In brief
Bill of Law No. 8761 (“Bill”) was submitted to the Luxembourg Parliament on 8 June 2026 in order to amend the law of 22 March 2004 on securitisation (“Securitisation Law”).
The Bill forms part of the continued evolution of Luxembourg’s securitisation regime and aims to further align the legal framework with current market practice while enhancing flexibility and legal certainty in the structuring and implementation of securitisation transactions under Luxembourg law.
The proposed amendments notably relate to (i) the financing means of securitisation undertakings, (ii) the updating of certain provisions relating to insolvency and restructuring proceedings, (iii) the active management of securitised risk portfolios, and (iv) the possibility for a compartment of a securitisation undertaking to invest in another compartment of the same undertaking.
In addition, the Bill aims to clarify the conditions under which securitisation undertakings may grant security interests and to further refine the rules governing subordination.
Broadening of financing means
The Bill broadens the financing options available to securitisation undertakings by expressly permitting them to rely on any form of external financing or financial commitment (rather than being limited to financial instruments or loans).
However, public offerings must continue to be financed exclusively through the issuance of financial instruments.
This amendment may facilitate the use of Luxembourg securitisation vehicles in the context of Islamic finance structures.
Extension of active management
The Bill extends the scope of active management to all types of securitised assets including equity securities (rather than being limited to debt securities, debt financial instruments and claims as in the currently applicable Securitisation Law), provided that the relevant instruments are not offered to the public.
It also clarifies, by way of a non-exhaustive list (comprising seven items), that certain operations, including inter alia asset substitution and marginal adjustments, shall not qualify as active management.
Cross-compartment investments
The Bill provides that a compartment may invest directly or indirectly in another compartment of the same securitisation undertaking, provided that such structure does not result in direct or indirect circular investments.
Security and guarantees
The Bill further clarifies that a securitisation undertaking may encumber its assets or grant guarantees for the purpose of securing or guaranteeing (i) its own obligations, (ii) obligations of third parties relating directly or indirectly to the relevant securitisation transaction and/or (iii) obligations of third parties arising in connection with a direct or indirect investment in such securitisation transaction.
Asset segregation
The Bill strengthens the principle of asset segregation by expressly confirming that the assets of securitisation “funds” (as opposed to securitisation “companies”) remain segregated and are not affected by the insolvency of their management company. Accordingly, creditors of the management company should not have recourse to the assets of the securitisation fund managed by it.
Clarification of subordination
The Bill clarifies the ranking of debt instruments by providing that instruments bearing interest at a reference rate plus a margin are to be treated as equivalent to fixed-rate debt instruments.
Conclusion
Overall, the Bill should be viewed as a targeted refinement and modernisation of the Luxembourg securitisation framework rather than a fundamental recast of the existing regime. The amendments described above are expected to provide market participants with greater structuring flexibility with enhanced legal certainty. In practice, these amendments should facilitate the use of Luxembourg securitisation undertakings in more sophisticated financing, repackaging and investment structures, while preserving the core features underpinning the attractiveness of the Luxembourg securitisation regime, including asset segregation, bankruptcy remoteness and investor protection.