Background
On 30 July 2026, Bill of Law 8814 was tabled before the Luxembourg Parliament, proposing to insert a new Article 28bis into the Luxembourg AIFM Law, as amended. Until now, an SCS (société en commandite simple) or SCSp (société en commandite spéciale) could only adopt a multi-compartment structure with statutory segregation between compartments if it was governed by one of Luxembourg's fund product laws, such as the SICAR Law, the SIF Law and the RAIF Law. Outside those regimes, an SCS or SCSp could only replicate segregation contractually, through pools or tracking classes set out in the limited partnership agreement, mechanisms that remain exposed to challenge by third parties and add complexity to lending and security arrangements.
What Article 28bis changes
Article 28bis provides that an SCS or SCSp qualifying as an AIF and managed by an AIFM authorised in the European Union may adopt an umbrella structure with ring-fenced compartments, without being subject to any of the Luxembourg fund product laws. The regime is not available to AIFs managed by sub-threshold or third-country AIFMs. It is limited to the SCS and SCSp legal forms and does not extend to the common fund (fonds commun de placement - FCP). The new provision draws directly on the established compartment mechanics of Article 49 of the RAIF Law, itself derived from Article 71 of the SIF Law, extending a well-tested legal technique to a new category of vehicle rather than inventing a new one.
Key features
- Statutory ring-fencing: By default, the rights of investors and creditors relating to a compartment, or arising in connection with its creation, operation or liquidation, are limited to the assets of that compartment. The assets of a compartment answer exclusively for the rights of its own investors and creditors, and each compartment is treated as a separate pool among investors. This segregation operates as a default rule: the constitutional documents may provide otherwise, so the extent of ring-fencing in any given structure will depend on the actual wording of the limited partnership agreement.
- No diversification requirement: Unlike an SCS or SCSp governed by the SIF Law or the RAIF Law, no risk-spreading is required within a compartment established under Article 28bis. Compartments can accordingly be created for single investments, which is of particular use for deal-by-deal structures, as well as for different vintages, different investment strategies, different leverage limits, or dedicated co-investment arrangements.
- Cross-compartment investment: Subject to the terms of the constitutional documents, one compartment may subscribe for, acquire or hold interests issued by one or more other compartments of the same AIF. Two statutory safeguards apply: the target compartment may not in turn invest in the investing compartment, and any voting rights attached to the relevant interests are suspended for as long as they are held by the investing compartment, without prejudice to appropriate treatment of those holdings in the accounts and periodic reports.
- Separate liquidation: Each compartment can be liquidated separately without causing the dissolution of the SCS or SCSp, provided at least one compartment remains. The SCS or SCSp automatically enters liquidation only upon the liquidation of the last remaining compartment.
- Constitutional documents and disclosure: The use of compartments and the rules governing them must be expressly provided for in the LPA. The specific investment policy of each compartment must be disclosed in accordance with Article 21 of the AIFM Law, but the Bill does not impose an obligation to produce a formal offering or issuing document, preserving the flexibility currently available under the AIFM Law as to the form and location of investor information.
- No minimum capital: Unlike the SIF or RAIF regimes, the new framework imposes no minimum regulatory capital requirement.
- Reporting: A separate annual report may be prepared for each compartment, provided it includes, in addition to compartment-specific information, aggregated data covering all compartments of the AIF, an approach similar to what is already available to RAIFs and SIFs.
How this compares internationally
Among comparable offshore structures, the Cayman Islands' segregated portfolio company (SPC) is a company under Cayman law that can create statutorily ring-fenced portfolios, whereas its exempted limited partnership (ELP) achieves comparable protection only contractually, through the limited partnership agreement, rather than by statute. Delaware's Series LLC offers a statutory internal liability shield between series, but its recognition by courts outside Delaware remains untested. Article 28bis brings the Luxembourg limited partnerships a step closer to combining statutory segregation with partnership flexibility within a single onshore, EU-regulated framework.
Practical relevance
Many Luxembourg private funds are already structured as an SCSp without being subject to a fund product law, in particular as parallel investment vehicles alongside offshore funds for European investors. This generally works well for a simple SCS or SCSp, but not where the parallel fund is itself compartmentalised, such as a Series LLC. Article 28bis should be particularly valuable for parallel fund, feeder fund and co-investment arrangements, multi-strategy platforms, and Luxembourg vehicles intended to replicate foreign umbrella or series structures, by providing a clearer and more robust legal framework for achieving segregation without the need to adopt a product-law wrapper solely for that purpose.
The new regime does not replace the RAIF, which remains a distinct product governed by the RAIF Law, reserved to well-informed investors and requiring an authorised external AIFM together with the service providers and documentation the RAIF Law prescribes. The choice between the two will continue to depend on the intended investor base, investor eligibility restrictions, investment policy and diversification requirements, marketing strategy, and service-provider and financing arrangements, among other factors. In either case, sponsors and their advisers can draw on decades of Luxembourg market and regulatory experience in operating compartmentalised structures, which should support a smooth transition of this established technique to the SCS/SCSp toolbox.
Next steps
The Bill is now proceeding through the legislative process. The State Council and the Chamber of Commerce are next expected to issue their opinions, and further amendments may be made, before the Bill can be put to a vote in Parliament.
We consider this a genuine upgrade for Luxembourg's fund structuring offering: it closes a real gap for sponsors who wanted statutory ring-fencing without accepting the fund-product-law obligations that their project did not otherwise require.
