management regulations of the securitisation undertaking and, where applicable, authorises its management company. Securitisation companies and management companies of securitisation funds must have adequate organisation and resources for carrying on their activity and for supervision by the CSSF.

The members of the administrative, management and supervisory bodies of a securitisation company or of a management company of an authorised securitisation undertaking, and their direct or indirect shareholders and members who are in a position to exercise significant influence over the conduct of the business of such a company, must be of good repute and have the experience or the means required to perform their duties. To that end, the identity of those persons, and any replacement of them, must be notified to the CSSF immediately.

Any change in the control of the securitisation company or of the management company, any replacement of the management company and any amendment to the management regulations or to the articles of association are subject to the prior approval of the CSSF.

Authorised securitisation undertakings are entered by the CSSF on a list. Such entry constitutes authorisation and is notified to the securitisation undertaking. The list and any changes made to it are published by the CSSF.

Entry and continued entry on the list referred to in the paragraph above are subject to the condition that all the statutory, regulatory and contractual provisions governing the securitisation undertaking, the functioning of its bodies and the distribution, placement or sale of the financial instruments it issues are complied with.

The fact that a securitisation undertaking is entered on the list referred to in the preceding Article may not in any case or in any form whatsoever be presented as a positive assessment by the CSSF of the quality of the financial instruments issued by that undertaking.

Note. The reference to “the preceding Article” appears defective: the list of authorised securitisation undertakings is the one provided for in paragraph 1 of this Article (Article 21); Article 20 contains no list.

Authorised securitisation undertakings must entrust the safekeeping of their liquid assets and transferable securities to a credit institution established or having its registered office in Luxembourg.

Authorised securitisation undertakings are supervised by the CSSF, which ensures in particular that they comply with the law and with their obligations.

The CSSF performs its task until the close of the liquidation of the securitisation undertaking.

The CSSF may request from authorised securitisation undertakings a periodic statement of their assets and liabilities and of their results.

It may require any information to be communicated to it or carry out on-site inspections and examine all documents of a securitisation company, a management company or a credit institution responsible for holding the assets of an authorised securitisation undertaking that relate to the organisation, administration, management, functioning and operations of that undertaking and to the valuation and profitability of the assets, in order to verify compliance with the provisions of this Law and with the rules laid down by the management regulations or the articles of association of the securitisation undertaking and by the contracts for the issue of financial instruments, as well as the accuracy of the information communicated to it.

If the CSSF finds that a securitisation undertaking that is authorised, or that should have been authorised under the provisions of this Law, does not comply with the provisions of this Law, the management regulations, the articles of association or the contracts for the issue of financial instruments, or that the rights attached to the financial instruments it has issued are at risk of being jeopardised, it may give the securitisation undertaking formal notice to remedy the situation found within the period it sets.

If that formal notice is not complied with, it may:

- make public its position on the findings made under paragraph 1;

- prohibit any issue of financial instruments;

- request the suspension of the quotation of the financial instruments issued by the securitisation undertaking;

- request the judge presiding over the chamber of the District Court sitting in commercial matters to appoint a provisional administrator for the securitisation undertaking;

- revoke its authorisation.

Where an authorised securitisation undertaking or its management company does not publish the undertaking’s placing in liquidation in accordance with Article 13, that publication is carried out by the CSSF, at the expense of the securitisation undertaking.

Decisions of the CSSF taken under this Law state the reasons on which they are based and, except where delay would entail danger, are taken after an inter partes procedure. They are notified by registered letter or served by a bailiff.

Decisions taken by the CSSF may be referred to the Administrative Tribunal. The appeal must be brought within one month from notification of the contested decision, failing which it is time-barred. It is exempt from all stamp and registration duties. The Administrative Tribunal rules on the merits.

A decision of the CSSF withdrawing a securitisation undertaking from the list provided for in Article 21 automatically entails, from its notification to the undertaking concerned and with effect as against that undertaking, until the day on which the decision has become final, the suspension of all payments by that undertaking and a prohibition, on pain of nullity, on carrying out any acts other than protective acts, unless authorised by the supervisory commissioner.

