New CNC Q&A 25/036: companies held for resale - practical highlights and clarifications for consolidation exclusion/exemption in the alternative investment sector (so-called "PE exemption")

On 2 December 2025, the Luxembourg Accounting Board (Commission des Normes Comptables or CNC) issued a new Q&A CNC 25/036 that replaces the previous guidance CNC 09/002. This updated interpretation concerns the application of article 1711-8(3), point 3° of the Luxembourg Commercial Companies Law (LCCL) in the specific context of companies operating in the alternative investment sector, and sets out the conditions under which these companies may benefit from an exemption from the obligation to prepare consolidated financial statements and a consolidated management report.

This new recommendation clarifies and expands the scope foreseen by the previous recommendation.

You will find below the main elements of this recommendation. The official recommendation can be found on the CNC website.

Applies to parent companies whose exclusive activity is:

• Collecting capital from professional investors with the aim of providing these investors with investment management services; and
• Deploying these funds exclusively to generate returns through capital appreciation from resale of investments.

The new Q&A clarifies the scope of alternative investment structures which includes private equity, venture capital, and more broadly alternative investments such as real estate, infrastructure, private debt, and other speculative investment strategies (such as crypto assets, digital funds, commodities, art or wine).
Are expressly excluded companies holding participations in other companies with the aim of carrying out a commercial or industrial activity with long-term strategic objectives or without a defined exit horizon.

The CNC advises that, to invoke exclusion under article 1711-8(3), point 3° LCCL, all the following conditions must be met:

1. Documented exit strategy from acquisition date

A true and serious intention to dispose the subsidiary with a capital gain exists from the acquisition date. This induces a divestment strategy formally documented, specifying a defined holding period. This strategy should be documented in writing and can be based on specific criteria (e.g., IPO), achievement of explicit financial goals, or a predefined investment cycle determined by the parent company.

Key change: The previous guidance referred to a medium-term horizon of 3 to 8 years. Acknowledging that neither the LCCL nor the Accounting Directive 2013/34 was foreseeing a timeline, the new Q&A introduces greater flexibility, by considering reasonable that investments should generally not exceed 10 years and may exceptionally extend up to 15 years under extraordinary market conditions. It is specifically mentioned that the divestment strategy must be periodically reviewed by the governing body, as well as when a major event calls into question the previous analysis.

2. Consistent application to all subsidiaries held for resale

The decision to apply the exclusion must cover all subsidiaries held by the parent company, except those providing investment-related services, among others, to the parent company.

The CNC stresses that this exclusion’s decision should never be applied abusively and must be based on:

• A serious and documented analysis supported by factual and detailed elements and therefore requiring careful justification; and
• A clearly affirmed, permanent and duly documented intention to dispose of these subsidiaries, duly documented from the acquisition date, as part of a formal exit strategy with a defined time horizon.

3. Disclosure of fair value in the notes

Companies must disclose the fair value of investments in the notes to their annual accounts. For the sake of reliability, it is recommended to determine the fair value by reference to generally accepted approaches, models and techniques (e.g., IPEV guidelines).

For clarity and relevance, disclosure of fair value can be presented by investment category.

4. Disclosure of significant events, guarantees, or uncertainties

The CNC recommends as well to present in the notes to annual accounts the information on any significant events, guarantees, or uncertainties at subsidiary level that could impact the going concern, the cash position, the liquidity, or the solvency of the parent company.

The CNC confirms that Luxembourg entities controlled exclusively for legal or regulatory purposes by such parent companies in the alternative investment sector may also apply these exclusions, provided that the parent meets all required conditions. This is subject to shareholders or partners holding at least 10% of the subscribed capital (if the exempted company is a public limited company or a partnership limited by shares) or at least 20% (if it is a private limited company or another legal form), who have not requested the preparation of consolidated financial statements no later than six months before the end of the financial year.
Additionally, it is stated that such companies cannot use other sub-group consolidation exemptions (Articles 1711-5 to 1711-7 LSC) based on their inclusion or fair value presentation in the parent’s accounts.

Applies to any open financial year still within the legal filing deadline.

CNC Opinion 09/002 is officially withdrawn.