A private limited liability company (Société à responsabilité limitée – SARL) is a special form of commercial company in that: it combines features that are characteristic of both capital companies (e.g. the limitation of shareholders' liability to the extent of their contribution) and partnerships (e.g. the non-transferability of shares in the company).

The SARL is the most common form of incorporation in Luxembourg. Approximately two-thirds of companies in Luxembourg are SARLs.

An SARL can have between 2 and 100 shareholders.

There is also a form of SARL known as a "single member" SARL. The single member SARL is an exception to the traditional idea of a company in company law, in that it is an SARL that can be set up by a single shareholder.

Who is concerned

An SARL can have between 2 and 100 shareholders. The shareholders may be natural or legal persons.

There may be only one shareholder at the time of incorporation since it is possible for one shareholder to own all of the shares.

Prerequisites

An SARL may be formed for any business purpose.

Anyone who wishes to set up a company to do business in Luxembourg must have the requisite authorisations/approvals.

Costs

Setting up an SARL entails certain costs, including:

• a share capital contribution of at least EUR 12,000;
• notary fees;
• the cost of publication in the Trade and Companies Register (Registre de commerce et des sociétés – RCS);
• statutory auditor fees (if statutory audits are required);
• any costs related to the issuance of administrative permits.

How to proceed

Deed of incorporation

An SARL must be formed in the presence of a notary.

The deed of incorporation must contain certain legally required information, such as:

• the identity(ies) of the natural or legal person(s) who signed the deed, or on whose behalf the deed was signed;
• the form of the company and the company name;
• the address of the company's head office;
• the company/business purpose;
• the amount of subscribed share capital;
• the different classes of shares;
• details of contributions in kind;
• details of any other non-cash considerations at the time of incorporation;
• where applicable, the number of securities or shares that do not form part of the share capital, and the rights attached thereto;
• when not provided for by law, the rules governing the operation, administration and oversight of the company;
• the duration of the company;
• at least an approximation of the company's costs.

The articles of association must be filed in full with the Trade and Companies Register for publication.

Company name

An SARL 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 whether the company name is available, contact the RCS.

Duration

An SARL may be formed for a limited duration or an unlimited duration.

Conversion

An SARL may change its corporate form in the course of its lifetime through shareholder decision.

If the number of shareholders exceeds 100, the SARL has one year to change its legal form.

The rules on mergers and demergers, which are likely to bring about a change in legal form, apply to SARLs.

Dissolution

An SARL may be dissolved for the following reasons:

• expiry of the company's duration;
• completion or extinction of its business purpose;
• judicial ruling to dissolve the company for legitimate reasons;
• voluntary dissolution decided on by the single shareholder or all of the shareholders at the meeting of shareholders.

Any document establishing the voluntary dissolution of the company must be accompanied by the following administrative certificates:

• a certificate issued by the Data-Processing, Membership and Contributions Centre of the Joint Social Security Centre (Centre commun de la sécurité sociale – CCSS);
• a certificate issued by the Luxembourg Inland Revenue (Administration des contributions directes);
• a certificate issued by the Registration Duties, Estates and VAT Authority (Administration de l’enregistrement, des domaines et de la TVA).

Capital

Incorporating as an SARL requires a minimum share capital of EUR 12,000.

The share capital must be fully subscribed and paid up at the time of incorporation.

An SARL may issue shares with different values, either with or without a nominal value.

Contributions can be made in cash or in kind.

Contributions in kind must be valued in the articles of association.

Contributions "in industry" (services, know-how, etc.) do not form part of the share capital and do not need to be valued separately by a statutory auditor. Contributions in industry:

• entitle the contributor to non-transferable shares;
• entitle the contributor to share in the profits and net assets of the company, and obligates them to contribute to covering its losses.

Form of company shares

The shares in the capital of an SARL are issued as registered shares, with or without a nominal value.

An SARL is permitted to issue profit shares. The profit shares do not form part of the company's share capital. The rights attaching to the profit shares must be specified in the articles of association.

Public issues of shares or bonds are not permitted.

Private bond issues are allowed, but require the shareholders' approval in the case of convertible bonds.

Transfer of company shares

The company shares are not freely negotiable.

They may only be transferred inter vivos to non-shareholders with the approval of the general shareholders meeting representing at least 75 % of the share capital. However, if provided for in the articles of association, the proportion of the share capital required for approval may be lower (but not less than 50 %).

Unless otherwise specified in the articles of association, the shares may be freely transferred between the shareholders.

Share transfers must be recorded in a notarised deed or a private deed.

Structure of managerial bodies

An SARL is managed by one or more managers – who may or may not be shareholders – appointed by the shareholders, either in the articles of association or by subsequent deed, for a limited or unlimited term.

The manager

A legal person may be appointed to manage an SARL.

With the exception of actions requiring a decision on the part of the shareholders, as provided for by law or in the articles of association, the manager(s) may undertake any action they deem necessary or useful for achieving the corporate purpose.

They represent the company with respect to third parties and in the courts.

There are no restrictions on the nationality of an SARL's managers; they may be Luxembourg nationals, EU nationals, or nationals of any third country.

Managers need not be registered as traders.

They may only be removed from office for legitimate reasons, such as: obvious incapacity, unfair competition to the detriment of the company or misappropriation of funds, unless otherwise specified in the articles of association.

