Key Takeaways
- • Ordinance No. 2024-662 of July 3, 2024, issued under Article 40 of the "Green Industry" Law, was published in the Official Journal on July 4, 2024 and took effect the following day, but must be ratified by a bill tabled in Parliament by October 4, 2024 or it becomes void.
- • The ordinance removes the cap on ELTIF-approved fund redemption gates during exceptional circumstances and abolishes the 10 percent limit on receivables held by an FPCI.
- • A new Société de Libre Partenariat Spéciale (SLPS), without legal personality distinct from its investors, is created as a direct response to the Luxembourg special limited partnership, with a common pool managed for partners.
- • FPSs and SLPs may now issue debt securities alongside units or shares, subject to decrees, which could make them more attractive to institutions under Solvency II.
- • FCPRs can now invest in investment entities aligned with the FPCI definition, allowing fund-of-funds products for non-professional investors, while SCPIs gain expanded eligible assets.
Summary
According to Dechert, Ordinance No. 2024-662 modernizes the French alternative investment fund framework. The ordinance was issued under Article 40 of the "Green Industry" Law and published in the Official Journal of the French Republic on July 4, 2024. A ratification bill must be tabled within three months of publication, by October 4, 2024, to avoid the ordinance becoming void. Dechert notes that the current political context and probable future instability limit visibility on this timeline.
The ordinance includes technical adjustments required by the ELTIF II Regulation, which is directly applicable in the EU but depends on compatible local legal forms. For ELTIF-approved funds, redemption gates are no longer limited as a provisional measure when exceptional circumstances and the interests of unitholders or the public so require. The limit on receivables held by an FPCI, previously 10 percent of assets, has been abolished.
The ordinance creates the SLPS, a new variant of the Société de Libre Partenariat (SLP) introduced by the 2015 Macron Law. The SLPS lacks legal personality distinct from its investors, mirroring the Luxembourg special limited partnership. It keeps the classic SLP framework, including limited liability for limited partners, and adds a common pool (masse commune) administered by the manager in the partners' interest. Dechert expects the SLPS to follow the SLP tax regime, though lawmakers must confirm this in the next finance bill. The absence of legal personality may also allow certain foreign investors, such as Belgian investors, to treat the vehicle as fully transparent.
FPSs and SLPs may now issue debt securities in addition to units or shares, subject to conditions to be set by decree. This is expected to make these vehicles more competitive with Luxembourg structures and to suit institutions with prudential constraints, since debt investments can have a more favorable effect on capital adequacy ratios under Solvency II. Dechert also flags potential NAV financing opportunities.
The ordinance aligns the FCPR legal quota with that of FPCIs. FCPRs may now invest in entities whose main purpose is to invest directly or indirectly, and rights in other investment funds count toward the 50 percent quota up to the share of underlying assets in eligible companies. This is expected to broaden fund-of-funds offerings to non-professional investors. The tax quota under Article 163 quinquies B of the French Tax Code is unaffected and still limits indirect investments to one level of interposition.
The ordinance also clarifies that FPSs, SLPs and FPCIs may issue units, shares or, for FPSs and SLPs, debt securities giving different rights to fund assets or income. These instruments may not qualify as securitizations under Regulation (EU) 2017/2402. Dechert notes that carried interest arrangements must be addressed in constituent documents.
Finally, the list of eligible SCPI assets has been expanded under new Article L. 214-115 of the Monetary and Financial Code, covering furnishings, equipment and renewable energy production linked to buildings, and investments through unlisted companies mainly holding real estate with limited liability. Dechert cautions that directly operating furnished properties may trigger corporate income tax if not ancillary.
The ordinance includes technical adjustments required by the ELTIF II Regulation, which is directly applicable in the EU but depends on compatible local legal forms. For ELTIF-approved funds, redemption gates are no longer limited as a provisional measure when exceptional circumstances and the interests of unitholders or the public so require. The limit on receivables held by an FPCI, previously 10 percent of assets, has been abolished.
The ordinance creates the SLPS, a new variant of the Société de Libre Partenariat (SLP) introduced by the 2015 Macron Law. The SLPS lacks legal personality distinct from its investors, mirroring the Luxembourg special limited partnership. It keeps the classic SLP framework, including limited liability for limited partners, and adds a common pool (masse commune) administered by the manager in the partners' interest. Dechert expects the SLPS to follow the SLP tax regime, though lawmakers must confirm this in the next finance bill. The absence of legal personality may also allow certain foreign investors, such as Belgian investors, to treat the vehicle as fully transparent.
FPSs and SLPs may now issue debt securities in addition to units or shares, subject to conditions to be set by decree. This is expected to make these vehicles more competitive with Luxembourg structures and to suit institutions with prudential constraints, since debt investments can have a more favorable effect on capital adequacy ratios under Solvency II. Dechert also flags potential NAV financing opportunities.
The ordinance aligns the FCPR legal quota with that of FPCIs. FCPRs may now invest in entities whose main purpose is to invest directly or indirectly, and rights in other investment funds count toward the 50 percent quota up to the share of underlying assets in eligible companies. This is expected to broaden fund-of-funds offerings to non-professional investors. The tax quota under Article 163 quinquies B of the French Tax Code is unaffected and still limits indirect investments to one level of interposition.
The ordinance also clarifies that FPSs, SLPs and FPCIs may issue units, shares or, for FPSs and SLPs, debt securities giving different rights to fund assets or income. These instruments may not qualify as securitizations under Regulation (EU) 2017/2402. Dechert notes that carried interest arrangements must be addressed in constituent documents.
Finally, the list of eligible SCPI assets has been expanded under new Article L. 214-115 of the Monetary and Financial Code, covering furnishings, equipment and renewable energy production linked to buildings, and investments through unlisted companies mainly holding real estate with limited liability. Dechert cautions that directly operating furnished properties may trigger corporate income tax if not ancillary.
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