The legal framework in Luxembourg
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Legal forms in Luxembourg
A limited liability company (SARL) is a joint stock company (shareholders’ liability is limited to the amount of their contribution) whose principle of intuitu personae means that shares in the company cannot be transferred to a non-partner without the consent of the other partners.
SARL : the most common structure among legal forms in Luxembourg.
The Luxembourg Private Limited Liability Company (SARL) is a widely used corporate structure, suitable for small and medium-sized enterprises. It can be formed by one or more individuals (up to 100 shareholders) and combines management flexibility with limited liability for shareholders, limited to their contributions. The minimum share capital is €12,000, fully subscribed and paid up at the time of incorporation. Management is carried out by one or more managers, who may or may not be shareholders. The SARL cannot raise public funds, and its shares are subject to strict transfer regulations. It is governed by the law on commercial companies and is subject to corporate tax. This structure is often chosen for its simplicity, legal security, and clear tax framework.
The minimum share capital must be deposited in the bank account opened in the company’s name before incorporation.
The bank will then block this amount and issue a certificate to the notary confirming that the capital payment has been duly made. The deed of incorporation must be executed before a Luxembourg notary.
The money paid for the subscription to the share capital and blocked by the bank will be released once the company has been incorporated. The deed of incorporation, including the Articles of Association, must be filed with the Luxembourg Trade and Companies Register and then published in the Luxembourg Electronic Journal (‘RESA’).
The limited liability company’s capital may also be paid up by means of a contribution in kind. In this case, the valuation must be confirmed to the notary by the contributing partner(s). Unlike a Public limited company (S.A tab), no valuation of the assets contributed by an independent auditor will be required.
The S.à r.l. exists from the date on which the deed of incorporation is signed by the notary.
There is also a form of limited liability company known as a simplified limited liability company (SARLs). The SARLs is an exception to the company formation process, in that it is an SARL that can be created by private deed (i.e. without the involvement of a notary) with a minimum capital of €1. This form is frequently adopted by small commercial start-ups.
The Public limited company (S.A.), along with the limited liability company (SARL), is one of the most widely adopted legal forms in Luxembourg.
The main attraction for shareholders is that their liability is limited to their capital contribution (or capital contribution commitment). The S.A. is often the legal form chosen by large companies, but it can also be used for small businesses because shares in this type of company are easily transferable. Thanks to its characteristics, the SA is suitable for a wide range of companies of different sizes, with different types of activities, offering legal entities and individuals the possibility of :
- promote the company’s development by bringing in new shareholders ;
- accessing financial markets (initial public offering).
The minimum share capital is €30,000 (or the equivalent in another currency) and must be deposited in the bank account opened in the company’s name before incorporation. The bank will then block this amount and issue a certificate to the notary confirming that the capital payment has been duly made. The incorporation deed must be drawn up before a Luxembourg notary.
The money paid for the subscription to the share capital and blocked by the bank will be released once the company has been incorporated. The deed of incorporation, including the Articles of Association, must be filed with the Luxembourg Registre de Commerce et des Sociétés and then published in the Luxembourg Electronic Journal (‘RESA’).
The contribution in kind may also be made to pay up the share capital of the S.A., in which case a valuation report issued by an independent auditor (Company auditor) must be provided to the notary.
The S.A. will exist from the date on which the deed of incorporation is signed by the notary.
A partnership limited by shares (SCA) is a company composed of two different categories of partners, namely one or more general partners (managers) and one or more limited partners (shareholders).
The general partner is jointly and severally liable for the company’s commitments, while the the limited partners are liable for the amount of their contribution to the share capital. Shareholders are not allowed to participate in the day-to-day management of the company, while the manager has the broadest powers to manage the company. One advantage of the SCA is that its management is stable. The SCA is therefore one of useful legal forms for bringing together investors (as shareholders) and entrepreneurs (as managers) in Luxembourg. It is also a structure that enables the company to withstand hostile takeover bids. It can also suitable for small and medium-sized family businesses.
The minimum share capital is €30,000 (or the equivalent in another currency) and must be deposited in the bank account opened in the company’s name before incorporation. The bank will then block this amount and issue a certificate to the notary confirming that the capital payment has been duly made. The incorporation deed must be drawn up before a Luxembourg notary.
The money paid for the subscription to the share capital and blocked by the bank will be released once the company has been incorporated. The deed of incorporation, including the Articles of Association, must be filed with the Luxembourg Registre de Commerce et des Sociétés and then published in the Luxembourg Electronic Journal (‘RESA’).
Capital contributions may be in cash or in kind. Non-cash contributions must be valued by an independent auditor (Company auditor). Contributions in kind do not form part of the share capital, but could be included in the articles of association and remunerated.
The SCA will exist from the date on which the deed of incorporation is signed by the notary.
The special limited partnership (SCSp) operates similarly to a simple limited partnership and is often the structure chosen for alternative investment funds. Two partners are required, namely a general partner and a limited partner.
The SCSp may be incorporated by notarial deed before a Luxembourg notary or under private deed, the latter option being the most common option. Contractual freedom governs the drafting of the SCSp’s articles of association.
There is no minimum capital, and capital contributions to the SCSp can be made in cash, in kind or in industry. A valuation is not required for this purpose.
The drafting of the partnership agreement is quite free, and can include specific provisions on the transfer of shares, the exclusion of a partner, voting rights, profit distribution, amendments to the partnership agreement, and the replacement of the manager in the event of death or incapacity.
The SCSp will validly exist from the date of signature of its articles of association. The deed is not published in its entirety, but only an extract, indicating the name of the SCSp, the name of the general partner, the company’s object (a general object of holding assets is commonly adopted), the address and the date of incorporation/end of the SCSp. It is not required to publish the amount of capital, the identity of the limited partners, or the partners’ contributions.
SCSp must maintain regular accounting records but are not required to follow the standardized chart of accounts, and their financial statements do not need to be filed or made available to the public, unlike most other legal forms offered in Luxembourg.
The flexibility and freedom of the articles of association, as well as the confidentiality with which public information is restricted, make the SCSp a highly attractive tool for certain specific private agreements. These may include arrangements for the distribution of potential gains between co-investors making contributions that are different and unequal in value but not necessarily in utility, or an anticipated inheritance transfer. The absence or low tax impact gives potential long-term robustness to such structures.
From a tax point of view, SCSp are transparent and are not subject to taxation in Luxembourg if they have no commercial activity.
The Cooperative Society organised as a public limited company (SCOPSA) is a cooperative company subject to the provisions of the Public limited company, except as provided by Luxembourg’s Companies Act. The main characteristics of a cooperative society include its variable capital, a variable number of members and the absolute non-transferability of shares to third parties. The number of members changes frequently, precisely because of the variable nature of its capital. For the SCOPSA, a single shareholder is possible.
The terms and conditions governing the admission and withdrawal of members are specified in the Articles of Association.
A cooperative company is administered by one or more representatives. The representatives may or may not be members and are only liable within the scope of the functions entrusted to them.
Luxembourg company law allows a great deal of latitude in drafting the articles of association of a SCOPSA, and the members are free to determine the extent of their liability and the way in which the company operates and is managed.
A cooperative company may be incorporated by notarial deed or under private deed. In a société coopérative, the capital is variable.
There are no minimum or maximum capital requirements, unlike other legal forms in Luxembourg. Capital contributions can be in cash or in kind. Non-cash contributions do not need to be valued by an independent auditor (company auditor).
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