International tax advice

Public Offering, Private Placement  (20/05/2010)

There are two distinct ways to distribute securities in the Grand-Duchy of Luxembourg as follows:

  1. by way of public offering or

  2. through the channel of the private placement.

Article 5 of the law of 10th July 2005 on prospectuses for securities lays down the general principle that no offer to the public of securities shall be made within the territory of Luxembourg without prior publication of a prospectus and a prior notification to the Commission de Surveillance du Secteur Financier (the "Regulator” or “CSSF”).

Broadly speaking, the goal of the legislator is to protect public savings by requiring the supervision of the offer by the Regulator. However, Article 5 of the law of 10th July 2005, provides that the obligation to publish a prospectus and consequently the obligation to notify the CSSF does not apply to certain categories of offers as follows:

However, any subsequent resale of securities which were previously the subject of one or more of the types of offer mentioned in (a) to (e) of this paragraph shall be regarded as a separate offer and the definition set out in Article 1(1)(l) shall apply for the purpose of deciding whether that resale is an offer of securities to the public. The placement of securities through financial intermediaries shall be subject to publication of a prospectus if none of the conditions (a) to (e) are met for the final placement.”

We then summarise that two sets of conditions must be met to qualify an offer as a public offering:

Alternatively the provisions of Article 5 may be seen as a safe harbor for the private placement once the criteria and threshold of Article 5 are observed[i].

In order to avoid the strict framework from the Prospectus Directive, issuers have shown a keen interest in distributing their securities through the channel of the private placement.

[1] Subject to several conditions resulting from “market practices” and “usage”.
[i] Also in France : Code Monétaire et Financier Art. 411-2 and in Switzerland: FINMA Circulaire 2008/8
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