Introduction to Luxembourg Company Law

-
First Part : the contract for the constitution of a company and legal personality or
The Common Law of Companies
-
Loi luxembourgeoise concernant les sociétés commerciales en sa version orginale en
langue française (original French version of Luxembourg company Law Statute):
http://www.mj.public.lu/legislation/commerciale/LOI_-10_08_1915.pdf
Dispositions du Code civil concernant le contrat de société (art. 1832-1873) :
http://legilux.public.lu/eli/etat/leg/code/civil/20160901
To be noted : until Dec. 2017, the law on commercial companies (hereinafter : “LCC”) had a different
numbering for its articles. In the table of contents that follows the new numbering is first used, followed by the
old numbering preceded by “ex” (useful for the students able to read in French as doctrinal articles relating to
the LCC that were published until 2018 refer to the old numbering). The link (above) referring to the French
version contains a table establishing the concordance between the new and old numberings (starting at page
144)

Table of contents
NB:
- for some English translations of the Law of 10th August 1915 concerning commercial
companies (hereinafter referred to as “LCC”), we will refer to these publicly available
versions (now adapted to the most recent reforms including the Law of August 10th,
2016 1 and new article numbering):
- https://www.nautadutilh.com/en/information-centre/news/consolidated-
commercial-companies-act-of-10-august-1915-updated-version-of-2017 (NautaDutilh)
2

- http://www.ehp.lu/uploads/media/EHP-Law-of-10th-August-1915-on-commercial-
companies.pdf (EHP)
- the English versions of the EU company law directives will also be useful for English
legal terminology relating to company law. See, for instance : directive 2017/1132
compiling several previous EU directives relating to certain aspects of company law :
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:32017L1132

Preliminary remarks : historical origins and types of companies available in Luxembourg

1
For a short summary of this major reform: http://www.ehp.lu/legal-topics/legal-topics-by-areas-of-
expertise/corporate-and-ma/corporate-and-ma-detail/article/company-law-bill-of-law-5730-adopted/
2
This is the translation I preferably use.

1
I. – The Common Law of Companies

Introduction : nature and definition of a company

A. The company contract (validity, nullities, winding-up and liquidation)

A. 1. – Conditions for the validity of the contract

A. 1.1. – Conditions relating to substance

A. 1.1.1. – Conditions for the validity of any contract

A. 1.1.2. – Conditions that are specific to the company

contract

A. 1.1.2.1. – Contributions

A. 1.1.2.2. – Participation in the profits and losses

A. 1.1.2.3. – Common interest

A. 1.1.2.4. – Affectio societatis

A. 1.2. – Conditions relating to form

A. 2. – Nullity of the company contract

A. 2.1. – Causes of nullity

A. 2.2. – Action in nullity and effects of nullity

A. 3. – Winding-up (dissolution) and liquidation of companies

A. 3.1. – Causes of dissolution

A. 3.1.1. – Voluntary dissolution

A. 3.1.2. – Judicial dissolution

A. 3.1.2.1. – General provision

A. 3.1.2.2. – Just motive

A. 3.2. – Liquidation

A. 3.2.1. – General principle

2
 A. 3.2.2. – Other effects of the company’s dissolution

A. 3.2.3. – Liquidation procedure

B. 0ne-person company

C. Legal personality

C. 1. – Recognition of legal personality

C. 2. – The attributes of legal personality

C. 2.1. – Name

C. 2.2. – Domicile

C. 2.3. – Nationality (or applicable company law)

C. 3. – Legal capacity and organic representation

C. 4. – Responsibility

C. 4.1. – Civil

C. 4.2. – Criminal

C. 5. – Conversion

C. 5.1. - Principle of continuation of the company’s legal personality

C. 5.2. – Effects of a conversion procedure

C. 5.3. – Procedure and responsibilities

C. 6. – Mergers and divisions

C. 6. 1. Scope

C. 6.2. – The various transactions covered

C. 6. 3. – Effects of merger/division

C. 6.4. – Procedure to be followed

C. 6.5. – As to form

C. 6.6. – Liabilities

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 C. 6.7. Nullity of the merger/division

C. 7. – Partial transfer of assets and universal transfers of assets (without

winding up of the contributing company)

C. 8. – Transfer of professional assets

Preliminary remarks

- Historical origins of Luxembourg company law : a 1915 statute 3 mainly inspired from
Belgian law as it existed then 4, meaning: influenced by the Napoleon Civil Code civil law
system (as opposed to Anglo-American common law) but generally quite more liberal than
its French Commercial Code counterpart and that gained specific features when compared
to Belgian company law since the start of the transposition of the EU directives (Luxembourg
tending to choose the most liberal options offered by the directives, which was not
necessarily the choice made in Belgium 5) that started in the 1970s;
- Short presentation of the available types of companies (see art. 100_2 ex 2 LCC) :
- general partnership (société en nom collectif, SNC) 6 – See art. 200-1 ex 14 LCC =
an unlimited liability company where all members/partners are jointly and severally
liable for the company’s acts and endowed with legal personality. Was historically
the “common law” company;

- (common) limited partnership (société en commandite simple, SCS) – See art. 310-
1 ex 16 LCC = a company with two types of members/partners: (one or more)
unlimited partners who are jointly and severally liable for the company’s acts and
(one or more) limited partners whose liability is limited to the amount of the

3
Hereinafter referred to as LCC (Law on Commercial Companies)
4
Belgian Company Law originated in a 1873 statute that was itself inspired from French law. As of 2018 Belgian
Company Law is undergoing its most fundamental reform since its origin that will make it quite similar to Dutch
company law when it will be adopted.
5
The desire to re-become more liberal, especially for the private limited liability company (less regulated by EU
company law), is the main reason underlying the reform presently conducted in Belgium. The present “legal
competition” between EU member states relating to their respective company law system found its origin in
some important ECJ case law :
- Daily Mail, 1988 (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A61987CJ0081 ),
- Centros, 1999 (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A61997CJ0212 ),
- Überseering, 2002(https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A62000CJ0208 ),
- Inspire Art, 2003 (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A62001CJ0167 ),
- Sevic, 2005 (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A62003CJ0411 ),
- Cartesio, 2008 (https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A62006CJ0210 ),
- Vale, 2012 (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A62010CJ0378 ) and
- Polbud, 2017 (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=ecli:ECLI:EU:C:2017:804 )decisions (to be
considered infra).
6
Named “general corporate partnership/unlimited company” in the EHP translation.