The CSSF acts as supervisory commissioner by operation of law unless, at its request, the District Court sitting in commercial matters appoints one or more other supervisory commissioners.

The reasoned application, supported by the substantiating documents, is filed for that purpose with the registry of the court in whose district the undertaking has its registered office. The court rules promptly. If it considers itself sufficiently informed, it rules immediately in open court without hearing the parties. If it considers it necessary, it summons the parties, through the court clerk, no later than three days after the filing of the application. It hears the parties in chambers and rules in open court.

The court sets the costs and fees of the supervisory commissioners; it may grant them advances.

On pain of nullity, the written authorisation of the supervisory commissioners is required for all acts and decisions of the undertaking. The court may, however, limit the scope of the operations subject to authorisation.

The commissioners may submit to the corporate bodies for deliberation any proposals they consider appropriate. They may attend the deliberations of the administrative, executive, management or supervisory bodies of the undertaking.

The judgment provided for in Article 39(1) of this Law terminates the functions of the supervisory commissioner, who must, within one month of being replaced, report to the liquidators appointed by the judgment on the use made of the undertaking’s assets and submit to them the accounts and supporting documents.

Where the withdrawal decision is reversed by the court, the supervisory commissioner is deemed to have resigned.

After their dissolution, securitisation undertakings are deemed to continue to exist for the purposes of their liquidation. All documents issued by a securitisation undertaking in liquidation must state that it is in liquidation.

Each compartment of a securitisation undertaking may be liquidated separately without such liquidation resulting in the liquidation of any other compartment.

The liquidator may bring and defend any actions on behalf of the securitisation undertaking, receive any payments, grant releases with or without receipt, realise all the assets of the undertaking and reinvest the proceeds, draw or endorse any commercial paper, and settle or submit to arbitration any disputes.

Sums and assets due to investors who did not come forward at the close of the liquidation operations are deposited with the Consignment Office (Caisse de consignation) for the benefit of whoever is entitled to them.

Liquidators are liable both to third parties and to the securitisation undertaking for the performance of their mandate and for any faults committed in their management.

Actions for liability against liquidators are time-barred five years after the acts concerned or, if those acts were fraudulently concealed, five years after their discovery.

The liquidator of an authorised securitisation undertaking must offer every guarantee of professional standing and professional qualification and must be authorised by the CSSF.

During the liquidation proceedings, authorised securitisation undertakings remain subject to the supervision of the CSSF.

At the request of the State Prosecutor, acting ex officio or at the request of the CSSF, the District Court sitting in commercial matters orders the dissolution and liquidation of authorised securitisation undertakings whose entry on the list provided for in Article 21 has been finally refused or withdrawn.

When ordering the liquidation, the court appoints a supervising judge and one or more liquidators, subject to Article 75 below.

The court determines the mode of liquidation. It may make the rules governing the liquidation of bankruptcies applicable to the extent it determines. The mode of liquidation may be changed by a subsequent decision, either of the court’s own motion or at the request of the liquidator or liquidators.

The judgment ordering the dissolution and liquidation is provisionally enforceable.

Court decisions ordering the dissolution and liquidation of a securitisation undertaking are published in the RESA, in accordance with Title I, Chapter Vbis of the amended Law of 19 December 2002 on the Trade and Companies Register and on the accounting and annual accounts of undertakings, and in two newspapers with adequate circulation designated by the court, at least one of which must be a Luxembourg newspaper. Those publications are made at the instance of the liquidator.

From the date of the judgment, all actions relating to movable or immovable property and all enforcement measures against movable or immovable property may be pursued, brought or exercised only against the liquidator.

The judgment placing the undertaking in liquidation stops all attachments of movable and immovable property made at the request of unsecured and non-preferential creditors.

