A limited partnership (société en commandite simple - SCS) is a commercial company. It requires at least two partners, one of which is a general partner and the other, a limited partner.
The difference between the 2 partners lies in the nature of their liability.
Who is concerned
To form an SCS, a minimum of 2 partners is always required, with at least one general partner and one limited partner. A general partner may simultaneously be a limited partner.
A natural person or legal person may be a partner.
Before setting up an SCS, you must ensure that the general partners are authorised to do business as traders. This requirement does not apply to limited partners.
Any person wishing to set up a company to do business in Luxembourg must have the authorisations/approvals required to carry out the activity.
Setting up an SCS entails certain costs, including:
- the cost of publication in the trade and companies register (registre de commerce et des sociétés - RCS);
- any costs related to the issuance of administrative authorisations;
- notary costs, if a notary's services are used (this is not legally required);
- auditor costs, if an auditor's services are used (this is not legally required).
How to proceed
Deed of incorporation
An SCS may be created through a private deed known as a partnership agreement.
Two original copies of the partnership agreement must be drawn up.
There is no legal requirement to have the agreement drawn up by a notary.
The deed of incorporation – in this case, the partnership agreement – must contain at least:
- the company name and the address of its head office;
- the company's purpose;
- a description of each partner's contributions.
The deed of incorporation must be filed with the RCS in the form of an extract.
The SCS must have a company name that is established in its deed of incorporation.
The name must be different from that of any other existing company.
To find out if the company name is available, contact the RCS.
The company may be established for a limited duration or an unlimited duration.
The SCS may change its corporate form in the course of its lifetime through a decision by the partners.
The rules on mergers and demergers, which are likely to change its legal form, apply to the SCS.
The company is automatically dissolved at the end of the duration specified in the deed of incorporation.
It may be dissolved by the shareholders by majority vote representing three quarters of the ownership interests, unless specified otherwise in the partnership agreement.
If provided for in the partnership agreement, the sole general partner may be replaced in the event of:
- dissolution, legal incapacity;
- revocation, resignation, impediment;
- other situations of adversity affecting the general partner.
The general partner will be replaced pursuant to the terms of the partnership agreement or, if the partnership agreement is silent on this matter, by the president of the district court (tribunal d’arrondissement) at the request of any interested party.
Any voluntary dissolution must be accompanied by the following administrative certificates:
- certificate from the Data-Processing, Membership and Contributions Centre of the Joint Social Security Centre (Centre commun de la sécurité sociale – CCSS);
- certificate from the Luxembourg Inland Revenue (Administration des contributions directes);
- certificate from the Registration Duties, Estates and VAT Authority (Administration de l'enregistrement, des domaines et de la TVA).
The company may also be dissolved through a legal ruling for legitimate reasons or due to unlawful activities.
The dissolved company retains its legal personality for the needs of its liquidation.
In an SCS, the capital is made up of ownership shares. There is no minimum required capital.
The partnership agreement must specify:
- the amount of the share capital; or
- the value of the contributions provided by each general partner or limited partner.
The contributions have the following characteristics:
- they may be in cash, in kind or "in industry" (services, know-how, etc.);
- they may be made over time;
- the terms and conditions for doing so are provided for in the partnership agreement: they need not be valuated by an auditor;
- the contributions need not be made at the time of formation.
An SCS may issue debt securities.
The distribution of dividends is governed by the partnership agreement, which may provide for unequal distribution rules.
If the partnership agreement on this matter, the dividends will be distributed proportionally.
Form of ownership shares
The ownership shares must be registered shares.
Transfer of ownership shares
The terms and conditions of transfers of ownership shares are provided for in the partnership agreement.
Under penalty of nullity, ownership shares may only be transferred, subdivided or pledged in accordance with the terms and conditions provided for in the partnership agreement.
If the partnership agreement is silent on this matter:
- For limited partners' ownership shares: transfers of limited partners' ownership shares for a reason other than death, subdivision or pledging, require the approval of the general partner(s);
- For general partners' ownership shares: transfers of general partners' ownership shares for a reason other than death, subdivision or pledging, require the approval of the partners, who decide by majority vote representing three quarters of the ownership shares, and the approval of the general partners.
Structure of the management bodies
General meeting of partners
The partners' decisions are taken at the general meeting. The partnership agreement may contain special provisions regarding the operation of the SCS. If it does not, the following provisions apply.
The general meeting decides on:
- amendments to the partnership agreement;
- any change in the SCS's nationality;
- the conversion or liquidation of the SCS.
These decisions require a majority vote representing three quarters of the ownership shares. The partners' voting rights are determined based on the proportion of ownership shares held.
The general meeting approves the annual financial statements on a yearly basis.
The general meetings are convened by:
- the manager; or
- at the initiative of the partners representing more than half of the ownership shares.
Decisions at general meetings are validly taken by majority vote.
The general meeting may be replaced by a written consultation in which each partner receives the text of the decisions to be taken. In that case, voting will be cast in writing.
Daily management of the SCS
The SCS is managed by one or more managers, who may or may not be general partners.
The manager(s) are appointed in accordance with the rules provided for in the partnership agreement.
If the partnership agreement is silent on the appointment of managers, all of the general partners can bind the company.
The manager must not be a trader.
The manager represents the company with regard to third parties, as well as in all courts, as plaintiff or defendant.