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 contribution they made to the company. The company is endowed with legal
personality;

- special limited partnership (société en commandite spéciale, SCSp) – See art. 320-
1 ex 22-1 LCC = introduced in 2013. Its regime is almost identical to the one
applicable to the common limited partnership but it is NOT endowed with legal
personality. It was introduced to satisfy the needs of foreign customers whose
jurisdictions eventually only know of limited partnerships without legal personality
(tax implications);

- public limited liability company (société anonyme, SA) – See art. 410-1 ex 23 LCC =
a company presenting the specificity of issuing transferable/negotiable shares (that
can eventually be listed on a stock exchange). All the shareholders benefit from a
limitation of their liability and the company is endowed with legal personality. This
company can issue either bearer, nominative or dematerialised shares. Could be a
one-person company

The European Company (SE) instituted by a 2001 EU regulation 7 is a form of PLC

that derives its legal personality from European law and not from national law. The
SE is governed, in addition to the provisions stemming from the 2001 regulation, by
the national law of its statutory seat (see art. 1 (3) and 9 of the SE Regulation). That
explain why the provisions of the LCC relating to the SA also apply to the SE and
eventually contain special provisions for the SE that originate in the 2001
regulation;

- simplified joint-stock company (société par actions simplifiée, SAS) – See art. 500-
1 and 500-2 ex 101-18 and 101-19 = a company that corresponds to a public limited
liability company except that it may not issue shares to the public (hence may not
be listed) and is not regulated by the rules applying to the management of the SA
(see art. . The specific rules applicable to the SAS are to be found in art. 500-1 to
500-9 ex 101-18 to 101-26 LCC;

- partnership limited by shares (société en commandite par actions, SCA) – See art.
600-1 ex 102 LCC = a company with two types of members/partners: (one or more)
unlimited partners who are jointly and severally liable for the company’s acts and
(one or more) limited partners whose liability is limited to the amount of the
contributed share capital to the company (a combination of the common limited
partnership and of the public limited liability company, meaning that the limited
partners’ shares are negotiable/transferrable and can eventually be listed, as is the
case in a public limited liability company). The company is endowed with legal
personality;

- private limited liability company (société à responsabilité limitée, SARL or Sàrl) –

See art. 710-1 ex 179 LCC = a company offering limited liability to all of its
shareholders (limited to the contributed share capital) but issuing non negotiable

7
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:32001R2157

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 (compulsory limitations on transfer do exist: see art. ex 710-12 ex 189 LCC)
nominative shares, endowed with legal personality. Could be a one-person
company (see art. 710-1 (2) LCC).
Since July 2016 there is also a form of simplified private limited liability company
(the one-euro SARL 8) as organized by art. 720-1 to 720-6 ex 202-1 to 202-6 LCC
(reserved to physical persons and that must be managed by physical persons) 9;
- cooperative society (société cooperative, SC) – See art. 811-1 ex 113 LCC = a
company whose members and capital are variable (as opposed to the SA or SARL
having a “fixed” capital that can be modified only through a procedure of
amendment of the company’s statutes), in other terms the company’s capital
increases or decreases with the entry or exit of members without need to alter the
company’s statutes (above an amount of “fixed capital” that is however freely
determined by the company’s statutes). The company can be either a limited or
unlimited company (choice made in the company’s statutes) and is endowed with
legal personality. A cooperative society may also be organised as a SA (coopsa, see
art. 820-1 ex 137-1 LCC): in such case it appears as an hybrid between a SC and a SA
and constitutes one of the forms available for the constitution of Luxembourg
pension funds (Sepcav or société d’épargne pension à capital variable);

The European Cooperative Society (SEC) instituted by a 2003 EU regulation 10 is a

form of cooperative society but that derives its legal personality from European law
and not from national law (see art. 1 (5) of the SEC regulation). The SEC is governed,
in addition to the provisions stemming from the 2001 regulation, by the national
law of its statutory seat (see art. 8 of the SEC regulation). In Luxembourg special
provisions were enacted at art. 831-1 to 839-1 ex 137-11 to 137-62;

- participation company (société en participation) – See art. 900-2 ex 139 LCC = a

company deprived of legal personality that presents an occult feature: for third
parties only the manager(s) (with unlimited liability) appears to the fore whereas
the participants (who undertook to contribute something to the company) remain
in the shadow and hence incur no liability towards third parties;
- temporary company (société momentanée) – See art. art. 900-1 ex 138 LCC = a
company deprived of legal personality characterized by a duration that will vary
with the nature of its purpose (will end after a project was carried out in that form).

