Every Luxembourg special limited partnership (SCSp) needs at least one general partner, usually called the GP. The GP has unlimited liability for the SCSp’s obligations. Its liability is not capped at its contribution. The limited partnership agreement, the contract between the partners, sets out how the SCSp is managed and represented. One or more managers are appointed under its terms and may or may not be general partners. Limited partners retain limited liability if they stay within the legal framework for their role.
The GP therefore has responsibilities beyond signing documents. Its legal form, ownership, decision-making process and interest in the fund must fit the limited partnership agreement and the wider regulatory structure.
The GP’s legal role
The Law of 10 August 1915 gives the SCSp contractual flexibility. The limited partnership agreement can define investment powers, reserved matters requiring specific approval, transfers, the appointment of managers, and removal or replacement of the GP. That flexibility does not change the basic split between the partners.
The appointed manager or managers run the SCSp and enter into commitments on its behalf. A GP can hold that mandate, but the agreement may appoint another person. A limited partner may exercise the rights permitted by law and the agreement without becoming the external face of management. The agreement should therefore distinguish manager decisions, GP rights and investor consent rights.
The GP also bears unlimited liability for partnership debts. This is why most institutional structures use a company rather than an individual as GP.
Why a corporate GP is common
A corporate GP places the unlimited partnership liability in a company with its own legal identity. The company itself remains fully liable as GP, but its shareholders normally benefit from the liability rules of the chosen corporate form.
Two forms appear most often.
| Corporate form | Statutory minimum capital | Governance outline |
|---|---|---|
| SARL (private limited liability company) | EUR 12,000 | One or more managers |
| SA (public limited company) | EUR 30,000 | Board of directors (monistic) or management board and supervisory board (dualistic) |
A SARL often suits a closely held sponsor. An SA can fit a broader ownership or governance model. The choice is not determined by the SCSp Law alone. Transfer restrictions, financing, board organisation and investor expectations also matter.
A separate GP company does not block every claim against an individual. Personal guarantees, directors’ duties and liability for a person’s own conduct remain separate questions.
The GP interest and the 5% rule
The SCSp is normally transparent for Luxembourg corporate income tax purposes. Its income is attributed to its partners, subject in particular to the reverse-hybrid rules. Municipal business tax requires a separate analysis of its activity and of the statutory commercial-imprint rule, which can treat investment income as commercial income.
ACD Circular L.I.R. 14/4 explains that, outside a special product-law tax regime, a capital-company GP holding at least 5% of the partnership interests brings the SCSp within that rule. The test covers each GP. Reducing one GP’s stake below 5% has no effect if another relevant GP still reaches the threshold. Article 14(4) also treats a commercially characterised partnership as a capital company when it holds interests in another partnership.
The threshold is not a complete tax exemption. For an SCSp that is not an alternative investment fund (AIF), the actual activity remains a separate test, so the investment policy, trading pattern and other facts can still produce commercial income. An SCSp that qualifies as an AIF is deemed not to exercise an actual commercial activity under Article 14(1) LIR. It must nevertheless test the separate commercial-imprint rule, and a capital-company GP interest of at least 5% triggers that rule.
The GP’s stake, voting rights and economic rights should therefore be reviewed together. Carried interest or other profit rights are not automatically best held by the GP. Their legal and tax treatment depends on the instruments used and on the fund’s economics.
The GP and the AIFM are different roles
When the GP is also an appointed manager, it manages the partnership under company law. That role is separate from the regulated role of the alternative investment fund manager (AIFM), which manages the investment portfolio and its risks when the SCSp qualifies as an AIF.
An SCSp has no legal personality and cannot itself be authorised as an internally managed AIF. Where the AIFM Law applies, the manager is a separate legal person. A corporate GP can perform that role only if it meets the applicable registration or authorisation requirements for the mandate concerned.
The alternative is to appoint a separate AIFM. The GP then retains its partner rights and any management or signing powers granted by the limited partnership agreement, while the AIFM carries the regulated functions. The limited partnership agreement and management agreement must describe the split consistently.
A RAIF, a reserved alternative investment fund, makes this point stricter. It must have an external authorised AIFM under the RAIF Law. A merely registered GP cannot manage a RAIF.
Governance in practice
The GP should be able to show how decisions are prepared, questioned and recorded. This does not create a general requirement for a majority of Luxembourg-resident managers. It does mean that the formal board cannot be disconnected from the decisions attributed to it.
Conflicts need particular attention. The sponsor may own the GP, advise the AIFM, receive fees from portfolio companies and participate in carried interest. The partnership agreement can allocate approval rights, but the actual process must follow that allocation.
The GP company also has its own accounting obligations, alongside its tax and company-law duties. Its expenses and income must be separated from those of the SCSp. Amounts paid by the fund should follow the agreements and be recorded in the correct entity.
Removal and continuity
The limited partnership agreement usually defines when investors can remove the GP, whether removal requires a specified event, such as a breach, and how a successor is appointed. Those clauses are central because removing a GP that is also a manager can affect signing authority, regulatory appointments and the sponsor’s economic rights at the same time.
The agreement should also address temporary incapacity and the period between removal and replacement. If the sole GP leaves or can no longer act, continuation and replacement provisions become critical. Where continuation is stipulated but replacement arrangements are missing, Article 320-8 provides for a court-appointed provisional administrator to perform urgent and ordinary administrative acts and obtain a partner decision within 15 days of appointment.
A change of GP can require updates to the Trade and Companies Register (RCS) filing, bank mandates, service-provider records and AIFM documentation. The legal replacement and the operating transition should therefore be prepared together.
Luxembourg fund formation support
To incorporate the GP, structure its stake and keep its accounts and filings in order.
Explore fund formation supportFrequently Asked Questions
Can an individual be the general partner of a Luxembourg SCSp?
Yes. The general partner has unlimited liability for the SCSp's obligations. A separate Luxembourg limited-liability company is commonly used so that this unlimited liability stops at the company rather than passing to its shareholders. This does not remove personal guarantees or liability for a person's own conduct.
What does the 5% GP threshold mean?
Outside a special product-law tax regime, a capital-company GP holding at least 5% of the partnership interests makes the SCSp commercial by law. To avoid this deeming rule, each relevant GP must stay below that threshold. For a non-AIF SCSp, actual activity remains a separate test. The ACD treats the investment activity of an AIF SCSp as non-commercial under Article 14(1), while preserving the separate deeming rule.
Can the GP also be the AIFM?
A corporate GP can do so if it is separately registered or authorised for the relevant mandate. An SCSp cannot be an internally managed AIF because it has no legal personality. A RAIF must appoint an external authorised AIFM, whether that manager is the corporate GP or another entity.
