The New SARL-S in Luxembourg: What Does It Mean ?

The simplified private limited liability company

In order to promote entrepreneurship and stimulate growth, the Luxembourg Government has introduced the draft law dated 2 February 2015 for the purpose of creating a new type of private limited liability company (“Société à responsabilité limitée simplifiée” or “S.à r.l.-S”) that can be incorporated pursuant to a private deed with a corporate capital of 1.- EUR only.

Apart from the special provisions applicable to the S.à r.l.-S., the S.à r.l.-S will be governed by the same set of rules as the S.à r.l.


1. A draft law targeted at entrepreneurs

The S.à r.l.-S is dedicated to private individuals only and the draft law expressly prohibits legal persons to either hold corporate units of an S.à r.l.-S or to manage them.

In addition, private individuals are not entitled to own shares in more than one S.à r.l.-S.

These limitations have been introduced by the Government in order to prevent the misuse of the S.à r.l.-S for any purpose that is contrary to the spirit of the draft law.

Non-compliance with any of these two prohibitions would result either in (i) the invalidity of the deed pursuant to which any legal person has become a member or a manager of an S.à r.l.-S or (ii) the joint and several liability for all obligations and liabilities of any additional S.à r.l.-S of which an individual would become a member of.


2. Purpose

The S.à r.l.-S is dedicated to commercial, craft and industrial activities and certain liberal professions that require a business authorization from the Ministry of Middle Classes.

To ensure that S.à r.l.-S are not employed for any means other than those foreseen by the draft law, the corporate object of an S.à r.l.-S must be an activity that requires a business authorization, such as commercial activities (e.g. trade, restaurants, catering, transportation, industrial activities, etc.), craft activities (e.g. construction, engineering, audiovisual, art, etc.) and a certain number of liberal professions.

Given the fact that the corporate purpose of any S.à r.l.-S requires such S.à r.l.-S to hold a business authorization, the draft law subjects the registration of an S.à r.l.-S with the Luxembourg Trade and Companies Register (“RCS”) to filing such business authorization with the RCS.


3. Formalities

The S.à r.l.-S may have one or several members and can be incorporated pursuant to a private deed.

After its incorporation, the newly incorporated S.à r.l.-S will be required to file the names and surnames of its members, their addresses, the number of corporate units held by each of them and its business authorization with the RCS.

The corporate capital of an S.à r.l.-S may consist of a symbolic Euro only but must be subscribed and fully paid up at the time of incorporation, whether by contributions in cash or in kind.

The maximum corporate capital of the S.à r.l.-S is set to EUR 12,394.68; a capital increase beyond that limit is permitted but requires the transformation of the S.à r.l. into another type of company pursuant to a notarial deed.

Finally, it is worthwhile noting that the Luxembourg Government has introducing a provision pursuant to which each year at least one-twentieth of the net profits of the S.à r.l.-S shall be allocated to the creation of a reserve, in order to protect the S.à r.l.-S’ creditors.

This allocation shall cease to be compulsory when the amount of the corporate capital plus the reserve has reached the amount of EUR 12,394.68.

As a conclusion, it can be stated that the introduction of the S.à r.l.-S into Luxembourg’s comprehensive and efficient legal framework would provide entrepreneurs with a convenient tool to operate the separation between their private assets and business assets.

In a Nutshell:
  •  Minimum corporate capital: EUR 1.-
  •  Possibility of incorporation under a private deed
  •  Dedicated to private individuals only
  • Joint and several responsibility of any individual that holds corporate units in more than one S.à r.l.-S
  • Business authorization is required for registration purposes with the RCS
  • Compulsory payment of an annual reserve of 5% of the annual benefits