I. - The common law of companies

8
As opposed to the “ordinary” SARL that must have a minimum capital of at least (see art. 710-5 (1) ex 182 (1)
LCC).
9
The provisions relating to the simplified SARL entered into force on January 16th, 2017.
10
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:32003R1435

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Introduction

Nature of the company: is it a “mere” contract (company’s interest reduced to the – short
term – financial interest of its shareholders, freedom of contract, deregulation, presumed
externality-free) or also an institution (company’s “social” interest not reduced to its
shareholders’ but taking into account the interest(s) of its other stakeholders, regulation in
order to protect minority shareholders, stakeholders against abuses and negative
externalities) ? Historically this debate has taken the form of a pendulum 11.
Definition of a company (applicable to all companies whatever their size or form)
Art. 1832 of the Civil Code: “A company can be founded by one or more persons who
convene to put something in common with the view to share in the profits that may result
from their investment or, in cases provided by law, by one person’s expression of will to
affect certain goods to the carrying out of a determined activity”

This definition makes it clear that a company may eventually be formed by only one person
(in Luxembourg it is the case for the SA, SAS and the SARL) and expresses the specific
characteristics of the contract for the formation of a company when more than one person
are involved (see below)

A. The company contract (validity, nullities, winding-up and liquidation)

A. 1. – Conditions for the validity of the contract
A. 1.1. – Conditions relating to substance
A. 1.1.1. – Conditions for the validity of any contract

Art. 1108 of the Civil Code: the parties must freely consent (no fraud, no mistake, no
violence…), must be capable of contracting, the contract must have a sufficiently determined
object or purpose and must exhibit a lawful cause.

A contract at common law may be voided if any of the parties suffers from a vice of consent
(fraud, mistake, violence) or presents a problem vis-à-vis the requirements stated above.
A company contract presents a specific problem as it generally is a multi-parties long term
contract as opposed to the two-parties short-term contract that forms the Civil code
stereotype. Hence these principles, as applied to companies, have been adapted as follows:

- a) these principles are applied without alteration (one problem affecting one party
leads to the nullity of the company as a whole) to temporary companies, companies
by participation;

11
For more details see I. CORBISIER, La société : contrat ou institution ?, Bruxelles, Larcier, 2011.

7
 - b) for SA (SE), SCA, SARL, SCS, SCSp 12, and, since the law of August 10th, 2016, the
civil company 13, SAS 14, SNC and cooperative society 15, these principles only apply
to the individual parties’ commitment (i.e.: only the commitment affected by one of
those problems will be voided and the affected party will be able to withdraw from
the contract and recoup his/her contribution but the company contract will continue
between the other – non-affected – parties. Art. 100-18, (1) & (2) ex 12ter, (1) & (2)
LCC : only the unlawful object may lead to the nullity of the company as a whole.

Example : Claude, Lola and Serge create a SARL. It appears that Serge was the victim of a fraud. Serge
will obtain his withdrawal from the company and his contribution will reimbursed. The company will
however continue between Claude and Lola.

A. 1.1.2. – Conditions that are specific to the company contract

A. 1.1.2.1. – Contributions
Art. 1833, al. 2 of the Civil code : “(…) Every shareholder must contribute either money or
other goods or his/her work”.
In theory three types of contributions are allowed: in money, in kind, in work/services.

But the companies endowed with a “protected capital” (i.e. that defines a limitation of
liability for shareholders) generally do only take into account contributions of money or in
kind (and not the contribution in work) in order for (the sum of) these contributions to form
the company’s capital. Exception, introduced in 2016, for the SARL (that are often family
companies or companies between spouses where one of the spouses work for the company)
: see art. 710-6, (3) ex 183 (3) LCC 16.
A. 1.1.2.2. – Participation in the profits and losses
On the participation in the profits side, being in company means pursuing a so-called
lucrative intent, as opposed to non-profit organisations that pursue a so-called superior or
ideal aim (that may pertain to the so-called “social economy” sector) 17.

12
For this form of company, see art. 320-1 ex 22-1 (8) LCC.
13
A civil company is one that does not undertake commercial activities as defined by articles 1-3 of the
Luxembourg Commercial Code (see :
http://www.legilux.public.lu/leg/textescoordonnes/codes/code_commerce/CODE_DE_COMMERCE_2015.pdf).
They are mainly governed by art. 1832 et seq. of the Civil Code and do enjoy a separate legal personality (see
art. 100-3, par. 1 ex 3, par. 1, LCC). People who are engaged in a so-called “liberal profession” such as
accountants (doctors, lawyers etc.) must adopt the form of a civil company as they may not be considered as
“merchants”.
14
Pursuant to art. 500-1, par. 1 ex 101-18, par. 1 LCC
15
For this form of company, see art. 811-3 (2) ex 115 (2) LCC.
16
Contributions in work/services are also expressly authorized in the limited partnership (see art. 310-1 (2) ex
16 (2) LCC) and special limited partnership (see art. 320-1 (3) ex 22-1 (3) LCC) but these are companies that
include at least one unlimited partner who/that will be liable for the companies’ obligations on its/his/her
entire estate whatever the amount or real value of the contributions that were made.
17
Foundations, trusts and associations or associations sans but lucratif are, for instance, non lucrative legal
persons.

8
On the participation in the losses side, this character of a company implies the prohibition
of unconscionable clauses (litteraly: “lion’s clauses”, clauses léonines) according to the
provisions of art. 1855 of the Civil code: “The agreement that would allocate the totality of
the profits to one shareholder is void. The same will apply to a clause that would free a
shareholder from any participation in the losses”.
The name “lion’s clause” comes from an ancient fable: “The lion and the animals of th forest”. The lion
gathers the other animals of the forest to participate in a hunting party. All animals cooperate with the
lion, increasing as a consequence the efficiency of the operation. When the day of hunting is over, the
lion roars to scare off the other animals and keeps for itself the products of the joint cooperation.

Problem raised by the carrying of or holding of shares (portage d’actions) being a

contract whereby a person (generally a financial institution) agrees on acquiring and
holding shares for a certain period of time until the moment when those shares are
sold back to their final purchaser (the first person playing the role of the financier) for
a price that guarantees the financier to get back at least what he/she/it originally paid
for the shares. Case law now tends to save these contracts by stressing the fact that
the cause of object of such contracts is financing and not of introducing
unconscionability in the company contract.
The Law of August 10th, 2016 did add a par. to art. 1855 (“Are not prohibited
stipulations whereby present or future shareholders organize the transfer or
acquisition of social rights, the purpose of which is not to affect the sharing in profits
or contribution to the losses in the company’s social relations”) that has the effect of
legalizing most agreements for the carrying/holding of shares.