The liquidator may create security interests over the assets of the securitisation undertaking or give them as collateral only with the authorisation of the court. The court may give the liquidator that authorisation at any time during the liquidation proceedings for all or part of the assets of the securitisation undertaking.

After the debts have been paid or the sums needed to pay them have been deposited, the liquidator distributes to the investors the sums or assets due to them.

The court may at any time ask the liquidator to report to it on the state of the liquidation. It sets the costs and fees of the liquidators and may grant them advances.

Where the supervising judge finds that there are no assets or insufficient assets, procedural documents are exempt from all court registry fees and registration duties, and the costs and fees of the liquidator are borne by the Treasury and paid as court costs.

When the liquidation is completed, the liquidator reports to the court on the use made of the undertaking’s assets and submits the accounts and supporting documents.

The court appoints one or more approved statutory auditors (réviseurs d’entreprises agréés) to examine the documents. After receiving the report of the approved statutory auditor, it rules on the liquidator’s management and on the close of the liquidation.

Its decision is published in accordance with Article 39 above and also contains:

- an indication of the place designated by the court where the corporate books and records must be deposited for at least five years;

- an indication of the measures taken in accordance with Article 35 for the deposit of the sums and assets due to creditors and investors that could not be delivered to them.

Actions against liquidators in that capacity are time-barred five years after the publication of the close of the liquidation operations.

Securitisation companies must comply with the requirements of Chapters II and IV of Title II of the Law of 19 December 2002 on the Trade and Companies Register and on the accounting and annual accounts of undertakings. Their management reports must contain all material information on their financial position that is likely to affect the rights of investors.

Where compartments are financed by means of shares (actions or parts sociales), the balance sheet and profit and loss account prepared for each compartment are approved solely by the shareholders or members holding shares issued by the compartment in question, if the articles of association so provide.

Without prejudice to the application to public limited companies of Article 461-2 of the amended Law of 10 August 1915 on commercial companies, profits and distributable reserves may be determined for each compartment without taking into account the position of the securitisation undertaking as a whole, if the articles of association so provide.

Without prejudice to the application to public limited companies of Article 461-1 of the amended Law of 10 August 1915 on commercial companies, the reserve required by law under that Law must be determined solely for each compartment, without taking into account the position of the securitisation undertaking as a whole, if the articles of association so provide.

By way of derogation from Article 25, first subparagraph, point 1, of the amended Law of 19 December 2002 on the Trade and Companies Register and on the accounting and annual accounts of undertakings, the provisions of Title II, Chapters II, IIbis and IV, of that Law of 19 December 2002 apply to securitisation companies that take the form of a general partnership (société en nom collectif), a common limited partnership (SCS) or a special limited partnership (SCSp).

The accounts of a securitisation undertaking are audited by one or more approved statutory auditors appointed, as the case may be, by the administrative body of the securitisation company or by the management company of the securitisation fund.

The approved statutory auditors of an authorised securitisation undertaking must be approved by the CSSF.

The approved statutory auditors responsible for auditing the accounts of a securitisation undertaking must report any irregularities and inaccuracies they identify in the performance of their duties to the managers (persons who conduct the business) of the securitisation company or of the management company and, in the case of authorised securitisation undertakings, also to the CSSF and, where applicable, to the investors’ representative.

Every authorised securitisation undertaking that is subject to the supervision of the CSSF and whose accounts are audited by an approved statutory auditor must, on its own initiative, communicate to the CSSF the reports and written comments issued by the approved statutory auditor in the course of the audit of the annual accounting documents.

The CSSF may lay down rules on the scope of the audit mandate for the annual accounting documents and on the content of the reports and written comments of the approved statutory auditor referred to in the preceding subparagraph, without prejudice to the statutory provisions governing the content of the report of the statutory auditor.

The office of supervisory auditor (commissaire) provided for by the amended Law of 10 August 1915 on commercial companies is abolished for Luxembourg securitisation companies.

