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“A ‘no’ uttered from deepest conviction is better and greater than a ‘yes’ merely uttered to please, or what is worse, to avoid trouble.” – Mahatma Gandhi

  • Writer's pictureTracey McDermott


On 23 August 2018, the CSSF published a new Circular 18/698 to replace and update its Circular 12/546 which dealt, amongst others, with the organisational requirements of fund management entities such as UCITS management companies, AIFM, and self-managed UCITS or AIF.

Both regulation and global corporate governance trends have continued to evolve greatly since 2012, and ILA welcomes the clarification and transparency of certain administrative practices regarding the approval of directors by the CSSF being written into text.

Certain aspects regarding Boards - such as the need to have sufficient experience and competence, and attest to professional integrity and honourability have already been in the CSSF texts for several years. Whilst this has included the CSSF requiring Board appointment applications to include an estimate of time commitment for that particular mandate, the question of upper limits on numbers of mandates has remained the subject of much debate. In Circular 18/698, the CSSF has, with immediate effect, clarified its requirements.

As a result, in addition to respecting criteria such as experience and integrity, Directors of fund management entities must now respect the following double limit: (i) not exceeding 1,920 hours per year of professional engagements; and (ii) having no more than 20 mandates in regulated or operational entities.

In ILA’s view, the setting of a fixed number of mandates is of an inherently arbitrary nature, however, it is noted that the proportionality principle remains.

For example, the Circular expressly states that stricter limits may be applied where the nature, scale or complexity of the activities of the entities so justify, and also in the event of a reduction in the candidate's overall working time. Conversely, candidates can also request the application of the proportionality principle to request a higher limit, for example due to the limited activities of various entities, or by demonstrating appropriate administrative and technical support to support the request. This message aligns with the growing importance, and the professionalisation, of the role of Directors over the last decades, with the responsibilities and involvement growing heavier. With heightened responsibilities and time required from Directors over the past years, Board remuneration has however not changed substantially. At the same time scrutiny on other aspects of Boards continue to increase – including on the personal qualities of Directors to ensure they each fulfil their mandates with the commitment, availability, the objectivity, the critical sense and the independence required.

As with these other aspects which are now part of the regular Board evaluations being performed by Directors, Board composition and remuneration should also be reviewed and adjusted periodically to take account of these evolutions and to ensure that remuneration of Directors appropriately compensates and incentivizes their greater time commitments and the increasing focus on independence and debate.

It is to be noted that the Circular does not seem to apply to those Directors who only hold Fund Board mandates. It is however expected that, in practice, the limits prescribed by the Circular would apply to all Directors.

(Source: ILA)


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