A. 1.1.2.3. – Common interest

Art. 1833, first part, of the Civil Code: “All companies must have a lawful purpose and be
contracted in the common interest of its parties”.
A. 1.1.2.4. – Affectio societatis
Refers to a collaboration between the parties on an equality footing. Allows the distinction
of the company contract from other types of contracts involving a collaboration between
parties, like the employment of work contract, for instance. However, this concept is of
course much more prevalent in closely held or family businesses than in large/listed public
limited liability companies where a “collaboration” between parties appears largely non-
existent in practice.
A. 1.2. – Conditions relating to form
One has to distinguish between the different types of companies:
- no particular form required (so the company does not demand any written contract
and can be proven by all means including testimonies): for temporary companies and
participation companies (see art. 100-23 ex 13 LCC);
- a form is required for the company’s validity: for the SNC, SCS, SCSp, cooperative
society, civil company and simplified SARL, the shareholders have the choice
9
 between a written contract under private signatures or a notarial act whereas for the
SA (SE and SAS), SCA and SARL the shareholders are under the obligation to have
recourse to a notarial act (see art. 100-4 ex 4 LCC).
A. 2. – Nullity of the company contract

At common law the declaration of the nullity of a contract has a retroactive effect, which is
practically very hard to achieve for a company that eventually entered into a multitude of
contracts and that may have existed for a certain period of time before the cause of nullity is
recognized. Therefore EU law (first directive, now directive 2017/1132) notably imposes two
derogations from common law: for the SA-SARL-SCA, only certain causes of nullity are
accepted (the other causes leading to nullity at common law will only have an effect on the
affected individual party’s commitment) and the accepted causes of nullity will have no
retroactive effect but will lead to a liquidation of the company (so the company ceases to
exist only for the future). Recent reforms of Luxembourg company law have extended the
benefit of these principles to other form of companies. See art. 100-18, 100-19, 100-20, 320-
1 (8), 811-3 (2) ex 12ter, 12quater, 12quinquies, 22-1 (8), 115 (2) LCC.
A. 2.1. – Causes of nullity

See art. 100-18 (1) and (2) ex 12ter (1) and (2) that applies to SA-SARL-SCA (absence of
notarial act, absence of indications on some important topics, unlawful purpose or object,
absence of at least one founder) and to (par. (2) 18) SNC-SCS-civil company (unlawful
purpose, absence of indications on some important topics, absence of at least two founders
or, in the case of the SCS, two legally distinct limited and unlimited partners). Clauses that
would violate art. 1855 of the Civil code (see supra) are deemed to be “not written”, in other
words they will be considered as removed from the company’s statutes.
For the SCSp a similar regime applies according to art. 320-1 (8) ex 22-1 (8) LCC
For cooperative societies, a similar regime (art. 811-3 (2) ex 115 (2) LCC) also applies since
the Law of August 10th, 2016.
A. 2.2. – Action in nullity and effects of nullity

See art. 100-19 to 100-21 ex 12quater to 12 sexies LCC that apply to all companies endowed
with legal personality: the nullity has to be declared by a court and has effect only for the
future (no retroactive effect), leading to the liquidation of the company. This provision was
extended to the SCSp (see art. 320-1 (8) ex 22-1 (8), last sentence LCC).
A. 3. – Winding-up (dissolution) and liquidation of companies
A. 3.1. – Causes of dissolution
A. 3.1.1. – Voluntary dissolution

18
Law of August 10th, 2016.

10
The members/shareholders may decide to put an end to the existence of the company
(common law basis: art. 1865, 5° and 1869 of the Civil Code that might lead to dissolution
when one single shareholder expresses such will).
BUT for the SA 19, SARL and Cooperative society, winding-up can only be decided upon by
the company’s general meeting (so at a qualified majority determined by law, see art. 480-1
ex 99, 710-3 ex 180-1 and 811-4 ex 116 LCC). For the SCS-SCSp the common law provisions
quoted above are not applicable either, the applicable majority being determined by the
company’s contract (see art. 1100-2, last sentence ex 142, last sentence LCC).

The Law of August 10th, 2016 introduced an article 1865bis (that applies to ALL companies)
that provides for the possibility of a voluntary dissolution of a company when its shares are
concentrated within the hands of a single shareholder:
“The concentration of the shares within the hands of a single shareholder does not lead
to the dissolution of the company. Any interested party may ask such dissolution if the
situation was not regularized within a one year delay. The court may grant a maximum
delay of six months to the company in order to regularize its situation (…)
The shareholder within one’s hands the shares were concentrated may decide to dissolve
the company at any moment.
(…)
In the case of a dissolution, this will entail the universal transfer of the company’s assets
to the sole shareholder, without prior liquidation. The creditors may, within the 30 days
following publication of the dissolution, ask the Court, acting ias n summary proceedings,
for the constitution of securities. The Court may reject the claim only when the creditor
already has adequate guarantees or when they do not appear to be necessary considering
the shareholder’s personal assets”.

A. 3.1.2. – Judicial dissolution

A. 3.1.2.1. – General provision

IMPORTANT general provision of art. 1200-1 ex 203 LCC: any serious violation of the
Commercial code, Criminal code or LCC might lead to judicial dissolution, professionals from
the financial sector being assessed even more severely. Most common case of
implementation of art. 203 LCC: lack of deposit of the company’s annual accounts (one year
absence of deposit could suffice). See also the criminal provision of 1500-2, 2° ex art. 163, 2°
LCC. See also art. 1200-2 ex 203-1 concerning the possibility of closing establishments of
foreign companies that would likewise violate the same provisions.
A. 3.1.2.2. – Just motive

19
In the SAS this is a decision to be taken by the shareholders according to the conditions laid down by the
company’s statutes.

