On 8 June 2026, the Luxembourg government submitted bill of law No. 8761 to the Chamber of Deputies (Chambre des Députés), proposing targeted amendments to the amended law of 22 March 2004 on securitisation (the Securitisation Law).
The bill is presented as a continuation of the successive reforms aimed at modernising and reinforcing the competitiveness of Luxembourg's securitisation legal framework. It proposes to extend the permitted activities of securitisation vehicles as regards (1) financing methods, (2) secured obligations and (3) active management of underlying assets. It also provides welcome clarity on a number of points.
A detailed overview of the bill is set out below.
1. Extended financing arrangements
The bill amends the Securitisation Law to allow securitisation vehicles ("SVs") to raise financing through means other than the issuance of traditional financial instruments or the taking out of loans. Specifically, the bill introduces the concept of "financing arrangements" and "other financial commitments" alongside existing references to loans, so as to expand the range of instruments available to SVs.
This modification responds to a growing demand from market participants facing specific constraints in certain investment segments, in particular in the context of Islamic finance, where the use of traditional loans and financial instruments may be prohibited.
The bill further codifies the rule that issuances offered to the public can only be financed by the issuance of financial instruments.
2. Protection of securitisation fund assets in the event of management company insolvency
The bill amends the Securitisation Law to clarify expressly that, in the event of the bankruptcy of a management company, the assets of the securitisation fund(s) managed by it do not form part of the management company's estate and cannot be used to satisfy the claims of the management company's creditors.
This clarification is inspired by the approach taken in investment fund legislation which provides that assets managed thereunder do not form part of the estate in the event of the management company's bankruptcy and may not be seized by the management company's own creditors. The amendment brings the Securitisation Law into alignment with this well-established principle and further reinforces investor protection in the context of multi-compartments fund securitisation structures.
3. Update of collective proceedings references
The bill amends further the Securitisation Law to update references to collective proceedings, in light of the entry into force of the law of 7 August 2023 on business preservation and the modernisation of bankruptcy law, as well as the amended law of 28 October 2022 establishing the administrative dissolution without liquidation procedure.
Certain collective proceedings previously referenced in the Securitisation Law, such as the concordat and the gestion contrôlée (controlled management), have been formally abolished and replaced by, in particular, the judicial reorganisation procedure (procédure de réorganisation judiciaire) and the amicable reorganisation (réorganisation par accord amiable). By removing obsolete references and clarifying the scope of analogous measures, the bill ensures a harmonised reading of the applicable regime and reinforces the predictability of the treatment of distress situations within securitisation structures.
4. Cross-compartment investment
The bill introduces a new Article 59-1 into the Securitisation Law, expressly permitting a compartment of an SV to invest directly or indirectly in one or more other compartments of the same SV, subject to the conditions set out in the constitutional documents, regulations, and issuance documents of the SV.
In order to protect investors and prevent circular structures, any circular investment is excluded: a compartment may not invest in another compartment that already holds an investment in the first compartment.
Where an investing compartment holds debt instruments issued by another compartment of the same SV, it enjoys all the rights of a creditor, including voting rights and the right to receive all financial yields and returns attached to the investment. The civil law rule on the confusion of debts (confusion, as per Article 1300 of the Civil Code) is expressly disapplied, thereby ensuring that an investing compartment retains full creditor rights vis-à-vis the target compartment, notwithstanding the common ownership structure and the single legal personality of the SV.
This possibility is already recognised in several special laws applicable to multi-compartment investment vehicles in Luxembourg, notably the amended law of 13 February 2007 on specialised investment funds and the amended law of 23 July 2016 on reserved alternative investment funds. The introduction of equivalent provisions in the Securitisation Law therefore brings SVs into line with the treatment afforded to other Luxembourg investment vehicles.
5. Clarification of the security interest regime
The bill amends Article 61(3) of the Securitisation Law to clarify and expand the regime governing the granting of security interests and guarantees by SVs.
Under the amended provision, an SV may grant security interests or guarantees in three circumstances: (i) to cover its own obligations; (ii) to guarantee the obligations of a third party directly or indirectly linked to the securitisation transaction; or (iii) to guarantee the obligations of a third party in the context of a direct or indirect investment in the securitisation transaction.
