The reform seeks to modernize Luxembourg company law, ease operational constraints at incorporation (notably those related to AML/KYC checks), and align domestic practice with the flexibility observed in several neighboring jurisdictions.
The Draft Law proposes to amend the law of August 10, 1915 on commercial companies (the 1915 Law) to allow the deferral in time of the payment of the minimum share capital of a S.à r.l., set at EUR12,000 and currently fully payable upon incorporation. It draws lessons from a requirement dating from 1933 that has become ill-suited to contemporary realities, particularly the time needed to open bank accounts due to AML/KYC checks, which slows the setting up of vehicles and harms the market’s competitiveness when tight timelines apply.
1. Proposed mechanics: deferred payment (up to 12 months) of share capital
The Draft Law amends Article 710-6 of the 1915 Law to enshrine the following principle: the share capital must be fully subscribed upon incorporation, but its payment may be deferred for up to twelve months, in accordance with the terms set out in the articles of association; the same option applies to any share premium provided for at incorporation. Foundering shareholders will have a choice between full payment at incorporation and deferred payment, enabling, in particular, the bank account to be opened afterwards without delaying incorporation.
The articles of association must govern the procedures and triggers for capital calls and may provide mandatory due dates or authorize the managers to make calls based on cash needs. No minimum paid-up amount is required at incorporation.
The notary’s role is adjusted: the notary must verify full subscription and, where applicable, payments made on the date of incorporation, but is not required to check subsequent deferred payments.
2. Safeguards
- Any amount contributed above the minimum share capital must be fully paid up at incorporation
- Contributions in kind (and any related premiums) must be fully paid up at incorporation
- Shares issued after incorporation (and any related premiums) must be fully paid up at the time of their issuance
3. Liability, transparency, and protection of third parties
The Draft Law transposes, mutatis mutandis, mechanisms inspired by the public limited liability company regime:
- Joint and several liability of the founders for the portion of the capital not validly subscribed and for effective payment upon expiry of the twelve-month period.
- Adjustment of the transferor’s liability in the event of a transfer of shares that are not fully paid up, with joint recourse against the transferee and its successors.
- Suspension of the voting rights attached to shares in default of payment after a proper call for funds.
A transparency requirement is introduced: publication, following the balance sheet, of the list of shareholders who have not fully paid up their shares (and any premium) together with the amounts due. In addition, where corporate documents mention the capital, they must, where applicable, indicate the portion not yet paid and, in the case of an increase, the portion not yet subscribed.
4. Simplified S.à r.l. (S.à r.l.-S)
Article 720-4 of the 1915 Law is adapted to extend deferred payment to all capital subscribed at incorporation of S.à r.l.-S, where contributions are in cash.
5. Practical scope and next steps
The reform should speed up the incorporation of Luxembourg special purpose vehicles and strengthen the attractiveness of Luxembourg by aligning with European practices.
The new regime will apply to incorporations after the law enters into force. The text is at the very beginning of the legislative process and must obtain the required opinions, notably from the Council of State.
AML/CTF requirements remain unchanged and fully applicable at incorporation.
6. Points of attention for commercial companies
The reform requires precise drafting of the articles to precisely govern the timetable, modalities, and powers for capital calls, and to anticipate the consequences of any failure to pay, notably the suspension of voting rights and the disclosure of amounts due, as well as the implications in the event of a transfer of unpaid shares and the twelvemonth deadline weighing on the founders.