Background
On 30 July 2026, Bill of Law 8814 was tabled before the Luxembourg Parliament, proposing to insert a new Article 28bis into the Luxembourg AIFM Law, as amended. Until now, an SCS (société en commandite simple) or SCSp (société en commandite spéciale) could only adopt a multi-compartment structure with statutory segregation between compartments if it was governed by one of Luxembourg's fund product laws, such as the SICAR Law, the SIF Law and the RAIF Law. Outside those regimes, an SCS or SCSp could only replicate segregation contractually, through pools or tracking classes set out in the limited partnership agreement, mechanisms that remain exposed to challenge by third parties and add complexity to lending and security arrangements.
What Article 28bis changes
Article 28bis provides that an SCS or SCSp qualifying as an AIF and managed by an AIFM authorised in the European Union may adopt an umbrella structure with ring-fenced compartments, without being subject to any of the Luxembourg fund product laws. The regime is not available to AIFs managed by sub-threshold or third-country AIFMs. It is limited to the SCS and SCSp legal forms and does not extend to the common fund (fonds commun de placement - FCP). The new provision draws directly on the established compartment mechanics of Article 49 of the RAIF Law, itself derived from Article 71 of the SIF Law, extending a well-tested legal technique to a new category of vehicle rather than inventing a new one.
Key features
- Statutory ring-fencing: By default, the rights of investors and creditors relating to a compartment, or arising in connection with its creation, operation or liquidation, are limited to the assets of that compartment. The assets of a compartment answer exclusively for the rights of its own investors and creditors, and each compartment is treated as a separate pool among investors. This segregation operates as a default rule: the constitutional documents may provide otherwise, so the extent of ring-fencing in any given structure will depend on the actual wording of the limited partnership agreement.
- No diversification requirement: Unlike an SCS or SCSp governed by the SIF Law or the RAIF Law, no risk-spreading is required within a compartment established under Article 28bis. Compartments can accordingly be created for single investments, which is of particular use for deal-by-deal structures, as well as for different vintages, different investment strategies, different leverage limits, or dedicated co-investment arrangements.
- Cross-compartment investment: Subject to the terms of the constitutional documents, one compartment may subscribe for, acquire or hold interests issued by one or more other compartments of the same AIF. Two statutory safeguards apply: the target compartment may not in turn invest in the investing compartment, and any voting rights attached to the relevant interests are suspended for as long as they are held by the investing compartment, without prejudice to appropriate treatment of those holdings in the accounts and periodic reports.
- Separate liquidation: Each compartment can be liquidated separately without causing the dissolution of the SCS or SCSp, provided at least one compartment remains. The SCS or SCSp automatically enters liquidation only upon the liquidation of the last remaining compartment.
- Constitutional documents and disclosure: The use of compartments and the rules governing them must be expressly provided for in the LPA. The specific investment policy of each compartment must be disclosed in accordance with Article 21 of the AIFM Law, but the Bill does not impose an obligation to produce a formal offering or issuing document, preserving the flexibility currently available under the AIFM Law as to the form and location of investor information.
- No minimum capital: Unlike the SIF or RAIF regimes, the new framework imposes no minimum regulatory capital requirement.
- Reporting: A separate annual report may be prepared for each compartment, provided it includes, in addition to compartment-specific information, aggregated data covering all compartments of the AIF, an approach similar to what is already available to RAIFs and SIFs.
How this compares internationally
Among comparable offshore structures, the Cayman Islands' segregated portfolio company (SPC) is a company under Cayman law that can create statutorily ring-fenced portfolios, whereas its exempted limited partnership (ELP) achieves comparable protection only contractually, through the limited partnership agreement, rather than by statute. Delaware's Series LLC offers a statutory internal liability shield between series, but its recognition by courts outside Delaware remains untested. Article 28bis brings the Luxembourg limited partnerships a step closer to combining statutory segregation with partnership flexibility within a single onshore, EU-regulated framework.
Practical relevance
Many Luxembourg private funds are already structured as an SCSp without being subject to a fund product law, in particular as parallel investment vehicles alongside offshore funds for European investors. This generally works well for a simple SCS or SCSp, but not where the parallel fund is itself compartmentalised, such as a Series LLC. Article 28bis should be particularly valuable for parallel fund, feeder fund and co-investment arrangements, multi-strategy platforms, and Luxembourg vehicles intended to replicate foreign umbrella or series structures, by providing a clearer and more robust legal framework for achieving segregation without the need to adopt a product-law wrapper solely for that purpose.
The new regime does not replace the RAIF, which remains a distinct product governed by the RAIF Law, reserved to well-informed investors and requiring an authorised external AIFM together with the service providers and documentation the RAIF Law prescribes. The choice between the two will continue to depend on the intended investor base, investor eligibility restrictions, investment policy and diversification requirements, marketing strategy, and service-provider and financing arrangements, among other factors. In either case, sponsors and their advisers can draw on decades of Luxembourg market and regulatory experience in operating compartmentalised structures, which should support a smooth transition of this established technique to the SCS/SCSp toolbox.
Next steps
The Bill is now proceeding through the legislative process. The State Council and the Chamber of Commerce are next expected to issue their opinions, and further amendments may be made, before the Bill can be put to a vote in Parliament.
We consider this a genuine upgrade for Luxembourg's fund structuring offering: it closes a real gap for sponsors who wanted statutory ring-fencing without accepting the fund-product-law obligations that their project did not otherwise require.