The bill acknowledges that since the 2022 reform - which significantly expanded the financing modes available to SVs - securitisation structures have evolved, giving rise to a need for further clarification. The amendment builds upon the 2022 reform to accompany, through a more precise drafting, the structural developments it made possible, and to enhance legal certainty.
6. Extension and clarification of the active management regime
The bill replaces Article 61-1 of the Securitisation Law with a new, more comprehensive provision governing the conditions under which SVs may actively manage a securitised portfolio of risks.
Under the previous text, active management was reserved for baskets of risks consisting of debt securities, financial debt instruments, or receivables, and required that the financial instruments issued to finance the acquisition of such baskets were not offered to the public. The new Article 61-1 removes the restriction on asset class, so that active management can now apply to any basket of risks, subject to the requirement that the financial instruments issued to finance the acquisition of such basket are not offered to the public. This restriction ensures that active management remains available only in the context of securitisations directed at professional or sophisticated investors.
Importantly, the bill introduces a list of seven operations that are expressly excluded from the definition of "active management", recognising that even a passively managed portfolio cannot remain entirely static throughout the life of a securitisation transaction and that certain adjustments are necessary. These excluded operations are:
- the replacement of assets in the event of a confirmed default or a proven risk of default;
- the replacement of assets that cease to meet the eligibility criteria defined in the management regulations or the issuance agreement;
- the replacement of assets that do not comply with the representations or warranties provided by the transferor to the SV;
- the addition of assets during the initial portfolio build-up phase, provided that such phase does not exceed one-third of the total duration of the securitisation transaction;
- the addition of assets during the life of the securitisation in the context of continuous issuances;
- the replacement of assets that have reached maturity or have been subject to early redemption or prepayment; and
- the marginal adjustment of the portfolio composition, asset allocation, risk exposure, or investment duration.
This clarification responds to the need to modernise the Securitisation Law in order to ensure a level playing field for Luxembourg SVs compared with securitisation regimes in other jurisdictions that have long permitted the active management of portfolios held by securitisation vehicles, including portfolios holding equity positions.
7. Refinement of subordination rules for floating-rate instruments
The bill finally amends Article 64(1)(5) of the Securitisation Law to introduce a clarification regarding the statutory subordination of non-fixed income debt instruments.
Under the current text, non-fixed income debt instruments issued by an SV are subordinated to its fixed income debt instruments. The bill clarifies that non-fixed income instruments are subordinated not only to fixed-rate instruments but also to floating-rate instruments, that is, instruments bearing interest calculated on the basis of a reference rate (such as Euribor) plus a fixed margin. Fixed-rate instruments and floating-rate instruments with a fixed margin are to rank equally between themselves.
The equal ranking between fixed-rate instruments and floating-rate instruments with a fixed margin is justified by their common nature as claims whose remuneration is determined or determinable independently of the residual performance of the SV's assets. The subordination rule is limited in scope to the application of the Securitisation Law and does not prejudge the application of analogous or distinct rules arising from other legal provisions.
Conclusion
Although bill of law No. 8761 introduces targeted rather than wholesale amendments to the Securitisation Law, its practical significance should not be underestimated. The bill further refines an already mature and market-tested framework, addressing specific demands from market participants, harmonising the Securitisation Law with other Luxembourg legislation, and building on the 2022 reform to enhance legal certainty and structuring flexibility. Of particular note is the expansion of SV financing arrangements, which opens the door to Islamic finance structures, and the codification of a more nuanced active management regime, which facilitates managed CLO and similar structures whilst maintaining appropriate investor protections. Once enacted, the bill will further cement Luxembourg's position as a leading European jurisdiction for securitisation.
Please note that bill of law No. 8761 is currently at committee stage before the Finance Commission and has not yet been adopted into law. The above reflects the bill as submitted on 8 June 2026.
Contact information
For more details on how the contemplated amendments and how this may impact your operations or if you have specific questions and/or requests on this topic, feel free to contact our experts.
Disclaimer
While the greatest care has been devoted to the contents of this publication, AKD cannot be held liable in any way for the consequences of activities undertaken on the basis of this publication.
