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Introduction of company law in Luxembourg

Published on: October 27, 2023

1. Introduction

Main corporate formats:
  • Anonymous Society (AS);
  • Limited Liability Company (LLC);
  • Simple Limited Partnership (LP);
  • Special Limited Partnership (SLP);
  • Limited Company by Shares (LCS);
  • Company in Collective Name (CCN).
Luxembourg’s civil and commercial law is based on the Napoleonic Code, with corporate law, whose basis is the Commercial Companies Law of August 10, 1915, inspired by Belgian law. For this reason, the language of the Luxembourg legal world is French.

2. Incorporation of an AS or LLC

As in Brazil, AS and LLC are by far the most common corporate types. Both corporate types allow the possibility of a single partner.
These companies are incorporated before a public notary in Luxembourg, by means of a public deed of incorporation, written in one of the country’s official languages ​​(Luxembourgish, French or German), and it is permissible (and even common) for the deed to be done in English , followed (in the same act) by its translation into French.
The deed of incorporation is registered with the Luxembourg Register of Commerce and Companies and published in the Electronic Register of Companies and Associations.
Mandatory elements of the incorporation deed:
  • Company Name;
  • Company address (necessarily in Luxembourg);
  • Existence and Rights of Classes of Shares;
  • Qualification of Members;
  • Social object;
  • Share Capital (subscribed and paid-in or authorized);
  • Payment Details (in cash or goods);
  • Duration.

3. Share Capital

The minimum share capital for an SA is EUR 30.000 and for a SARL it is EUR 12.000, with the share capital being allowed to be expressed in USD, and the company’s balance sheet and financial statements must follow the same currency chosen to compose the share capital.
The subscribed share capital must be paid in at the time of execution of the public deed. If the contribution is to be made in cash, the company must already have a current account with a Luxembourg bank, which will issue a certificate confirming the deposit of the share capital, in a blocked account, in the name of the company being incorporated. Without this certificate, the notary will not be able to incorporate the company. After registering the company with the Commerce and Companies Registry, the notary issues a certificate of unblocking the share capital allowing the bank to unblock the funds in the current account.
Following legislation against money laundering, both the bank and the notary public will require documentation in advance (passport, proof of address and taxpayer number from the country of residence, accompanied by a declaration of origin of personal assets – and, eventually , supporting documentation) of the final beneficiaries of the company (directly or indirectly owning more than 25% of the share capital), this information being registered with the Register of Beneficial Owners, with the Register of Commerce and Companies.
Contributions of assets must be accompanied by an asset valuation report (mandatory for AS).
Share capital increases must follow the same procedures as company incorporation. Luxembourg practice has developed an alternative capital contribution without involving the issuance of shares, using account 115 of the Luxembourg Standard Accounting Plan. The advantage of this type of contribution is that it can be made through a private instrument, without the need for a bank deposit certificate or an asset valuation report.

3.1. The right to vote

The general principle of Luxembourg corporate law is “one share, one vote”, for both AS and LLC, and it is not possible to issue a share with multiple voting rights. However, legislation allows the issuance of preferred shares without voting rights.

3.2. Transfer of Shares

The shares of a AS can be freely transferred, with contractual limitations (including through shareholders’ agreements) being permissible on the right to transfer, with Lock-up, Right of Preemption, Tag Along and Drag Along clauses being permitted.
Shares in a LLC cannot be transferred to a third party without the agreement, in a general meeting, of at least ¾ of the share capital.
Share transfers can be made through a public or private instrument, and are not subject to any taxation (stamp duty).

4. Company management

In the same act as the company’s incorporation, the first Meeting of Partners is held, in which the Directors (AS) or Managers (LLC) are appointed, with at least 03 Directors for the SA (except in the case of a single partner, in which case admits a single right).
Directors are appointed for a term of maximum 6 years, renewable. The manager(s) can be appointed for an indefinite period.
The law does not provide for restrictions on nationality or residence for Directors and Managers, nor does it indicate qualification requirements, which can be individuals or legal entities, and do not need to be partners.
Board or management meetings are held at the company’s headquarters, with remote participation permitted, via videoconference. Occasionally, meetings may be held outside Luxembourg, but with caution, under penalty of possible implications on the characterization of the company’s tax residence (which can be attributed to the place of its effective administration).
The articles of incorporation may allow decisions to be taken by resolution signed by all members of the Board or Management.

5. Members' Assembly

The Annual Meeting must be held within the first 6 months of the year, with the meeting being optional for a LLC with less than 25 members.
The themes of the Annual Meeting are the approval of the balance sheet, the approval of the administrators’ accounts and the definition of the allocation or distribution of profits. The company’s Board of Directors or Management may decide on the distribution of interim dividends, as long as it is permitted by the articles of incorporation and by preparing an interim balance sheet that indicates the existence of the profit to be distributed.
There is only a mandatory legal reserve of 10% of the value of the share capital, which must be constituted with the allocation of 5% of annual profits.
If a AS experiences a loss of 50% or more of the value of its share capital, the Board of Directors must call a Meeting to decide on the continuity of the company’s activities. The continuity of activities must be decided by the majority of those present at the assembly.
If losses reach more than 75% of the share capital, the quorum to determine the dissolution of the company is only 25% of the share capital.
If the decision taken at the meeting results in a change to the AS’s bylaws, the meeting must be held in the presence of a notary.
The calling of meetings in an AS must be given at least 8 days in advance, and it may be held if at least half of the share capital is present, with the ordinary quorum for deliberations being ⅔ in the AS and ¾ in the LLC.

6. Transfer of a company’s headquarters to Luxembourg

A company that transfers its headquarters to Luxembourg will obtain Luxembourg nationality, as long as it adapts its articles of incorporation to local legislation, complying with the minimum share capital requirement.
The change of headquarters must take place at an Extraordinary General Meeting, held before a public notary. From a legal point of view, the law recognizes the continued legal existence of the company after the transfer of its headquarters to Luxembourg, under the condition that this transfer is permitted by the legislation of the country in which it was incorporated.
Luxembourg legislation allows the company’s assets to be revalued at market value, in a balance sheet specially calculated for the date of transfer of the headquarters and approved by the general meeting.