General partners are jointly and severally liable for the company's obligations.
Limited partners are only liable to a limited extent, determined by their ownership interests, which may or may not be represented by instruments as provided for in the partnership agreement. Under no circumstances may they perform any act of management with regard to a third party, or participate regularly in acts of management with regard to third parties. Should they do so, they will lose the benefit of their limited liability. However, acts relating to the exercise of their rights as limited partner are not affected by this restriction.
Managers who are not general partners are representatives and are liable for their misconduct only in carrying out the mandate entrusted to them. They may validly bind the SCS.
The restrictions on a manager's powers are not binding on third parties, even if they are published. Nonetheless, it is possible, through the partnership agreement, to assign responsibility to one or more managers to represent the company, either alone or jointly, in acts or in court. This clause is then binding on third parties subject to publication in the RCS.
The SCS is bound by the acts carried out by a manager, even if they surpass the corporate purpose, unless the SCS can prove that the third party involved knew, or could not have been unaware of the fact that these acts surpassed the corporate purpose, given the circumstances (the publication alone of the partnership agreement does not constitute sufficient proof).
No ruling in respect of the company's obligations that personally holds the partners' jointly liable may be handed down before the company is held to be liable.
Maintenance of a register
An SCS must keep a register that contains:
- a complete, certified and up-to-date copy of the company's partnership agreement;
- a list of all of partners, who must be clearly identified;
- details on the ownership shares held by each partner;
- references to any transfers of ownership shares.
Oversight of the SCS
The law does not require any oversight by internal auditors.
An audit of the financial statements by an approved statutory auditor is required only for SCSs:
- in which the partners are SAs, SARLs, SECAs or companies in any other comparable legal form; or
- in which, on the balance sheet closing date, after 2 consecutive financial years of operation, 2 of the 3 following criteria are exceeded:
- balance sheet total: EUR 4.4 million;
- net turnover: EUR 8.8 million;
- average number of full-time employees: 50.
An extract of the partnership agreement is filed with the Luxembourg Business Registers for the purpose of being published in the electronic repository of companies and associations (Recueil électronique des sociétés et associations - RESA).
The extract contains:
- the exact names of the joint partners;
- the company name or corporate name of the business;
- the corporate purpose;
- the registered office;
- the names of the managers and their signing authority;
- the duration of the company.
It is not necessary to list the limited partners by name.
In addition, the SCS must file the following with the RCS:
- subsequent amendments to the deed of incorporation;
- information on the appointment of managers, transfers of managerial duties and, where applicable, their deaths;
- information on liquidators, where applicable;
- certain legal decisions;
- where applicable, information on the dissolution of the company.
The SCS must maintain accounts that are appropriate to the nature and scope of its business, and which comply with the Standard Chart of Accounts.
If the annual turnover of its last financial year does not exceed EUR 100,000 (excluding VAT), it is not required to produce or file annual accounts (balance sheet, profit and loss account and the annex), or to use the Standard Chart of Accounts. Conversely, if it exceeds this threshold, the SCS is bound to do all of the above.
Also, the SCS is required to produce annual financial statements and use the Standard Chart of Accounts, in cases where:
- all of the partners with unlimited liability are legal persons in the form of an SA (public limited company), SARL (limited liability company) or SECA (partnership limited by shares);
- all of the partners with unlimited liability are themselves organised as an SENC/SCS or SA, SARL or SECA;
- the partners are non-European companies, but with a comparable legal form.
The annual financial statements must be filed with the Luxembourg Business Registers within one month of their approval and no later than 7 months after the close of the financial year.
SCSs can draw up a short-form balance sheet if, on the balance sheet closing date, after 2 consecutive financial years of operation, they do not exceed 2 of the following 3 criteria:
- balance sheet total: EUR 4.4 million;
- net turnover: EUR 8.8 million;
- average number of full-time employees: 50.
SCSs can combine certain headings in the profit and loss accounts if, on the balance sheet closing date, after 2 consecutive financial years of operation, they do not exceed 2 of the following 3 criteria:
- balance sheet total: EUR 20 million;
- net turnover: EUR 40 million;
- average number of full-time employees: 250.
SNCs are subject to the following fees and taxes:
- a fixed registration fee;
- property tax;
- business tax;
- net wealth tax;
- corporate income tax;
- VAT; the frequency of returns depends on the following criteria:
- if the annual turnover excluding taxes is less than EUR 112,000: VAT returns must be filed annually;
- if the annual turnover excluding taxes is between EUR 112,000 and EUR 620,000: VAT returns must be filed quarterly;
- if the annual turnover excluding taxes exceeds EUR 620,000: VAT returns must be filed monthly.
Who to contact
'Contact Entreprise' at the Chamber of Skilled Trades and Crafts - Luxembourg2, Circuit de la foire internationale
Postal address :
B.P. 1604 / L-1016
Luxembourg Business Registers
Luxembourg Business Registers - Luxembourg Office14, rue Erasme
Postal address :
Phone : (+352) 26 428-1Fax : (+352) 26 42 85 55Monday to Friday from 09.00 - 12.00 and 13.30 - 16.00
Registration helpdesk: Monday to Friday by appointment only
Luxembourg Business Registers - Diekirch OfficePlace Joseph Bech
Phone : (+352) 26 428-1Fax : (+352) 26 42 85 55Mondays, by appointment only