On 8 June 2026, the Luxembourg government submitted bill of law No. 8761 to the Chamber of Deputies (Chambre des Députés), proposing targeted amendments to the amended law of 22 March 2004 on securitisation (the Securitisation Law).
The bill is presented as a continuation of the successive reforms aimed at modernising and reinforcing the competitiveness of Luxembourg's securitisation legal framework. It proposes to extend the permitted activities of securitisation vehicles as regards (1) financing methods, (2) secured obligations and (3) active management of underlying assets. It also provides welcome clarity on a number of points.
A detailed overview of the bill is set out below.
1. Extended financing arrangements
The bill amends the Securitisation Law to allow securitisation vehicles ("SVs") to raise financing through means other than the issuance of traditional financial instruments or the taking out of loans. Specifically, the bill introduces the concept of "financing arrangements" and "other financial commitments" alongside existing references to loans, so as to expand the range of instruments available to SVs.
This modification responds to a growing demand from market participants facing specific constraints in certain investment segments, in particular in the context of Islamic finance, where the use of traditional loans and financial instruments may be prohibited.
The bill further codifies the rule that issuances offered to the public can only be financed by the issuance of financial instruments.
2. Protection of securitisation fund assets in the event of management company insolvency
The bill amends the Securitisation Law to clarify expressly that, in the event of the bankruptcy of a management company, the assets of the securitisation fund(s) managed by it do not form part of the management company's estate and cannot be used to satisfy the claims of the management company's creditors.
This clarification is inspired by the approach taken in investment fund legislation which provides that assets managed thereunder do not form part of the estate in the event of the management company's bankruptcy and may not be seized by the management company's own creditors. The amendment brings the Securitisation Law into alignment with this well-established principle and further reinforces investor protection in the context of multi-compartments fund securitisation structures.
3. Update of collective proceedings references
The bill amends further the Securitisation Law to update references to collective proceedings, in light of the entry into force of the law of 7 August 2023 on business preservation and the modernisation of bankruptcy law, as well as the amended law of 28 October 2022 establishing the administrative dissolution without liquidation procedure.
Certain collective proceedings previously referenced in the Securitisation Law, such as the concordat and the gestion contrôlée (controlled management), have been formally abolished and replaced by, in particular, the judicial reorganisation procedure (procédure de réorganisation judiciaire) and the amicable reorganisation (réorganisation par accord amiable). By removing obsolete references and clarifying the scope of analogous measures, the bill ensures a harmonised reading of the applicable regime and reinforces the predictability of the treatment of distress situations within securitisation structures.
4. Cross-compartment investment
The bill introduces a new Article 59-1 into the Securitisation Law, expressly permitting a compartment of an SV to invest directly or indirectly in one or more other compartments of the same SV, subject to the conditions set out in the constitutional documents, regulations, and issuance documents of the SV.
In order to protect investors and prevent circular structures, any circular investment is excluded: a compartment may not invest in another compartment that already holds an investment in the first compartment.
Where an investing compartment holds debt instruments issued by another compartment of the same SV, it enjoys all the rights of a creditor, including voting rights and the right to receive all financial yields and returns attached to the investment. The civil law rule on the confusion of debts (confusion, as per Article 1300 of the Civil Code) is expressly disapplied, thereby ensuring that an investing compartment retains full creditor rights vis-à-vis the target compartment, notwithstanding the common ownership structure and the single legal personality of the SV.
This possibility is already recognised in several special laws applicable to multi-compartment investment vehicles in Luxembourg, notably the amended law of 13 February 2007 on specialised investment funds and the amended law of 23 July 2016 on reserved alternative investment funds. The introduction of equivalent provisions in the Securitisation Law therefore brings SVs into line with the treatment afforded to other Luxembourg investment vehicles.
5. Clarification of the security interest regime
The bill amends Article 61(3) of the Securitisation Law to clarify and expand the regime governing the granting of security interests and guarantees by SVs.
Under the amended provision, an SV may grant security interests or guarantees in three circumstances: (i) to cover its own obligations; (ii) to guarantee the obligations of a third party directly or indirectly linked to the securitisation transaction; or (iii) to guarantee the obligations of a third party in the context of a direct or indirect investment in the securitisation transaction.