11
See art. 1871 of the Civil Code in general (and art. 480-1 ex 99, 710-3 ex 180-1 and 811-4 ex
116 LCC for the SA/SAS, SARL and SC): a shareholder may file suit to obtain the winding-up of
the company for a “just motive” (for the companies covered by the LCC any interested party
could file suit to that effect). Most commonly accepted just motive would be the case of a
conflict between shareholders that would have a very detrimental effect on the functioning
of the company (in family companies, a divorce between shareholders may have such effect
but only to the extent that the conflict between spouses makes the functioning of the
companies’ organs practically impossible). In practice the judge hesitates to accept a just
motive when other interests (f.e. employees) could be affected by such dissolution.

Other judicial dissolution causes that deserve attention: see art. 710-12 (2) ex
189 (2) LCC for a non-agreed upon transfer of shares in a SARL following death
of a shareholder, important losses in a SA (art. 480-2 ex 100 LCC: problem of
proving the existence of a link of causality)
A. 3.2. – Liquidation

The procedure of liquidation follows a cause of dissolution or will also be applied after the
admission of a cause of nullity (see above).

The process of liquidation pursues three objectives, to be accomplished in the following

order: 1) pay back the creditors; 2) pay back the shareholders’ contributions; 3) share the
remaining capital gains between the shareholders (see art. 1100-9 ex 148 LCC). Only a
company in good financial health will be able to achieve the third objective. When a
company is in a bad situation, eventually close to bankruptcy, even the first objective might
prove hard to achieve.
A. 3.2.1. – General principle
See art. 1100-1 (1) ex 141 (1) LCC: commercial companies are deemed to exist for the
purpose of their liquidation, meaning that even though the company is dissolved (dead) it
may continue to act and so incur rights and obligations (as if it still existed) when those are
justified by or appear necessary for its liquidation. As a consequence the process of
liquidation maintains but, at the same time, also limits the company’s legal personality (f.e. a
company could not start an entirely new business, not justified in the interest of its
liquidation).
A. 3.2.2. – Other effects of the company’s dissolution

Mostly: equality between the so-called “ordinary creditors” (meaning the ones that do not
benefit from a privilege or any surety agreement or mechanism): each will be payed equally
following a rule of proportionality applied to the assets available to pay them (see art. 1100-
8 ex 147 LCC).
A. 3.2.3. – Liquidation procedure

12
In Luxembourg such procedure provided by the LCC is still largely suppletive of the
shareholders’ will 20 (contrary to many of the surrounding countries where the courts are
more largely involved in the supervision of the liquidation as it may eventually “degenerate”
into bankruptcy).
1) Setting-up of the liquidation organ (art. 1100-2 ex 142 LCC): the shareholders’
general meeting decides on the liquidation mode and on the person(s) of the
liquidator(s). When several liquidators are appointed they do form a college (one
liquidator alone may not take decisions). According to art. 1100-3 ex 143 LCC in the
absence of nomination of a liquidator, the previous management organ of the
company will become the company’s liquidator;
2) Liquidation is being conducted (see the three objectives mentioned above) by the
liquidator who benefits from the large powers enumerated at art. 1100-4 to 1100-6
ex 144-146 LCC (it may entail continuation of the company’s business with the
authorization of the company’s general meeting). To be noted: a company involved
in a process of liquidation may participate in a merger or division (see art. 1020-3 (2),
1020-4 (2), 1030-3 (2) and 1030-4 (2) ex 259 (2), 260(2), 287 (2) and 288 (2) LCC);
3) Each year the liquidator(s) will prepare the annual accounts of the liquidation and
explain why the process of liquidation could not be accomplished during the elapsed
year (see art. 1100-14 ex 150 LCC);
4) Termination (closure) of the liquidation process. See art. 1100-15 ex 151 LCC: first
general meeting that will examine the report of the liquidator(s) and appoint
auditor(s); second general meeting that will hear the report of the auditor(s) and
vote on the discharge of the liquidator(s). To be noted : according to art. 1100-13 ex
149 LCC liquidators can be held directly liable towards third parties (creditors) for
their acts completed during the process of liquidation. The Law of August 10th, 2016
also introduces a conflicts of interests procedure (art. 1100-12 ex 148quater LCC) ;
5) Publications. The publication of the closure of the liquidation marks the final
disappearance of the company’s legal personality with effect towards third parties
(see art. 1100-15, second part ex 151, second part, LCC).

B. 0ne-person company

In Luxembourg law the available forms for one-person companies are: the private limited
liability company (SARL, art. 710-1 (2) ex 179 (2) LCC), the public limited liability company
(art. 410-1 (1) ex 23, (1) LCC) that can also be created by legal persons without limitations
and the SAS since the Law of August 10th, 2016 (see art. 500-1 ex 101-18 LCC).

C. Legal personality

The concept of “legal personality” designates the capacity for the company to incur
personally rights and obligations in its own name and account (in other words such rights
and obligations are not incurred by the shareholders collectively).

20
Art. 1100-2 ex LCC : “Unless agreed to the contrary…”.

13
Legal personality entails a form of permanence. Illustrations:
- The company’s personality continues beyond dissolution for its liquidation needs (see
above);
- The company’s personality is not affected by changes brought to the company
contract’s fundamental elements such as the purpose (or objects) 21, the form 22 or
the nationality 23 of the company;
- The personality of a company being acquired (and consequently wound up) in the
course of a merger procedure or divided (also consequently wound up) survives into
the company benefitting from the transaction (so the company acquired or divided
will not be liquidated) (see below);
- The company’s nullities are limitatively enumerated and bear effect only for the
future (see above). However since 2013 (introduction of the SCSp) this regime was
eventually extended to a non-legal person (see art. 320-1 (8) ex 22-1 (8) LCC);
- Some European entities (namely the EEIG 24, SE and SCE) can transfer their seat from
one member state to another without having to go through a process of winding-
up/liquidation when crossing the national boundaries). For national companies
however the Polbud case (above, 2017) makes it clear that it should be possible as
well, without having to – contrary to the SE-SCE – transfer both seats (statutory and
real) at the same time.

