A SICAR (Société d'Investissement en Capital à Risque) is a Luxembourg investment vehicle specifically designed for investment in risk capital, defined as private equity, venture capital, and other investments in companies or projects at an early or expansion stage. It is a CSSF-regulated structure that benefits from a specific tax regime that exempts income and gains from risk capital investments from Luxembourg corporate income tax.
The SICAR is the appropriate Luxembourg structure when the fund manager requires the fund entity itself to be a CSSF-regulated vehicle (rather than relying on AIFM-level regulation as in a RAIF) and when the portfolio is focused on direct equity or quasi-equity investment in companies, rather than loan portfolios.
How it works
The SICAR was established by Luxembourg law in 2004 and provides a regulated framework for private equity and venture capital investment vehicles. Its distinguishing features are:
Regulatory status: The SICAR must obtain CSSF authorisation before it can commence activities. This process typically takes three to six months and involves review of the fund's constitutive documents, the appointed management company or AIFM, and the depositary. Unlike a RAIF (which requires only that the AIFM be authorised), the SICAR is itself regulated.
Investment scope: A SICAR must invest exclusively in risk capital. Luxembourg law defines risk capital as investments in instruments (equity, quasi-equity, subordinated loans, convertibles) that provide exposure to the development risk of the investee company or project. Risk capital is distinct from senior secured lending: a SICAR focused on private equity buyouts, growth equity, or venture capital qualifies; a vehicle primarily making senior secured private credit loans would not.
Eligible investors: SICARs are restricted to well-informed investors, the same category as RAIFs: institutional investors, professional investors, and investors who satisfy the EUR 125,000 minimum or professional assessment requirement.
Tax treatment: Income and gains from risk capital investments are exempt from Luxembourg corporate income tax and municipal business tax. This makes the SICAR particularly attractive for fund managers whose LP base includes EU investors for whom a Luxembourg-resident fund entity (rather than a transparent partnership) is more appropriate for treaty or administrative reasons. The SICAR is a taxable entity (unlike the transparent SCSp) but its primary income stream from risk capital investments is exempt.
Subscription tax: SICARs are exempt from the annual subscription tax (taxe d'abonnement) that applies to SIFs and RAIFs.
Legal form: The SICAR can be established in various legal forms, including SA (société anonyme), SCA (société en commandite par actions), SCSp (société en commandite spéciale), and Sàrl. The choice of legal form affects governance structure and LP participation rights.
For fund administrators, SICAR structures require the same ABOR maintenance, capital call processing, and LP reporting functions as other private equity fund structures, with the additional requirement to ensure that all investments documented in the fund's books qualify as risk capital within the CSSF-approved investment scope. Investments that do not qualify as risk capital can create regulatory issues for the SICAR, as the CSSF monitors compliance with the investment restrictions.
Worked example
Atlantic Ventures SICAR S.A. is a Luxembourg SICAR structured as a société anonyme, with EUR 150 million of LP commitments from European institutional investors. It focuses on growth equity investments in European technology companies at Series B and beyond.
The SICAR obtained CSSF authorisation before its first close. It appointed a Luxembourg AIFM and a Luxembourg depositary.
All investments are direct equity holdings in portfolio companies, qualifying as risk capital. Income from the portfolio (dividends from portfolio companies, exit proceeds from sales) is exempt from Luxembourg corporate income and municipal business tax.
The fund administrator maintains the SICAR's ABOR, processes capital calls from the LP register, calculates and distributes carried interest to the GP entity, and prepares annual audited financial statements under Luxembourg GAAP. The CSSF receives periodic regulatory reports through the AIFM.
A prospective investment in a senior secured private credit instrument is reviewed against the SICAR's mandate: it is determined not to qualify as risk capital and is declined. The portfolio company is instead offered a convertible loan, which qualifies as risk capital and is approved.
Frequently asked questions
What is the key difference between a SICAR and a SIF? A SICAR is designed exclusively for risk capital investment (private equity, venture capital, growth equity, and similar instruments), and its primary tax advantage is the exemption of risk capital income and gains from Luxembourg corporate tax. A SIF (Specialised Investment Fund) can invest in any eligible assets and is subject to the 0.01% subscription tax; its tax treatment depends on its structure and applicable tax treaties. The SICAR is the preferred structure when the tax exemption for risk capital gains is a priority; the SIF offers broader investment flexibility.
Is a SICAR suitable for a private credit fund? Only partially. A SICAR can hold certain subordinated debt instruments (convertibles, participating loans, PIK instruments) that expose the fund to company development risk and therefore qualify as risk capital. However, a SICAR cannot primarily invest in senior secured term loans, which are the core of most private credit strategies. Managers primarily operating private credit strategies should typically use a RAIF, SIF, or SCSp rather than a SICAR.
How does the SICAR's corporate tax exemption work in practice? Income and gains from qualifying risk capital investments (dividends, interest on risk capital instruments, capital gains on disposal of equity holdings) are exempt from Luxembourg corporate income tax (17%) and municipal business tax (6.75% to 10.5% depending on municipality). Income from non-risk-capital assets is taxable. The SICAR must maintain documentation demonstrating that each investment qualifies as risk capital, which the fund administrator typically tracks in the investment register.
Can a SICAR be converted to a different structure? Luxembourg law provides mechanisms for conversion between certain fund structures, but any conversion of a SICAR requires CSSF approval and LP consent under the applicable constitutive documents. Conversion is uncommon in practice; it is more common for managers to wind down a SICAR at the end of its life and launch a new vehicle (potentially in a different structure) for the next vintage.
What reporting does a SICAR file with the CSSF? The SICAR, through its AIFM, files AIFMD Annex IV regulatory reports with the CSSF at intervals determined by its AUM (quarterly for large AIFs, semi-annually for smaller ones). The SICAR also submits annual audited financial statements to the CSSF. The CSSF may conduct on-site inspections of the SICAR or its service providers as part of its ongoing supervisory function.
Related terms
RAIF (Luxembourg), SCSp (Luxembourg), SIF (Luxembourg), AIFMD and capital calls, Carried interest, Distribution waterfall
Related pages
Luxembourg fund structures for private credit and private equity, Swelv for Luxembourg fund administrators