Luxembourg Securitisation: A Flexible Framework for International Investment Structures
Luxembourg's securitisation law lets one vehicle take on almost any identifiable risk and finance it through notes or, since 2022, loans, with each transaction ring-fenced in its own compartment. This guide explains how the framework works, where regulation begins, and which decisions shape a structure before any document is drafted.
What the Law of 22 March 2004 does
The Law of 22 March 2004 on securitisation defines securitisation as the transaction by which a securitisation undertaking "acquires or assumes, directly or through another undertaking, risks relating to claims, other assets, or obligations assumed by third parties or inherent to all or part of the activities of third parties". The undertaking then finances those risks through instruments or loans "whose value or yield depends on such risks" (Article 1).
The CSSF's FAQ describes the law as open to the securitisation of "all kinds of risk, in the broadest sense". The law also supplies the tools that make private structures workable: compartments, statutory limited recourse, and express recognition of subordination and non-petition clauses. The PwC Luxembourg and LuxCMA Securitisation Market Survey 2026 counts 1,682 active vehicles at the end of 2025, up from 1,541 a year earlier.
What the 2022 reform changed
The Law of 25 February 2022 (Mémorial A 2022, No 84) modernised the 2004 Law. Six changes matter most in practice:
Loan financing. A vehicle may be financed wholly or partly by loans, not only by financial instruments (Article 1(3)).
Active management. A pool of debt securities, debt instruments or claims may be actively managed, but only where its financing is not offered to the public (Article 61-1).
More legal forms. Four partnership and simplified forms were added (Article 4).
A statutory "public" test. The conditions for CSSF authorisation are now in the law (Article 19).
Default ranking. A statutory order of subordination applies unless the documents provide otherwise (Article 64).
Compartment-level accounts. Share-financed compartments can approve accounts and determine distributable profits separately.
Bill No 8761, deposited in June 2026, would widen the permitted financing and active management further. It is a proposal, not law.
Securitisation company or compartment
The articles of a securitisation company may authorise its management body to create compartments. Each compartment "correspond[s] to a distinct part of its assets and liabilities" (Article 5). The protection is statutory:
Where investors' and creditors' rights relate to a compartment, they are limited to that compartment's assets (Article 62(1)).
A compartment's assets are available only to the investors and creditors of that compartment (Article 62(2)).
Each compartment may be liquidated without liquidating any other (Article 33).
A compartment is not a separate legal entity, and some tests apply at company level: the EUR 3 million interest limitation de minimis, for example, is calculated for the company as a whole.
A dedicated securitisation company has its own board, articles and service providers. It suits repeat issuers and programmes that will add compartments over time.
A compartment in an existing company is usually quicker, because the entity and its onboarding already exist, but operates within the host's articles, policies and providers.
What can be securitised
Article 53 makes risks capable of securitisation if they relate to:
the holding of assets, "whether movable or immovable, tangible or intangible";
obligations assumed by third parties; or
all or part of the activities of third parties.
The vehicle may assume those risks by acquiring the assets directly or indirectly, by guaranteeing the obligations, or "by committing itself in any other way". True-sale and synthetic structures are both possible, covering loan portfolios, trade receivables, property exposure through loans or property companies, royalties and infrastructure cash flows.
There are limits. CSSF guidance confines a vehicle to administering the transaction's financial flows and prudently managing the securitised risks, and excludes activity that would make it an entrepreneur. Direct loan origination is possible only within that guidance; acquiring loans already granted by a third party is the more common route.
Financing: notes and, since 2022, loans
A vehicle can issue fixed-coupon notes, profit-participating notes or hybrid instruments, as well as shares. Their value, yield or repayment may be linked to specific compartments, assets or risks, or made subject to the repayment of other instruments (Article 63). Since 2022, a lender such as a bank or family office can also finance a compartment directly by a loan whose return tracks the securitised risks.
Unless the documents provide otherwise, Article 64 sets a default ranking:
shares rank behind beneficiary shares;
beneficiary shares rank behind debt instruments and loans; and
non-fixed-income debt ranks behind fixed-rate debt.
If credit risk is tranched, so that subordination determines how losses are shared, the transaction may fall within the EU Securitisation Regulation (Regulation (EU) 2017/2402) and its additional requirements. Non-tranched instruments and non-credit risks generally fall outside it while still benefiting from the Luxembourg law.