Legal personality furthermore entails a principle of imputability/accountability and of

continuity that is extremely useful for a company often presenting the characteristics of
durability, of involving multiple parties and of affecting many third parties’ interests.
To be noted however: in Luxembourg the SCSp, even though it was not endowed with legal
personality, is the mirror image of the SCS (with legal personality). Only major limitation: it
may not participate as such in a merger/division that requires legal personality for the
companies involved in such process (see art. 1020-1 and 1030-1 ex 257 and 285 LCC).

C. 1. – Recognition of legal personality

In Luxembourg free constitution applies meaning that legal personality arises from entering
into the contract for the foundation of the company and does not rest, like in many other
countries, on the accomplishment of some formalities (like registering with some authority,
for instance).

21
The company’s purpose or objects may now be modified by the companies’ general meeting generally at a
qualified majority (2/3 for the SA, ¾ for the SARL). This topic will be covered in the “Advanced Company Law”
class.
22
See C. 5 below relating to conversion of companies
23
See below C. 2.3
24
The EEIG, or European Economic Interest Grouping is another form of company – essentially conceived for
joint ventures – that presents the peculiarity of the ancillarity of its purposes (namely its aim is to develop the
pre-existing economic activities of its members). Like the SE and SCE, it derives its existence from an EU
regulation (from 1985: https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=celex%3A31985R2137 ). Ex Arte
TV in an EEIG or joint venture between a French and a German public TV channel.

14
So the acquisition of legal personality sort of “automatically” stems from the choice of a
company form for which the LCC recognizes legal personality (see art. 100-2 ex 2 LCC).
To be distinguished: the case of an “irregular” company, that is a company that did not
comply with its obligation of publication of its constitution acts. This company does
enjoy its legal personality but its court actions will be declared inadmissible (art. 100-
11 ex 10 LCC).

C. 2. – The attributes of legal personality

C. 2.1. – Name

Since the Law of August 10th, 2016 all companies receive a denomination (before then some
companies had the choice between a denomination and a “raison sociale”, composed of the
names of one or more shareholders). See art. 100-5 (1) ex 4bis (1) LCC
The company’s name is protected as other companies are not allowed to use the same name
or a name so similar as it might raise confusion (change of name or damages will be
awarded). Case law abounds on the topic (on the basis of ex art. 25 LCC now replaced by art.
100-5 ex 4bis LCC).

C. 2.2. – Domicile

In Luxembourg the company’s domicile is established at the place of its central

administration (“real seat”, and not at its statutory seat or official address): art. 100-2, third
part ex 2, third part LCC. However the company’s (real seat) is presumed to be located at its
official address unless contrary evidence is provided.
Lack of domicile can lead to judicial winding-up of the company (art. 1300-2, last sentence ex
159, last sentence LCC).

C. 2.3. – Nationality (or applicable company law)

Relies on the localisation of the company’s real seat (central administration, namely the
place where the company’s main decisions are taken, one will thus look where its
management is located and where the shareholders’ decisions are adopted) in Luxembourg
and this even when the company’s contract was entered into abroad (art. 1300-2, first
sentence ex 159, first sentence LCC). Reminder: presumption of coincidence between the
real seat and the statutory seat, supra C. 2.2. See art. 444-4 (3) ex 64bis (3) LCC that helps in
maintaining the localisation of the real seat in Luxembourg when it comes to the holding of
boards with the help of modern communication techniques 25. Similarly the law of 2016
introduced other tools further helping in maintaining the localization of the company’s real
seat when facing international situations (that are of course extremely frequent in
Luxembourg) : see art. 444-3 (1) last sentence ex art. 64 (1) last sentence relating to circular

25
See also art. 450-1 (3) ex 67 (3): “If the articles of association so provide, shareholders taking part in a general
meeting by video conference or by means of communication that allow them to be identified are deemed
present for the purposes of calculating the quorum and majority”.

15
resolutions; art. 450-8, fourth part ex 70, fourth part, that provides that in the case of a
general meeting held with not physically present shareholders, such general meeting will
then be deemed to be held at the place of the company’s (statutory) seat; art. 710-15 (2) ex
191bis (2) LCC (circular resolutions in a SARL); 710-15 (3) ex 191bis (3) (holding of
management boards in a SARL); 710-21 (2) ex 196 (holding of general meetings in a SARL)
LCC.

Change of nationality: can be effected in two ways, either following a decision of transfer of
the seat (that, since the Law of August 10th, 2016 does not require unanimous consent
anymore: see art. 450-3 (1) ex 67-1 (1) LCC for the SA and art. 710-26 ex 199 LCC for the
SARL) or as a consequence of a cross-border merger. See the Sevic, Vale and especially the
Polbud cases (EU court of justice) 26, the two last cases justifying the possibility for a
company to proceed to a cross-border conversion by transfer of the seat within the EU and
this even with the two seats (real and statutory) in two different member states (Polbud).

C. 3. – Legal capacity and organic representation

Legal persons enjoy full legal capacity (comparable to natural persons’ legal capacity) except
for the limitations resulting from:
- The nature of legal persons (family and political rights; however legal persons can
claim indemnification for non-pecuniary or “moral” damage);
- The statutory specialty (limitation resulting from the purpose of objects – sphere of
activities – of the legal persons as defined in their statutes). However this limitation
does no longer really applies to SA, SCA and SARL as acts undertaken outside of their
specialty do nonetheless bind the company when it cannot prove that the
contracting party knew or had to know (because of the circumstances) that said acts
were undertaken outside of the statutory specialty (art. 441-13 ex 60bis and art. 710-
15 (5) ex 191bis (5) LCC). Since 2013 the same principles apply to the SCSp (non legal
person) as well: see art. 320-3, fifth part ex 22-3, fifth part LCC);
- The legal specialty (namely legal restrictions as to activities allowed) which, for
companies generally rests upon the requirement of a lucrative activity (see A. 1.1.2.2
above) and also on various legal prohibitions such as the prohibition for the SARL to
be active in the fields of insurance, capitalisation and savings (art. 710-2, 2nd sentence
ex 180, 2nd sentence LCC) or for the SAS to issue shares to the public (art. 500-2 ex
101-19 LCC).
Organic representation: see art. 100-16, 2nd sentence ex 12, 2nd sentence LCC.