Securitisation funds are subject to the accounting and tax regime of common funds (fonds communs de placement, FCP) as it results from the Law of 17 December 2010 on undertakings for collective investment, with the exception of the subscription tax (taxe d’abonnement), which is not due.

All agreements entered into in the context of a securitisation transaction, and all other instruments relating to such a transaction, are exempt from registration formalities, even where they are used in a public instrument, in legal proceedings or before any other constituted authority, provided that they do not have the effect of transferring rights that must be transcribed, recorded or registered in respect of immovable property situated in Luxembourg, or of aircraft, ships or inland navigation vessels registered in Luxembourg. However, they may be presented for registration, in which case they are registered at the fixed duty.

By way of derogation from the Order of 24 Prairial, Year XI, where instruments concluded in the context of a securitisation transaction or other instruments relating to such a transaction are presented for registration, the obligation to attach to those instruments, where they are drawn up in languages other than the official languages, a translation certified by a notary or another sworn translator does not apply if those instruments are drawn up in English.

Article 44(1)(d) of the amended Law of 12 February 1979 on value added tax is supplemented by the addition of the following words: “as well as of securitisation undertakings situated in Luxembourg;”.

The risks relating to the holding of any assets, whether movable or immovable, tangible or intangible, as well as the risks resulting from obligations assumed by third parties or inherent in all or part of the activities carried out by third parties, may be securitised.

The securitisation undertaking may assume those risks by acquiring the assets directly or indirectly, by guaranteeing the obligations or by committing itself in any other way.

Securitisation transactions governed by this Law do not constitute activities subject to the amended Law of 7 December 2015 on the insurance sector.

Securitisation undertakings may acquire and, subject to the conditions of Article 61 below, transfer claims (receivables) and other assets, whether existing or future, in one or more transactions or on a continuous basis.

The assignment of an existing claim to or by a securitisation undertaking takes effect between the parties and becomes enforceable against third parties at the time of the assignment agreement, unless that agreement provides otherwise.

A future claim that will arise under a present or future contract may be assigned to or by a securitisation undertaking, provided that it can be identified as forming part of the assignment at the time when it comes into existence or at any other time agreed between the parties.

The assignment of a future claim is conditional upon the claim coming into existence but, when it does, the assignment takes effect between the parties and becomes enforceable against third parties as from the time of the assignment agreement, unless that agreement provides otherwise, notwithstanding the opening of bankruptcy or any other collective proceedings against the transferor before the claim came into existence.

A claim assigned to a securitisation undertaking forms part of its assets as soon as the assignment becomes effective, notwithstanding any undertaking given by the securitisation undertaking to reassign it subsequently. The assignment may not be recharacterised by reason of such an undertaking.

Unless otherwise agreed, an assignment to or by a securitisation undertaking entails the transfer of the guarantees and security interests securing the claim, and the enforceability of that transfer against third parties by operation of law, without further formalities.

The assigned debtor may obtain a valid discharge by paying the transferor for as long as it has not become aware of the assignment.

Article 1699 of the Civil Code does not apply to claims assigned to a securitisation undertaking.

An assignment that is prohibited by the contract from which the assigned claim arises, or that fails to comply with that contract for other reasons, is not enforceable against the assigned debtor unless

- the assigned debtor has consented to it,

- the transferee was unaware of the non-compliance or was not bound to know of it,

- the assignment concerns a monetary claim.

The law governing the assigned claim determines whether the claim is assignable, the relationship between the transferee and the debtor, the conditions under which the assignment is enforceable against the debtor and whether performance by the debtor discharges the debtor.

The law of the State in which the transferor is located governs the conditions under which the assignment is enforceable against third parties.

The articles of association or the management regulations of the securitisation undertaking, an assignment agreement or any other agreement may grant the transferor a right to all or part of the assets of the securitisation undertaking that remain available after payment of all other creditors.