Regulated or unregulated: where the CSSF comes in
Most Luxembourg securitisation vehicles are not authorised by the CSSF. Authorisation is required only where a vehicle issues, on a continuous basis, financial instruments offered to the public (Article 19). Since 2022, both elements are defined in the law:
Continuous basis means more than three issuances of financial instruments offered to the public during one financial year, counted across all compartments together.
Offered to the public means an issuance that meets all three of these conditions: it is not intended for professional clients, its denominations are below EUR 100,000, and it is not distributed as a private placement.
The two conditions are cumulative. A one-off public issue does not trigger authorisation, and neither do frequent issues to professional clients, issues in denominations of EUR 100,000 or more, or private placements.
The CSSF's FAQ on securitisation (version 1, 23 October 2013), still listed on the regulator's website, predates the reform and works through presumptions. Listing alone does not make an issue public; subscription by an intermediary for onward placement with the public does; each series under a programme is presumed to be a separate issue. Its presumption that denominations of at least EUR 125,000 are not public has been overtaken by the statutory EUR 100,000 threshold, and the statute governs.
When it applies
Unregulated vehicle: Any case outside the two cumulative Article 19 conditions
CSSF-authorised vehicle: Continuous issuance of instruments offered to the public
CSSF approval
Unregulated vehicle: None required
CSSF-authorised vehicle: Articles or management regulations approved; directors assessed for repute and experience
Changes of control or articles
Unregulated vehicle: Ordinary company law
CSSF-authorised vehicle: Prior CSSF approval
Board
Unregulated vehicle: As required by the legal form
CSSF-authorised vehicle: At least three members (CSSF practice)
Audit
Unregulated vehicle: Approved independent auditor (réviseur d'entreprises agréé)
CSSF-authorised vehicle: Approved auditor, itself authorised by the CSSF
Active management of debt pools
Unregulated vehicle: Permitted (Article 61-1)
CSSF-authorised vehicle: Not permitted where instruments are offered to the public
Unregulated does not mean unsupervised. The vehicle is audited, files accounts and registers its beneficial owners; its domiciliation agent, paying agent and auditor apply AML and KYC checks to it; and, depending on its activity, it must assess whether it is an alternative investment fund.
Legal forms and minimum capital
A securitisation company may be an SA, S.à r.l., SCA, cooperative organised as an SA, SNC, SCS, SCSp or SAS (Article 4). Alternatively, a securitisation fund without legal personality can be run by a management company as a co-ownership or fiduciary estate.
There is no securitisation-specific capital requirement, only the company-law minimum for the form: EUR 30,000 for an SA and EUR 12,000 for an S.à r.l., for the entity as a whole rather than per compartment.
Tax: taxable, but designed for neutrality
Corporate securitisation vehicles are fully subject to corporate income tax and municipal business tax, at an aggregate 23.87% in Luxembourg City for 2026. However, commitments to remunerate investors and creditors are deductible even when paid as a return on equity, so the taxable base is usually limited. Distributions are exempt from withholding tax in the same way as interest, and corporate vehicles pay only the minimum net wealth tax.
Neutrality is a design goal, not a guarantee:
Anti-hybrid rules apply.
The interest limitation rule caps deductible exceeding borrowing costs at the higher of 30% of tax EBITDA and EUR 3 million. The exemption for vehicles within the EU Securitisation Regulation is under challenge: the European Commission brought an action before the Court of Justice in February 2024, and draft bill No 7974 would remove it.
Partnerships not liable to corporate tax generally fall outside the interest limitation rule. Treaty access, VAT and source-country withholding need case-by-case analysis.
Market infrastructure
ISIN. Clearstream is numbering agency for Luxembourg (LU) and international (XS) ISINs.
Settlement. Clearstream supports delivery-versus-payment settlement, including bridge settlement with Euroclear Bank: securities move only against payment.
Paying agent. A bank settles payments on the instruments, usually through the clearing system.
Listing. Optional. It can add visibility, but admission is at the venue's discretion and it does not create liquidity.
What to decide first
The risk and how the vehicle obtains it: acquisition, guarantee or synthetic exposure, tested against origination limits and the entrepreneur test.
Investors and distribution: who subscribes, in what denominations, how and how often. This decides whether Article 19 is engaged.
Instrument and ranking: fixed or profit-participating notes, or loans; tranched or not.
Vehicle and form: dedicated company or compartment; corporate or partnership, which affects tax.
Management: static or actively managed, which engages Article 61-1 and the fund-regulation assessment.