Meeting of shareholders

The shareholders' decisions are taken at general meetings of shareholders.

The general meeting decides on:

• amendments to the articles of association;
• changes in the company name;
• changes in the share capital;
• changes in the legal form of the company;
• the appointment or dismissal of managers;
• the liquidation of the company, or changes in its nationality.

The shareholders are entitled to a share of the profits.

The shareholders are entitled to information on the inventory, balance sheets and reports produced by the supervisory board, if such a board exists.

In SARLs with more than 60 shareholders a general meeting of shareholders must be held at least once a year. The time of year at which the meeting is held is specified in the company's articles of association.

Other meetings of shareholders are convened by the manager(s).

Unless the articles of association have been amended to state otherwise, it is not mandatory to hold a general meeting in SARLs with fewer than 60 partners. In this case, the partners are invited to send in their votes in writing, after having received the text of the resolutions or decisions to be taken.

Shareholders may enter into agreements among themselves regarding the exercise of voting rights.

Each shareholder has a number of votes equal to the number of shares they hold. Decisions are validly taken by majority vote representing 50 % of the capital.

Liability

The founders of the company and, in the event of an increase in capital, the managers, are jointly liable in respect of third parties for:

• any part of the capital that is not validly subscribed, and for the difference between the minimum capital and the subscribed capital;
• the full payment of the shares and the portion of the capital for which they have subscribed;
• remedying any damages arising from:
  •  the company's nullity; or
  •  omissions or inaccurate statements in the company's deed of incorporation.

However, the deed of incorporation of the SARL may restrict the label of "founder" to subscribers who, together, hold at least one third of the share capital. In that case, all other shareholders mentioned in the deed of incorporation will be deemed simple subscribers.

The shareholders are liable to the extent of the amount of their contribution to the share capital.

The company is bound by the actions undertaken by the manager(s), even when they surpass the corporate purpose, unless it can be proven that the third party involved knew, or could not have been unaware of, the fact that the action surpassed the corporate purpose.

However, when several managers are appointed, the company may define their joint and/or individual duties and powers, in which case the latter must be declared to the Electronic Compendium of Companies and Associations (Recueil électronique des sociétés et associations – RESA) for publication and then become enforceable against third parties.

Managers are accountable to the company for carrying out the duties entrusted to them, and for any misdeeds committed in the performance of such duties.

Obligations

Auditor oversight

SARLs with more than 60 shareholders are subject to compulsory oversight by one or more internal auditors, whose names are mentioned in the articles of association. The auditors may or may not be shareholders.

Any company which, on the balance sheet closing date after 2 consecutive years of operation, exceeds the thresholds specified in 2 of the 3 criteria mentioned below, is legally required to have their accounts audited by a statutory auditor:

• balance sheet total: EUR 4.4 million;
• net turnover: EUR 8.8 million;
• average number of full-time employees: 50.

Legal publications

The articles of association of the SARL must be filed in full with the Trade and Companies Register for publication.

In order to register the company with the RCS, the following information about the company must be disclosed:

• the company or trade name and, where applicable, any abbreviations or commercial sign used;
• the legal form of the company and, where applicable, any additional details required by law;
• the exact address of the company's head office;
• the purpose of the company;
• the total share capital;
• the identities of its shareholders, their private or professional addresses and the number of shares they hold;
• for shareholders who are natural persons, their surnames, first names and their date and place of birth;
• for shareholders who are legal persons that are not registered with the Luxembourg Trade and Companies Register:
  • their company or trade name;
  • their legal form;
  • their business registration number in the Trade and Companies Register, if the law of the State in which the company is based provides for such a number, and the name of the business register;
• for shareholders who are legal persons registered with the Luxembourg Trade and Companies Register: merely the registration number.

The deed of incorporation and all subsequent amendments thereto must be filed with the RCS for publication.

All of the company's legal documents must bear:

• the company name;
• the wording, "société à responsabilité limitée";
• the address of its head office;
• the Luxembourg Trade and Companies Register registration number;
• the capacity of the signatory of the legal document.

The company's financial statements must be filed with the Luxembourg Trade and Companies Register within 7 months of the close of the financial year (6 months to hold the general meeting of shareholders, plus 1 month from the date of the meeting).

Accounting

An SARL must produce:

• a balance sheet;
• a profit and loss statement, along with its annexes;
• in principle, a management report.

All of these documents must be approved by the general shareholders' meeting.

An SARL may produce a short-form balance sheet if, on the balance sheet closing date, it has not exceeded the thresholds in 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.

An SARL may group certain items together in the profit and loss statement if, on the balance sheet closing date, it has not exceeded the thresholds in 2 of the following 3 criteria:

• balance sheet total: EUR 20 million;
• net turnover: EUR 40 million;
• average number of full-time employees: 250.

Taxation

SARLs are subject to the following fees and taxes:

• a fixed registration fee;
• property tax;
• business tax;
• net wealth tax;
• corporate income tax;
• VAT, based on the following criteria:
  • if its annual turnover excluding taxes is less than EUR 112,000: VAT returns must be filed annually;
  • if its annual turnover excluding taxes is between EUR 112,000 and EUR 620,000: VAT returns must be filed quarterly;
  • if its annual turnover excluding taxes exceeds EUR 620,000: VAT returns must be filed monthly.

Forms / Online services

Who to contact