The Bill is focussed on removing practical constraints that have emerged since the 2022 reform, while preserving the existing investor-protection framework. For market participants, the key theme is flexibility: broader funding tools, more usable active management, clearer compartment structuring and targeted clarifications on insolvency segregation, security and ranking.

The Bill would allow securitisation undertakings to finance transactions not only through financial instruments or borrowings, but also through other forms of financing and financial commitments.

This is particularly relevant for structures that do not fit neatly into conventional debt concepts. The explanatory notes expressly link the change to market demand, including Islamic finance structures where conventional loans or instruments may be unsuitable.

The flexibility is not unlimited. Public offers would remain limited to financing through financial instruments, preserving an important boundary within the securitisation framework.

The Bill would also clarify the segregation of assets of securitisation funds managed by a management company.

It would confirm that the assets of a securitisation fund do not fall into the insolvency estate of the management company. This is an important clarification for fund structures, reinforcing the separation between the fund’s assets and the position of the entity managing it.

The Bill also updates references to collective proceedings to reflect newer Luxembourg restructuring and dissolution procedures.

New Article 59-1 would expressly permit a compartment of a securitisation undertaking to invest, directly or indirectly, in another compartment of the same undertaking.

This would be subject to the constitutional documents and the relevant issue documentation. Circular investments would be excluded.

Where the investment is made through debt-type instruments, the investing compartment would retain creditor rights, including voting rights and rights to financial proceeds. This should give Luxembourg securitisation vehicles more structuring flexibility while preserving compartment-level discipline.

The proposed Article 61-1 would broaden the existing active-management permission.

Under the current framework, active management is focussed on portfolios of debt securities, loans, debt financial instruments or receivables. The Bill would remove that limitation and extend the possibility of active management to any basket of securitised risks.

That change could open the door to equity and private equity-style securitisation strategies. However, the public-offer limitation remains central: the instruments financing the actively managed basket must not be offered to the public.

The Bill would also draw a clearer line between active management and ordinary portfolio maintenance.

The following actions would not, by themselves, constitute active management:

• replacing defaulted assets;
• replacing assets that fail eligibility criteria;
• building the initial portfolio within prescribed limits;
• adding assets during continuous issuances;
• replacing assets at maturity; and
• making marginal allocation adjustments.

This is a useful clarification for transactions where portfolios need to be maintained or adjusted without necessarily moving into an actively managed strategy.

The Bill would also clarify when securitisation undertakings may grant guarantees or security.

Securitisation undertakings could grant security for:

• their own obligations;
• obligations of third parties linked to the securitisation; and
• obligations of third parties investing in the transaction.

The ranking rules would also be clarified. Instruments referencing a benchmark or reference rate plus margin would rank with fixed-return debt, rather than being treated as non-fixed-return debt. Non-fixed-return debt would remain subordinated.

If adopted in its current form, Bill 8761 should make Luxembourg securitisation vehicles more adaptable for complex private transactions, without turning the 2004 Securitisation Law into a new regime.

The Bill’s direction is one of targeted flexibility: broader financing mechanics, clearer compartment structuring, more practical active-management rules and technical clarifications on insolvency segregation, security and ranking. At the same time, the public-offer limitations remain an important boundary, particularly for actively managed structures.

Bill of Law No. 8761 can be found here.