C. 4. – Responsibility

C. 4.1. – Civil

26
Quoted above.

16
Direct responsibility (contractual or tortious 27) of the legal person for the acts undertaken
by their organs in the exercise of their function within the company.

However, the organs (managers or directors) may also be held liable for such acts (the direct
liability of the legal person does not absorb or exclude the liability of its organs for their
faults in managing the company).

C. 4.2. – Criminal

Legal persons’ criminal liability is expressly regulated in Luxembourg since the adoption of a
Statute of March 3rd, 2010 28.

C. 5. – Conversion
This topic was deeply reformed but the Law of August 10th, 2016

C. 5.1. - Principle of continuation of the company’s legal personality

A conversion (namely change of form, f.e. a SARL changing its form into a SA) does not affect
the company’s legal personality that simply continues under the new form (art. 100-3, 10th
part ex 3, 10th part LCC: “The conversion (…) shall not give lead to liquidation nor to the
creation of a new legal entity”). The Law of August 10th, 2016, extended the possibilities of a
conversion (before they were restricted to the possibility for a commercial company to
convert into another commercial company, for a civil company to convert into a commercial
company and for a SE to convert into a SA and vice versa): now it is possible for a
commercial company to convert into a civil company and for a European Economic Interest
Grouping (EEIG) to convert into a commercial company. As to the conversion of a SCSp into
a form of company with legal personality, see art. 320-9 ex 22-9 LCC. Furthermore the new
regime developed by the Law of August 10th, 2016 for conversion may possibly be extended
to other forms of legal persons provided that their specific rules would allow it.

C. 5.2. – Effects of a conversion procedure

The company’s rights and obligations under its old form are transferred (universal transfer)
to its new form without any change.
Third parties’ rights (f.e. creditors) are preserved (art. 100-3, last sentence ex 3, last
sentence, LCC), meaning that they cannot be negatively affected by a conversion procedure.

C. 5.3. – Procedure and responsibilities

27
Tortious liability (tort liability) arises not from contract but either from negligence or willful behaviour
inflicting damage upon a third party (see art. 1382-1383 of the Civil code).
28
http://legilux.public.lu/eli/etat/leg/loi/2010/03/03/n1/jo

17
Prior to 2016 no legal rules existed on that matter except for the ones already referred to (in
art. 100-3 ex 3 LCC). Therefore practice followed the Belgian model in a nonetheless
simplified way.

Before 2016 like today, two categories of interests are to be protected in the course of a
conversion procedure: the interests of the company’s shareholders and the interests of third
parties (especially the company’s creditors):

- As to the shareholders: as the conversion brings about a change in the company’s

statutes (the new form being of course mentioned therein, along with the rules that
concern it and that are eventually dependent on the company’s form), the decision
will have to be adopted at the conditions requested for such change (see art. 450-3
ex 67-1 for the SA and art. 710-26 ex 199 LCC for the SARL, a qualified majority is
needed). The obligations of the shareholders may not be increased without their
consent. As a consequence if the company is to evolve from a limited liability form to
an unlimited liability form, unanimous consent will be necessary.
- As to third parties : see art. 100-3 ex 3 in fine LCC

Furthermore the company must comply with all requirements applicable to its new form,
f.e. raise its minimum capital if it evolved from a SARL (art. 710-5 ex 182 LCC) into a SA (art.
420-1 ex 26 LCC).

Publications are also requested for the conversion to become effective against third parties.

New rules introduced by the Law of August 10th, 2016 (see art. 1010-1 to 1010-12 ex
308bis-15 to 308bis-26):

- Prior to the conversion an accounting statement summarizing the assets and liabilities of
the company must be drawn up at a date not prior to six month before the general
meeting’s decision of conversion (art. 1010-2 ex 308bis-16 LCC);
- A statutory auditor shall report on this statement (to avoid overestimation) (art. 1010-3 ex
308bis-17 LCC);
- An explanatory report shall be drawn up by the management body unless all shareholders
waive that right (art. 1010-4 ex 308bis-18 LCC);
- The shareholders have the right to obtain some information before the holding of the
general meeting (art. 1010-5 ex 308bis-19 LCC);
- Art. 1010-7 ex 308bis-21 LCC provides for the decision-making process, making the
necessary distinctions between companies;
- After the decision bearing on the conversion, the company’s statutes are amended
accordingly (art. 1010-8 ex 308bis-22 LCC). This is of course an important step in the
procedure as the statutes have to be adapted to all of the requirements applying to the new
chosen form for the company (minimum capital, management organ, sorts of shares and
securities and their characteristics etc.);

18
- The act of conversion has to be drawn up in the authentic form (art. 1010-9 ex 308bis-23
LCC);
- Various possible liabilities are dealt with in art. 1010-11 and 1010-12 ex 308bis-25 and
308bis-26 LCC.

C. 6. – Mergers and divisions

This topic was harmonised at EU level by three directives: the 3rd directive relating to
mergers, the sixth directive relating to divisions and the 2005 Cross-border mergers directive
29, directives that were all transposed in Luxembourg.