The securitisation undertaking may entrust the transferor or a third party with the collection of the claims it holds and with any other tasks relating to their management, without those persons being required to obtain an authorisation under the legislation on the financial sector, and without prejudice to the obligations arising from the Law of 15 July 2024 on the transfer of non-performing loans and from Part I, Chapter 2, Section 2, Sub-section 2ter of the amended Law of 5 April 1993 on the financial sector.

A securitisation undertaking may dispose of its assets only in accordance with the arrangements laid down in its articles of association, the applicable offering documents or its management regulations.

Where the transferor or the third party responsible for collecting the claims is subject to collective proceedings, such as bankruptcy, controlled management, judicial liquidation or any other proceedings giving rise to a concurrence of claims among its creditors, the securitisation undertaking is entitled to claim the sums collected on its behalf before the opening of those proceedings, free from any concurrence with the other creditors and notwithstanding the claims of the bankruptcy receiver (curateur), the commissioner for controlled management or the liquidator.

It may create security interests over its assets or give them as collateral, in any manner whatsoever, only to secure obligations relating to the securitisation transaction.

Unless otherwise stipulated, security interests and guarantees extend by operation of law to the income from the assets assigned or encumbered by the security interest, to the funds received in payment and to the assets in which those funds are invested.

Without prejudice to the amended Law of 5 August 2005 on financial collateral arrangements, Article 445(4) of the Commercial Code does not apply to a security interest created no later than at the time of the issue of the financial instruments or of the conclusion of secured contracts, notwithstanding its extension to new assets or claims in accordance with this Article and the agreement creating the security interest.

The beneficiaries of a pledge over claims are put in possession of those claims by the collateral or pledge agreement. The debtors of the pledged claims may nevertheless obtain a valid discharge by paying the securitisation undertaking for as long as they have not become aware of the pledge.

A securitisation undertaking may securitise a pool of risks consisting of debt securities, debt financial instruments or claims which is actively managed by the securitisation undertaking itself or by a third party only on condition that the financial instruments issued to finance the acquisition of that pool of risks are not offered to the public.

The rights of investors and creditors are limited to the assets of the securitisation undertaking. Where they relate to a compartment or have arisen in connection with the creation, operation or liquidation of a compartment, they are limited to the assets of that compartment.

The assets of a compartment are available exclusively to satisfy the rights of the investors relating to that compartment and the rights of the creditors whose claims have arisen in connection with the creation, operation or liquidation of that compartment.

As between investors, each compartment is treated as a separate entity, unless the constitutive documents provide otherwise.

Provided that the articles of association, the management regulations or the issue agreement so provide, a securitisation undertaking may issue financial instruments whose value or return depends on specific compartments, assets or risks, or whose repayment is subordinated to the repayment of other securities, of certain claims or of certain classes of shares. Where there is an acquisition undertaking separate from the issuing undertaking, the value, the return and the conditions of repayment may also depend on the assets and liabilities of the acquisition undertaking.

Notwithstanding any provision to the contrary, the voting rights attached to shares of unequal value are proportionate to the portion of the capital that those shares represent. The voting rights attached to bonds and other debt securities are always proportionate to the portion of the amount of the loan that they represent.

The following subordination rules apply to the financial instruments issued by a securitisation undertaking:

1. The units of a securitisation fund are subordinated to the other financial instruments issued, and to the loans taken out, by that securitisation fund;

2. The shares (actions or parts sociales) or partnership interests of a securitisation company are subordinated to the other financial instruments issued, and to the loans taken out, by that securitisation company;

3. The shares (actions or parts sociales) or partnership interests of a securitisation company are subordinated to the beneficiary units (parts bénéficiaires) issued by that securitisation company;

4. The beneficiary units issued by a securitisation company are subordinated to the debt financial instruments issued, and to the loans taken out, by that securitisation company;

5. The debt financial instruments with a non-fixed return issued by a securitisation undertaking are subordinated to the debt financial instruments with a fixed return issued by that securitisation undertaking.

