Deferred payment of minimum share capital for SARLs
Bill of law 8669 was submitted to Parliament yesterday to authorise the deferral of payment of the minimum share capital for private limited companies (SARLs) for up to 12 months after the date of incorporation.
The proposed reform represents an additional step forward in modernising Luxembourg’s company law framework and enhancing the competitiveness of its financial centre. By allowing company founders to defer payment of the minimum share capital for up to 12 months after incorporation, the bill of law addresses a practical barrier that has long hindered the swift establishment of SARLs in Luxembourg.
Why this reform?
Currently, incorporating a Luxembourg SARL (société à responsabilité limitée) requires a minimum share capital of EUR 12,000, which must be fully paid up at the time of incorporation.
Mandatory payment of the entire capital at incorporation no longer meets the needs of today’s business world, and greater flexibility is expected. The current constraint hinders access to Luxembourg companies for market participants, as it requires opening a bank account before the SARL can even be incorporated, which in some cases may take considerable time.
Luxembourg law already permits partially or fully deferred payment of share capital at incorporation for other corporate forms. Furthermore, Directive (EU) 2017/1132 on certain aspects of company law offers Member States this flexibility regarding the payment of share capital. Therefore, now is a good time to initiate this change.
Key aspects of the reform
- Deferral of full payment of minimum share capital with limit of 12 months
The bill of law grants SARL founders the option to defer full payment of the minimum share capital to a time after the date of incorporation, within a limit of 12 months from that date.
Founders will thus have two options: either (i) pay the entire share capital at the time of incorporation, or (ii) defer all or part of the payment of this initial share capital. The second option will give sufficient time to open a bank account and to allow payment of the share capital.
- Limitations and safeguards
Deferred payment of incorporation share capital and any related share premium will only be possible for cash contributions.
Contributions in kind must be fully paid up at the incorporation of the SARL, as is currently the case.
Shares issued in consideration for capital increases after incorporation of the SARL must continue to be fully paid up on the date they take effect.
- Liability regime
The bill of law largely follows the founders’ liability regime applicable to public limited companies (sociétés anonymes). Consequently, founders will be liable in particular for the portion of the incorporation share capital that has not been validly subscribed and for the effective payment of incorporation share capital after the expiry of the 12-month period.
- Publicity
Protection of third parties is also guaranteed via a publicity measure similar to that applicable to public limited companies (sociétés anonymes) concerning shares whose subscription price has not yet been fully paid up (i.e. in the annual accounts).
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The proposed reform represents an additional step forward in modernising Luxembourg’s company law framework and enhancing the competitiveness of its financial centre. By allowing company founders to defer payment of the minimum share capital for up to 12 months after incorporation, bill of law 8669 addresses a practical barrier that has long hindered the swift establishment of SARLs in Luxembourg.
Authors: Sébastien Binard and Alexandra Cabannes
How we can help
The experts in our Corporate Law, Mergers & Acquisitions teams are available to answer any questions you may have about how this change will affect your business.
