The
Luxembourg corporate legislation defines six forms of entity through
which business can be carried out from Luxembourg. Each of these
6 forms has a legal personality distinct from that of its members.
The choice of legal form depends on economic and legal considerations
(e.g. the extent of members’ liability, the extent to which
shares are transferable, etc).
No company may adopt a name giving rise to confusion with that of
an existing company.
The principal forms normally used are:
-
Société en Nom Collectif (SENC), considered to be a partnership, which may be formed
by two or more persons all of whom are personally, jointly and
indefinitely liable for the partnership’s debts. In principle,
shares of an SENC are not normally transferable, though the
articles of association may provide for departures from this
rule.
-
Société en Commandite Simple (SECS) or limited partnership, which is formed by one or more
partners (the “general partners”) who are jointly and indefinitely
liable for the partnership’s debts and by one or more
“limited partners” whose liability, is limited to
their contribution. Both SENC and SECS are not subject to tax
in their own name, but to personal income tax which is payable
by the partners to the extent of their share in the partnership’s
income.
-
Société Anonyme (SA),
considered to be the equivalent of the public limited company
whose members are liable only to the extent of their contribution
in the company’s capital;
-
Société à Responsabilité
Limitée (SARL) or the private limited liability
company;
-
Société en Commandite par
Actions (SCA) or the partnership limited by shares. The
SCA is comparable to the limited partnership (SECS), the only
difference being that the limited partners’ shares are
freely transferable.
-
Société Coopérative (SC) or the cooperative company whose members’ responsibility
may be limited by the statutes of the company to a certain amount.
Shares of an SC are not transferable to third parties.
In practice, the SA and SARL have proved to be
the most popular. The main features of these two corporate forms
are presented in the summary table below:
Trade Permit
The Luxembourg constitution of 1868 guarantees to every citizen
the freedom of trade and industry, as well as the freedom to
establish a business.
However, in the interest of industry and commerce and in order
to guarantee the administrative supervision of the business environment
of the country, local legislation lays down some specific conditions
for access to and exercise of trades and occupations.
Under the law of 28 December 1988, a government permit is required
for any industrial or trade activity to be carried out in Luxembourg.
The permit is issued by the Ministry of Middle Classes based on the
applicant’s professional qualifications and good standing.
The permit is strictly personal, and cannot be transferred to other
persons. Legal entities, including partnerships, must apply in the
same way as physical persons, demonstrating necessary professional
qualifications and good standing of the firm’s management.
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