Tax across the chain: source-country withholding, treaty access and the investors' own position.
Providers and infrastructure: auditor, account bank, paying agent, settlement and any listing venue.
A fictional example: a property-loan portfolio in a compartment
This example is fictional. It describes no actual transaction, offering or expected return.
A regional commercial lender holds 58 performing loans totalling EUR 46 million, secured on mid-market office and logistics property. It wants to free up its balance sheet while keeping its borrower relationships. An existing multi-compartment securitisation company creates a new compartment by board resolution, as its articles permit, and the compartment buys the portfolio. It is financed by:
EUR 40 million of Class A fixed-rate notes, in denominations of EUR 100,000, placed privately with professional investors, including two family offices and a credit fund; and
a EUR 6 million profit-participating loan from the lender itself, ranking behind the notes.
The lender continues to service the loans. Each quarter, collections pay the compartment's costs, then the Class A coupon and scheduled principal, then the participating loan.
Ring-fencing: a creditor of another compartment, such as one holding trade receivables, has no claim on these loans.
Protections: investors agree to limited recourse and non-petition terms.
No CSSF authorisation: the notes go to professional clients, in denominations of at least EUR 100,000, by private placement.
Infrastructure: the notes carry an LU ISIN and settle delivery versus payment through the investors' custodians.
EU rules: because credit risk is tranched between notes and loan, the parties must establish at the outset whether the EU Securitisation Regulation applies.
The structure does not remove credit risk. If borrowers default, the participating loan absorbs losses first, and noteholders bear any shortfall beyond it.
How Kuts & Co supports securitisation transactions
Kuts & Co works with sponsors from the first structuring discussion to ongoing administration:
Structuring support: mapping the risk, investors, instruments and vehicle options against the points above.
Establishment coordination: company or compartment set-up, the documentation timetable and service-provider onboarding.
Administration and reporting: corporate administration, accounting, payment calculations and investor reporting.
AML and KYC support: the documentation that banks, paying agents and auditors require.
Legal advice, audit, banking, paying agency and listing are provided by independent licensed firms, whose work we coordinate. Kuts & Co provides corporate structuring and administration services and does not offer securities.
This article is general information only. It is not an offer of securities and not legal, tax or investment advice.
Sources
CSSF, Law of 22 March 2004 on securitisation, as amended (English consolidated text, unofficial; includes amendments by the Law of 25 February 2022, Mém. A 2022, No 84, and the Law of 15 July 2024). Accessed 9 November 2026. https://cssf.lu/wp-content/uploads/L_220304_securitisation_upd15072024.pdf
CSSF, FAQ: Securitisation (version 1), 23 October 2013. https://cssf.lu/wp-content/uploads/FAQ_titrisation_eng.pdf
CSSF, Authorisation of a securitisation undertaking (web page, last updated 31 July 2025). https://www.cssf.lu/en/authorisation-of-a-securitisation-undertaking/
PwC Luxembourg, Securitisation in Luxembourg: A comprehensive guide (15th edition), 3 June 2026. https://www.pwc.lu/en/securitisation/docs/pwc-securitisation-in-luxembourg-comprehensive-guide-2026.pdf
PwC Luxembourg in collaboration with LuxCMA, Securitisation Market Survey 2026, 2026. https://www.pwc.lu/en/securitisation/docs/securitisation-market-survey-2026.pdf
Stibbe, (R)evolution of the securitisation framework, March 2022. https://www.stibbe.com/publications-and-insights/revolution-of-the-securitisation-framework
Chambre des Députés, Projet de loi n° 8761 portant modification de la loi modifiée du 22 mars 2004 relative à la titrisation (deposit), 8 June 2026. https://wdocs-pub.chd.lu/docs/Dossiers_parlementaires/8761/20260721_Depot.pdf
Arendt & Medernach, Bill modernising legal framework for securitisation in Luxembourg, 11 June 2026. https://www.arendt.com/news-insights/news/bill-modernising-legal-framework-for-securitisation-in-luxembourg/
Clearstream, Code allocation services (web page). https://clearstream.com/clearstream-en/securities-services/issuance-1-/issuance-services/code-allocation
Clearstream, Settlement overview (web page). https://www.clearstream.com/clearstream-en/res-library/settlement/settlement-overview--1276298
European Systemic Risk Board, Glossary: delivery versus payment (web page). https://www.esrb.europa.eu/home/glossary/html/act7d.en.html
