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Legal Aspects of a Luxemburg Sárl and SA

Contributed by Gerli Wren & Co.
09 May, 2013

Contributed by Gerli Wren & Co. [www.gerlico.com ]

1.    Incorporation

A Luxembourg limited liability company (Sárl) or a public limited liability company (SA) must be incorporated before a Luxembourg civil law notary. The notarial deed of incorporation must be executed in French or German, but usually the incorporators are provided with translated articles in English.

Prior to incorporation, the Luxembourg notary will examine and verify the personal data of the incorporator(s), the managing director(s), and the ultimate beneficial owner(s).

2.    Capitalization

The capitalization requirements for Sárl and SA companies are different.

A Sárl has a minimum capital requirement of € 12,500 of which 100 percent must be paid-in.

Additional capital can be contributed without a maximum, should a higher capital be desired upon or after incorporation. The capital can be expressed in euro or in a foreign currency and is divided into a number of shares, with or without a par value.

An SA must have minimum subscribed capital of € 31,000. At least 25 percent of the subscribed capital must be paid in. Additional capital can be contributed without a maximum, should a higher capital be desired upon or after incorporation. The capital can be expressed in euro or in a foreign currency and is divided into a number of shares with or without a par value.

Luxembourg tax legislation requires a minimum debt-equity ratio of 85/15.

Managing directors of Luxembourg companies are not required to hold any shares, nor is it required that shares are held by residents of the Grand-Duchy of Luxembourg.


Bearer shares are freely transferable upon delivery of the related share certificates. Only an SA may issue bearer shares. Registered shares issued by an SA may be freely transferred, subject to any restrictions that may be included in the company's articles of association.

A Sárl can only issue registered shares. Its articles of association stipulate limitations as regards the transferability of the shares and is fixed by the law.

Sárl's and SAs can have different classes of shares. Whereas an SA can issue shares without voting rights but with dividend rights and vice versa, a Sárl does not have this possibility.

No notarial deed is required when transferring shares of a Sárl or an SA. The transfer of Sárl shares must however be registered in the Luxembourg trade register.

4.    ShareholderÂ’s register

If an SA has issued registered shares, its managing director must keep a shareholders' register at the registered office of the company. The register contains the numbers of all registered shares, the names and addresses of all shareholders as well as the particulars of any transfer, pledge, attachment, usufruct of the shares.

Shareholders, pledgors and usufructuaries of shares have the right to inspect the shareholders' register and receive a certified excerpt including the information that is registered with respect to their shares. Any amendment or adjustment of the shareholders' register requires the signature of one of the managing directors.

Luxembourg law does not provide requirements as regards the shareholders' register of a Sárl, since this is published in the trade register.

5.    Issuance of new shares

Bearer shares must be paid in full upon issuance. A contribution on shares may also be made in kind. A contribution in kind on the shares of an SA requires a certificate from a Luxembourg external auditor, confirming that the value of such contribution in kind is equal to or exceeds the par value of the issued shares. When making a contribution in kind to a Sárl, aforementioned auditor's certificate is not required.

Upon the issuance of additional shares by an SA, the existing shareholders can have pre-emptive rights, subject to exemptions under the law. However, pre-emptive rights may be limited or cancelled by the general meeting of shareholders. The articles of association may contain provisions to limit or even cancel pre-emptive rights.

The issuance of new shares by both a Sárl and an SA requires a notarial deed executed before a Luxembourg civil law notary. The SA must furthermore include the particulars of the registered shares issued in its shareholders register.

6.    Legal reserve

Luxembourg Sárl's and SAs must maintain a legal reserve. A fixed proportion of the annual profit (5 percent) must be allocated to this legal reserve up to the point where the reserve reaches a value of 10 percent of the subscribed capital.

7.    Management

A Luxembourg Sárl is managed by one or more managers, who can be appointed for a limited or for an unlimited period.

A Luxembourg SA is managed by a board of managing directors, consisting of at least three members (administrateurs) who are appointed (for a period of 6 years at the most) and discharged by the shareholders. If there is only one shareholder however, an SA can be managed by only one director.

Luxembourg corporate law does not require that the managing directors of a Luxembourg SA or the managers of a Sárl are Luxembourg residents. However, for Luxembourg tax purposes, it is advisable that at least half of the managing directors respectively managers is residing in Luxembourg.

The articles of association generally state that managing directors must act jointly when representing and binding the company. Alternatively, however, the articles of association may stipulate that one managing director can solely act on behalf of the company.

The articles of association may furthermore provide that a number of specified acts of the board of managing directors or the sole director require prior approval of the shareholder(s). As a rule however, such restrictions - although internally applicable - cannot be invoked against third parties, unless the third par§ is aware of this provision and did not act in good faith.

8.    Internal auditor

A Luxembourg SA should be controlled by one or more internal auditors (commissaire aux comptes) who advise and supervise the managing directors, but do not participate in the company's management. An internal auditor is appointed for a 6 years maximum and dismissed from its position through the general meeting of shareholders. No person may concurrently serve as a managing director and an auditor.


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