Notwithstanding paragraph 1, the articles of association or the management regulations of a securitisation undertaking, and any contract entered into by the securitisation undertaking, may contain clauses that define the ranking of the rights of investors and creditors differently.

The articles of association or the management regulations of a securitisation undertaking, and any contract entered into by the securitisation undertaking, may contain clauses under which investors and creditors undertake not to seize the assets of the securitisation undertaking or, where applicable, of the acquisition or issuing undertaking, and not to petition for their bankruptcy or apply for the opening of any other collective or reorganisation proceedings against them.

Proceedings brought in breach of the provisions referred to in paragraph 1 or of the clauses referred to in paragraphs 2 and 3 are inadmissible.

The terms of issue and repayment of the financial instruments issued by a securitisation undertaking are binding on the securitisation undertaking and on the investors and are enforceable against any other person, including in the event of the liquidation of one or more compartments, of bankruptcy and, more generally, of any situation of concurrence of claims among its creditors, provided that they do not prejudice the rights of creditors who have not consented to them.

The same applies to the special terms accepted by creditors for the payment of their claims.

Subject to Article 70 below, Articles 470-1 to 470-20 of the amended Law of 10 August 1915 on commercial companies apply to the holders of any debt securities issued by a securitisation undertaking. The issue agreements for such securities may, however, derogate from those provisions.

Where debt securities are issued by a securitisation fund, the management company of the fund exercises the rights and assumes the obligations that belong to the issuing company or its board of directors under Articles 470-1 to 470-20 of the Law referred to above.

The investors and the creditors of a securitisation undertaking may entrust the management of their interests to one or more fiduciary-representatives (représentants-fiduciaires). This Law applies only to fiduciary-representatives whose registered office is in Luxembourg.

The instrument by which a fiduciary-representative accepts its mission must specify its rights and powers, in particular its powers of representation, designate the groups of investors or creditors on whose behalf it acts and provide for a procedure for its replacement.

That instrument binds, without further formality, all investors and creditors who have accepted the fiduciary-representative. The subscription or acquisition of a transferable security of a securitisation undertaking that designates a fiduciary-representative constitutes acceptance of that fiduciary-representative and of its mission.

Unless otherwise provided, investors and creditors who have appointed a fiduciary-representative are represented by it in all their relations with the securitisation undertaking and with third parties connected with the securitisation. For as long as they are represented, they may no longer individually exercise the rights the management of which they have entrusted to the fiduciary-representative.

Within the limits of the powers conferred on it by the investors and the creditors, the fiduciary-representative may bring any action on their behalf and defend their interests, including in court, without having to disclose their identity, the mere statement that it is acting in that capacity being sufficient.

Where a securitisation undertaking issues debt securities, it may entrust to a fiduciary-representative the functions of representative of the body of holders of those securities, freely determining its powers, notwithstanding Article 470-5 of the amended Law of 10 August 1915 on commercial companies.

Articles 470-1 to 470-20 of the amended Law of 10 August 1915 on commercial companies apply to the issue only in so far as the issue agreement or the instrument appointing the fiduciary-representative does not derogate from them.

The fiduciary-representative may also be granted by investors and creditors the power to act in their interest as fiduciary, in accordance with the legislation on trusts and fiduciary contracts. The rights and assets it acquires for the benefit of the investors and the creditors form a fiduciary estate separate from its own estate and from any other fiduciary estate it may hold.

In that capacity, the fiduciary-representative may in particular accept, take, hold and enforce any security interests and guarantees and receive any payments intended for the investors and the creditors who have conferred that power on it, as if it were itself the holder of their claims, any payment made into its hands discharging the debtor. Articles 445, 446, 447, second subparagraph, and 448 of the Commercial Code do not apply to such security interests, guarantees or payments.

The securitisation undertaking may assign to the fiduciary-representative, on the terms agreed with it, all or part of the rights and actions arising from a contract concluded with a third party. The assignment is enforceable against the counterparty and against all other third parties as soon as it is concluded and may not be challenged on the basis of Articles 445, 446, 447, second subparagraph, and 448 of the Commercial Code.

