A partnership (société en nom collectif - SENC) is a commercial company characterised mainly by the fact that the partners are jointly and severally liable, to an unlimited extent, for all of the company's commitments.
All of the partners of an SENC are authorised to do business as traders in their own name.
An SENC is a particularly interesting form of company for small and medium-sized 'family-run' commercial or craft businesses that wish to avail themselves of the following features:
- rules that are simple and inexpensive to implement;
- no minimum capital requirements;
- considerable latitude in drafting the articles of association.
Who is concerned
At least 2 partners are required to form an SENC.
A legal person may be a partner.
Before an SENC is incorporated, you must make sure that all of the partner are authorised to do business as traders.
Any person wishing to set up company to do business in Luxembourg must have the authorisations/approvals required to carry out the activity.
Setting up an SENC 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 SENC may be established through a private deed. In such cases, there must be as many original copies as there are partners.
There is no legal requirement to have the deed drawn up by a notary.
The deed of incorporation must contain at least:
- the company name and 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 SENC 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 SENC 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 SENC.
The SENC is automatically dissolved at the end of the duration specified in the deed of incorporation.
It may be dissolved by the partners, for example, in the event of loss of the share capital.
The dissolution of the SENC requires the assent of half of the partners representing three quarters of the share capital. Failing this, the dissolution may be decided by the courts.
Unless stipulated otherwise in the deed of incorporation, the SENC is also dissolved following:
- the death of a partner;
- the ruin of a partner;
- the bankruptcy of a partner.
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.
There is no minimum required capital to set up an SENC.
The articles of association must specify the amount of the capital and the partners' contributions.
The share capital specified in the articles of association must be validly and fully subscribed.
Contributions in kind are possible. Their value is specified in the deed of incorporation. An auditor's report is not required.
Contributions "in industry" (services, know-how, etc.) are possible, but do not form part of the share capital.
Type of company shares
Only registered shares are permitted.
Transfer of company shares
The company's shares may not be transferred or assigned, unless:
- the partners have unanimously decided to do so;
- otherwise stipulated in the articles of association.
The company must be notified of and agree to any transfers.
Structure of the management bodies
General meeting of partners
The partners' decisions are taken at the general meeting. The operation of the general meeting of partners is provided for in the articles of association as it suits the company.
Unless otherwise specified in the articles of association:
- each partner has a single vote;
- decisions at ordinary general meetings are made by simple majority;
- decisions at extraordinary general meetings are made unanimously;
- meetings are convened by the manager;
- the dissolution of the SENC requires the assent of half of the partners representing three quarters of the share capital.
If no manager is appointed, all of the partners are managers.
Daily management of the SENC
The daily management of the business of the company, and the task of representing the company in matters concerning its management, may be delegated to one or more managers.
The manager may be appointed in the articles of association or later though a decision by the partners.
In principle, the manager's powers are determined by the articles of association.
The manager acts as the representative of the company.
The partners are jointly and severally liable, to an unlimited extent, for all of the company's commitments to:
- company creditors, to the extent of the company's assets as well as the partners' personal assets;
- the tax administration, if the liabilities result from the activities of the business (VAT, communal business tax);
- the other partners, as joint and several co-debtors, unless otherwise stipulated in the articles of association.
The managers, as representatives of the company, are liable for their misconduct while carrying out their mandate. They validly engage the company's liability. The articles of association may delineate their duties or powers.
Oversight of the SENC
The law does not require any oversight by internal auditors.
However, the statutory audit of the financial statements must be entrusted to one or more approved statutory auditors in any SENC:
- in which the partners include SAs (public limited companies), SARLs (private limited liability companies) or SCAs (partnerships limited by shares);
- in which the partners are non-European companies, but with a comparable form;
- in which, on the balance sheet closing date, after 2 consecutive financial years of operation, the thresholds of 2 of the following 3 criteria are exceeded:
- balance sheet total: EUR 4.4 million;
- net turnover: EUR 8.8 million;
- average number of full-time employees: 50.
The formality of registering the SENC with the RCS requires the disclosure of that information about the company.
The extract of the deed that is to be published specifies:
- the exact names of the joint partners;
- any transfers of company shares;
- the company name or corporate name;
- its corporate purpose;
- its registered office;
- the names of the managers and their signing authority;
- the duration of the company.
Any subsequent changes must be filed with the RCS.
In addition, the SENC must file the following with the RCS:
- information on the appointment of managers and on transfers of managerial duties and signing authority;
- information on the appointment of a liquidator;
- certain legal decisions;
- where applicable, information on the dissolution of the company;
- the annual financial statements, if its annual turnover exceeds EUR 100,000 (excluding VAT).
An SENC must use the standard chart of accounts (plan comptable normalisé) and keep its accounts at its registered office for inspection by interested parties, if its annual turnover exceeds EUR 100,000 (excluding VAT).
In addition, an SENC must use the chart of accounts if:
- all of the partners with unlimited liability are legal persons in the form of an SA, SARL or SCA;
- all of the partners with unlimited liability are themselves organised as an SENC/SCS or SA, SARL or SCA;
- the partners are non-European companies, but with a comparable legal form.
SENCs 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.