The bill acknowledges that since the 2022 reform - which significantly expanded the financing modes available to SVs - securitisation structures have evolved, giving rise to a need for further clarification. The amendment builds upon the 2022 reform to accompany, through a more precise drafting, the structural developments it made possible, and to enhance legal certainty.
6. Extension and clarification of the active management regime
The bill replaces Article 61-1 of the Securitisation Law with a new, more comprehensive provision governing the conditions under which SVs may actively manage a securitised portfolio of risks.
Under the previous text, active management was reserved for baskets of risks consisting of debt securities, financial debt instruments, or receivables, and required that the financial instruments issued to finance the acquisition of such baskets were not offered to the public. The new Article 61-1 removes the restriction on asset class, so that active management can now apply to any basket of risks, subject to the requirement that the financial instruments issued to finance the acquisition of such basket are not offered to the public. This restriction ensures that active management remains available only in the context of securitisations directed at professional or sophisticated investors.
Importantly, the bill introduces a list of seven operations that are expressly excluded from the definition of "active management", recognising that even a passively managed portfolio cannot remain entirely static throughout the life of a securitisation transaction and that certain adjustments are necessary. These excluded operations are:
- the replacement of assets in the event of a confirmed default or a proven risk of default;
- the replacement of assets that cease to meet the eligibility criteria defined in the management regulations or the issuance agreement;
- the replacement of assets that do not comply with the representations or warranties provided by the transferor to the SV;
- the addition of assets during the initial portfolio build-up phase, provided that such phase does not exceed one-third of the total duration of the securitisation transaction;
- the addition of assets during the life of the securitisation in the context of continuous issuances;
- the replacement of assets that have reached maturity or have been subject to early redemption or prepayment; and
- the marginal adjustment of the portfolio composition, asset allocation, risk exposure, or investment duration.
This clarification responds to the need to modernise the Securitisation Law in order to ensure a level playing field for Luxembourg SVs compared with securitisation regimes in other jurisdictions that have long permitted the active management of portfolios held by securitisation vehicles, including portfolios holding equity positions.
7. Refinement of subordination rules for floating-rate instruments
The bill finally amends Article 64(1)(5) of the Securitisation Law to introduce a clarification regarding the statutory subordination of non-fixed income debt instruments.
Under the current text, non-fixed income debt instruments issued by an SV are subordinated to its fixed income debt instruments. The bill clarifies that non-fixed income instruments are subordinated not only to fixed-rate instruments but also to floating-rate instruments, that is, instruments bearing interest calculated on the basis of a reference rate (such as Euribor) plus a fixed margin. Fixed-rate instruments and floating-rate instruments with a fixed margin are to rank equally between themselves.
The equal ranking between fixed-rate instruments and floating-rate instruments with a fixed margin is justified by their common nature as claims whose remuneration is determined or determinable independently of the residual performance of the SV's assets. The subordination rule is limited in scope to the application of the Securitisation Law and does not prejudge the application of analogous or distinct rules arising from other legal provisions.
Conclusion
Although bill of law No. 8761 introduces targeted rather than wholesale amendments to the Securitisation Law, its practical significance should not be underestimated. The bill further refines an already mature and market-tested framework, addressing specific demands from market participants, harmonising the Securitisation Law with other Luxembourg legislation, and building on the 2022 reform to enhance legal certainty and structuring flexibility. Of particular note is the expansion of SV financing arrangements, which opens the door to Islamic finance structures, and the codification of a more nuanced active management regime, which facilitates managed CLO and similar structures whilst maintaining appropriate investor protections. Once enacted, the bill will further cement Luxembourg's position as a leading European jurisdiction for securitisation.
Please note that bill of law No. 8761 is currently at committee stage before the Finance Commission and has not yet been adopted into law. The above reflects the bill as submitted on 8 June 2026.
Contact information
For more details on how the contemplated amendments and how this may impact your operations or if you have specific questions and/or requests on this topic, feel free to contact our experts.
Disclaimer
While the greatest care has been devoted to the contents of this publication, AKD cannot be held liable in any way for the consequences of activities undertaken on the basis of this publication.