The counterparty may, however, validly discharge any debts by payment to the assigning undertaking for as long as it has not become aware of the assignment.

A fiduciary-representative who appoints a third party as its substitute to exercise the rights and actions assigned to it is liable for damage caused by that third party only if it was not given the power to appoint a substitute or if it chose a person who was notoriously incompetent or insolvent.

The assigning undertaking and, notwithstanding their representation by the fiduciary-representative, the investors and the creditors may bring an action directly against the person whom the fiduciary-representative appointed as its substitute.

The articles of association or the internal rules of a securitisation undertaking may allow a fiduciary-representative to apply to the court, on serious grounds, for the provisional or permanent replacement of the undertaking’s administrative bodies, of those of the management company, where applicable, and of the management company itself.

In the event of the voluntary or compulsory liquidation of a securitisation undertaking or of one of its compartments, and unless the instrument of appointment provides otherwise, the fiduciary-representative acts as liquidator on behalf of the investors and the creditors who appointed it.

In the absence of any provision to the contrary in the instrument of appointment, the liability of a fiduciary-representative towards the investors and the creditors on whose behalf it acts is assessed as that of a salaried agent.

On the replacement of a fiduciary-representative, all rights and all actions it holds in the interest of the investors and the creditors pass by operation of law and without further formality to the new fiduciary-representative.

The resignation of a fiduciary-representative takes effect only from the moment a new fiduciary-representative has been appointed.

On a reasoned application by a represented investor or creditor showing serious grounds, the CSSF may replace a fiduciary-representative provisionally or permanently.

Unless the instrument of appointment provides otherwise, any other means of removal or replacement is excluded.

Fiduciary-representatives subject to this Law must be authorised by the CSSF.

Authorisation to carry on the activity of fiduciary-representative may be granted only to capital companies that show share capital and own funds of at least 125,000 euros.

Authorisation is subject to communication to the CSSF of the identity of the direct or indirect shareholders or members, whether natural or legal persons, who hold a qualifying holding in the fiduciary-representative to be authorised, within the meaning of Article 18 of the amended Law of 5 April 1993 on the financial sector, and of the amounts of those holdings.

In order to obtain authorisation, the members of the administrative, management and supervisory bodies and the shareholders or members referred to in the preceding article must show their professional standing. Good repute is assessed on the basis of criminal records and of any evidence tending to show that the persons concerned enjoy a good reputation and offer every guarantee of irreproachable conduct of business.

Note. “l’article précédent” (the preceding article) appears to be a drafting error: Article 79 does not mention shareholders or members; those meant are evidently the ones referred to in paragraph 2 of this Article.

The persons responsible for management must have adequate professional experience.

The application for authorisation must be sent in writing to the CSSF and be accompanied by all information needed to assess it, in particular precise information on the applicant’s administrative and accounting structure.

Authorisation is granted after an examination by the CSSF of the conditions required by this Law.

The decision on an application for authorisation must state reasons and be notified to the applicant within six months of receipt of the application or, if the application is incomplete, within six months of receipt of the information needed for the decision. A decision must in any event be taken within twelve months of receipt of the application, failing which the absence of a decision is equivalent to notification of a refusal. An appeal against the decision may be brought before the Administrative Tribunal, which rules on the merits, within one month, failing which it is time-barred.

Authorisation is granted for an unlimited period.

Any change in the persons who must meet the statutory requirements of professional standing and professional experience must be approved in advance by the CSSF. For that purpose, the CSSF may request all necessary information on the persons who may have to meet the statutory requirements. An appeal against the decision of the CSSF may be brought before the Administrative Tribunal, which rules on the merits, within one month, failing which it is time-barred.

A new authorisation is required before any change to the corporate object, the name or the legal form.

Authorisation lapses if it is not used for an uninterrupted period of more than twelve months.

Authorisation is withdrawn if the conditions for granting it are no longer met.