C. 6. 1. Scope

All companies enjoying legal personality may participate in a merger or in a division, even
when they are concerned by a procedure of liquidation (see above) or bankruptcy (art. 1020-
1, 2nd part and 1030-1, 2nd part ex 257, 2nd part and 285, 2nd part LCC). Luxembourg law does
not only allow cross border mergers within the EU but also allows cross border mergers with
a company originating outside the EU and cross border divisions (see art. 1020-1, 3rd to 5th
part and 1030-1 2nd and 3rd part ex 257 and 285 LCC). Partial divisions (where a company
does not transfer all of its assets and liabilities) are also allowed (art. 1030-4 (1) ex 288 (1)
LCC).

C. 6.2. – The various transactions covered

- Merger by acquisition : see art 1020-3 (1) ex 259 (1) LCC;

- Merger by incorporation of a new company: see art. 1020-4 (1) ex 260 (1) LCC;
- Division by acquisition: see art. 1030-3 (1) ex 287 (1) LCC;
- Division by incorporation of new companies: see art. 1030-4 (1) ex 288 (1) LCC;
- Partial division : see art. 1030-4 (1) ex 288 (1) LCC;
- Mixed division: combining acquisition and incorporation: see art. 1030-2 ex 286 LCC;
- A simplified procedure is available for the case when the acquiring already owns all of
the shares of the company being acquired (see art. 1023-1 and 1031-19 ex 278 and
306 LCC).

Fundamentally one has to distinguish a merger (implying a concentration of companies)

from a division (leading to a division of a company between two or several companies). A
division raises specific problems especially when considering the protection of creditors
but both mergers and divisions rest upon one basic principle: continuation of legal
personality in that both transactions are to be analysed as winding-up (of the company
that disappears in the process) without liquidation where the shareholders of the
company that is being wound up receive shares of the company(ies) that benefit from

29
All of these directives were recently codified into the directive 2017/1132 (quoted above).

19
 the transaction with eventually a cash payment that does not exceed 10% of the value of
the shares received.

C. 6. 3. – Effects of a merger/division
- Universal transfer or all assets and liabilities (except for the case of a partial division) of the
company that disappears to the company(ies) benefitting from the transaction (see art.
1021-17 (1) and 1031-16 (1) ex 274 (1) and 303 (1) LCC)
- The transferring company ceases to exist as a result of a winding up without liquidation;
- The shareholders of the acquired company or of the divided company become
shareholders of the company benefitting from the transaction

C. 6.4. Procedure to be followed

1. The administrative or management bodies of the companies involved have to draw

up the common draft terms of the merger/division that consequently have to be
published (art. 1021-1 & 1021-2 ex 261-262 and art. 1031-1 & 1031-2 ex 289-290
LCC);
2. The administrative or management bodies of the companies involved have to draw
up a report about the transaction (see art. 1021-5 ex 265 and 1031-5 ex 293 LCC)
whereas the common draft terms of the merger must be the subject of a report
drawn up by independent experts (approved statutory auditors) (see art. 1021-6 ex
266 and 1031-6 ex 294 LCC) 30 in which said experts have to express their opinion as
to the fairness/reasonableness of the share exchange ratio (namely how many shares
from the company(ies) benefitting from the transaction are obtained against the
shares of the company(ies) that disappear in the transaction). Furthermore some
additional information has to be made available for the shareholders (see art. 1021-7
ex 267 and 1031-7 ex 295 LCC)
3. The transaction demands approval by the shareholders of the companies
participating in the transactions (applicable rules vary according to the form of the
companies involved) (see art. 1021-3 ex 263 and 1031-3 ex 291 LCC);
4. Protection of creditors: see art. 1021-9 ex 268 and 1031-10 ex 297 and LCC. In short:
the creditors may, under judicial supervision, obtain additional security/collateral and
the rights of creditors previously involved with a company of an unlimited liability
form are preserved. Additionally if the draft terms of a division do not clearly indicate
which company takes over one specific liability, all the companies involved shall be
jointly and severally liable for it (see art. 1031-1 (3) (b) ex 289 (3) (b) LCC).
5. In the case of cross border merger, each company will comply with its own national
merger rules the compliance thereof being attested by the notary on the
Luxembourg’s side, the notary issuing a certificate that is being sent to the

30
Said provisions do provide for possibilities to save on the costs of such expert reports by allowing, under
certain conditions, that only one expert would be appointed for all companies involved or, eventually, to
proceed without such report.

20
 competent authority of the other state involved (art. 1021-12 (2) 2nd part ex art. 271
(2) 2nd part LCC)

C. 6.5. – As to form

Notarial act (art. 1021-12 ex 271 and 1031-13 ex 300 LCC).

C. 6.6. – Liabilities

Possible liability of the members of the administrative or management bodies or of the

experts involved in the transaction (see art. 1021-18 ex 275 and 1031-17 ex 304 LCC).

C. 6.7. Nullity of the merger/division

Considering the complexity of the transaction, nullity of a merger/division is admitted only in

some specific cases and can be claimed only during a limited period of six months (see art.
1021-19 ex 276 and 1031-18 ex 305 and LCC). In the case of a cross border merger nullity is
NOT admitted (art. 1021-19 (3) ex 276 (3) LCC).

C. 7. – Partial transfer of assets and universal transfers of assets (without winding up

of the contributing company)

See art. 1040-1 to 1040-5 ex 308bis-1 – 308bis-5 LCC

In all of these cases the parties may choose to submit their transaction to the procedure of
division, in which case the transaction will entail universal transfer of assets and liabilities.

C. 8. – Transfer of professional assets

See art. 1050-1 to 1050-9 ex 308bis-6 – art. 308bis-14 LCC, originally inspired from Swiss law.

This transaction is opened also to natural persons.

What is being transferred: “professional” assets according to a criterion of professional
assignment (tax law influence).
The transaction may be made for a consideration or without consideration (donation).
The procedure is loosely inspired from the procedure of division but entails a stronger
protection of creditors (see art. 1050-6 (1) ex 308bis-11 (1) LCC: three years joint and several
liability of the transferring person with the person benefitting from the transfer).

21