The obligations affect companies whose principal activity is to finance the activities of companies from the same group via loans or issuance of debt securities or derivative instruments, sold by way of public offers or private placements.
Competence of the BCL
The BCL is required, within the framework of the European System of Central Banks (the ESCB), to collect and provide to the European Central Bank comprehensive and reliable statistical data in relation to the balance of payments and the international investment position of Luxembourg. The statistical data to be reported under the Regulation serve the above purpose.
Definition of Issuing Company
The Regulation applies to all Luxembourg incorporated companies (including financial participation or finance companies) (an Issuing Company), whose principal activity is to finance the activities of companies from the same group (a Related Company).
"Principal activity" is not defined in the Regulation but should be assessed in accounting terms by reference to the Issuing Company's balance sheet structure (and not by reference to the corporate objects of its articles of incorporation). As such, if the balance sheet of an Issuing Company shows that, structurally, it is raising funds (by way of loans or issuance of securities or derivatives) to finance the activities of one or more Related Companies (whether by granting loans to, or by injecting capital in, these Related Companies), then the Issuing Company, in principle, falls within the scope of the Regulation.
Financing of Issuing Company
To be caught by the Regulation, an Issuing Company must finance itself by way of loans or issuance of debt securities (or derivative instruments). According to the BCL, "loans" and "debt securities" must be interpreted in the widest possible sense and encompass all types of claims and securities (other than pure equity), including hybrid instruments (such as preferred equity shares (PECs) and convertible preferred equity shares (CPECs)).
Financing of Related Companies
Financing the activities of Related Companies includes, a priori, all types of financings, whether by way of loans, subscription to debt securities, injection of share capital in, or entry into derivative transactions (for example, pre-paid forwards) with, the Related Companies.
Reporting means the provision to the BCL of:
- on a monthly basis, a reporting of securities issued by an Issuing Company (reporting titre par titre) (the TPT Reporting);
- on a quarterly basis, a balance sheet drawn according to the BCL's accounting standards (the S.2.16 Reporting); and
- on a quarterly basis, information on certain operations, such as statistics on cash flows (the S.2.17 Reporting).
Issuing Companies whose total balance sheet is less than EUR500,000,000 (or an equivalent amount in another currency) are exempted from the statistical reporting obligations under the Regulation.
Issuing Companies (including those benefiting from the EUR500,000,000 exemption) that have issued, or are contemplating issuing, debt securities (titres de crÃ©ance) are required to notify the BCL accordingly.
The first reporting obligations are to be fulfilled:
- in relation to the TPT Reporting and the S.2.16 Reporting, on 21 October 2011 (relating to September 2011); and
- in relation to the S.2.17 Reporting, on 20 January 2012 (relating to the last quarter of 2011).
The BCL has started approaching Issuing Companies which it has identified as falling within the scope of the Regulation. Issuing Companies which have not been contacted yet are invited to approach the BCL. For those Issuing Companies which have not been contacted yet, or only recently, the BCL may grant (upon request) a three-month delay to set up the necessary infrastructure to comply with their reporting obligations. In such a case, the first reporting will have to be made in January 2012 for the data relating to the last quarter of 2011.
The Regulation does not provide for any sanction that may potentially be imposed on Issuing Companies, which do not comply with their statistical reporting obligations.
The BCL is subject, by law, to professional secrecy, though exchange of information required in the context of the ESCB or with other Luxembourg regulatory authorities is possible.