Authorisation is withdrawn if it was obtained by means of false statements or by any other irregular means.

An appeal against the decision to withdraw authorisation may be brought before the Administrative Tribunal, which rules on the merits, within one month, failing which it is time-barred.

The directors, managers and executive officers of authorised securitisation undertakings or of a fiduciary-representative, and the liquidators in the event of the voluntary liquidation of an authorised securitisation undertaking, may be subjected by the CSSF to an administrative fine of 125 to 12,500 euros if they refuse to provide the financial reports and information requested, or if those reports or that information prove to be incomplete, inaccurate or false, as well as where any other serious irregularity is found.

Persons who have carried out, or caused to be carried out, continuous issues of financial instruments offered to the public without the securitisation undertaking on whose behalf they acted having been entered on the list provided for in Article 21(1) are liable to imprisonment of three months to two years and a fine of 500 to 125,000 euros, or to one of those penalties only.

Article 13(2) of the amended Law of 5 April 1993 on the financial sector is supplemented by the following indent, inserted as the penultimate indent:

“- to securitisation undertakings and to fiduciary-representatives acting for such an undertaking”

The first subparagraph of Article 2(1) of the amended Law of 23 December 1998 establishing a financial sector supervisory commission (Commission de Surveillance du Secteur Financier) is replaced by the following text:

“The Commission is the competent authority for the prudential supervision of credit institutions, of professionals of the financial sector (PSF) within the meaning of the amended Law of 5 April 1993 on the financial sector, of undertakings for collective investment, of pension funds in the form of a SEPCAV or an ASSEP, of authorised securitisation undertakings, of fiduciary-representatives acting for a securitisation undertaking and of persons carrying on stock exchange activities.”

Article 4 of the Law of 27 July 2003 on trusts and fiduciary contracts is amended as follows: “This Title applies only to fiduciary contracts in which the fiduciary is a credit institution, an investment firm, an investment company with variable or fixed capital, a securitisation company, a fiduciary-representative acting in the context of a securitisation transaction, a management company of a common fund (fonds commun de placement, FCP) or of a securitisation fund, a pension fund, an insurance or reinsurance undertaking or a national or international public body operating in the financial sector.”

The amended Law of 4 December 1967 on income tax is amended as follows:

a) Article 22bis is supplemented by the addition of a paragraph 5 worded as follows: “(5) Transferable securities issued by a securitisation undertaking are excluded from the benefit of the provisions of paragraph 2 of this Article.”

b) Article 25 is supplemented by the addition of a paragraph 3 worded as follows: “(3) The acquisition price of an asset acquired by a securitisation undertaking must correspond to the estimated realisation value of that asset.”

c) Article 46 is supplemented by the addition of a point 14 worded as follows: “14. commitments assumed by a securitisation company towards investors and any other creditor.”

d) Article 97 is supplemented by the addition of a paragraph 6 worded as follows: “(6) Distributions and other income allocated to the investors and other creditors of a securitisation undertaking constitute investment income (revenus provenant de capitaux mobiliers) within the meaning of paragraph 1, point 5, of this Article.”

e) Article 164bis is supplemented by the insertion, after paragraph 4, of a new paragraph 5 worded as follows:

““(5) Securitisation undertakings are excluded from the scope of this Article.” The other paragraphs are renumbered accordingly.”

§ 3(1), point 4, of the amended Law of 16 October 1934 on net wealth tax is amended as follows:

““4. securitisation companies formed as a public limited company (société anonyme), a partnership limited by shares, a private limited liability company or a cooperative company organised as a public limited company, subject to the minimum net wealth tax determined in accordance with § 8(2)”.”

This Law does not apply to securitisation transactions and undertakings set up before its entry into force, unless the parties concerned decide otherwise by an express declaration of intent, amending the constitutive documents of the securitisation undertaking concerned to include an express provision to that effect.

This Law is to be referred to in the following form: “Law of 22 March 2004 on securitisation”.