Pending Luxembourg Legislation Will Make SARL Incorporations Quicker And Easier – New York Office Snippet

Loyens & Loeff New York regularly publishes "Snippets" on various EU tax and legal topics. This Snippet focuses on pending Luxembourg legislation that would allow a Luxembourg private limited liability company (SARL) to defer payment of its statutory minimum share capital (EUR 12,000 or the equivalent in another currency) for up to 12 months after incorporation. This addresses a longstanding practical bottleneck for incorporating a Luxembourg SARL under current law: the time-consuming requirement to open and fund a bank account before incorporation can proceed. 

Under current rules, the minimum capital must be deposited into a bank account opened in the name of the SARL to be incorporated, unless the minimum capital is contributed in kind. Since the bank account is usually opened in Luxembourg, this triggers stringent AML/KYC due diligence requirements that can take weeks or even several months to complete, often becoming a significant bottleneck to timely incorporation of a SARL. The draft legislation addresses this by introducing a deferred payment mechanism designed to eliminate this hurdle while preserving necessary safeguards.

Key highlights:

• The cash payment of the minimum capital can be delayed for up to 12 months after the SARL’s incorporation. The same option applies to any share premium provided for upon incorporation.
• This deferral does not apply to any subsequent capital increases.
• Contributions in kind and any cash amount above the minimum EUR 12,000 must still be fully paid at incorporation.
• Unpaid capital must be publicly disclosed in corporate documents and annual accounts, and the founding shareholder(s) is (are) liable for payment within the deferral period.
• Voting rights tied to unpaid shares may be suspended after a valid call for payment of the deferred amount (the terms of which are to be set in the articles of incorporation).

This reform would eliminate the requirement to open and fund a bank account prior to incorporation, significantly reducing the incorporation timeline. This is especially valuable for the incorporation of a Luxembourg general partner (which typically takes the form of a SARL) of a Luxembourg fund and/or Luxembourg investment vehicles operating under tight transaction schedules, where bank onboarding has historically been a source of delay.

The new rules would apply to SARLs incorporated after the law enters into force. The draft is currently progressing through the legislative process. It has not yet received all required advisory opinions and may still be amended before enactment. Once in force, the reform will be a welcome development for any sponsor or investor relying on Luxembourg SARLs as part of their structuring toolkit, removing one of the last remaining practical hurdles to fast-track incorporation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.