This guide provides an overview of the formation, capital requirements, governance and tax treatment of a Luxembourg S.à r.l., the most commonly used private company structure in Luxembourg for holding, financing and operational activities. It is provided for general information purposes only and does not constitute legal, tax, accounting or other professional advice under Luxembourg law or practice. No reliance should be placed on the information contained herein. Specific advice should be sought in relation to particular circumstances.

A Luxembourg S.à r.l. is a private limited liability company under Luxembourg law. It may have one or several shareholders, whose liability is limited to the amount of their capital contribution.

The S.à r.l. is frequently used for entrepreneurial ventures, group holding companies and operational entities that require a stable but flexible corporate framework

The share capital of a Luxembourg S.à r.l. may be paid in by way of contributions in cash, contributions in kind, or a combination thereof.

Cash contributions

In practice, where contributions are made in cash, the share capital is typically deposited into a blocked bank account opened in the name of the company in formation. The bank issues a capital deposit certificate (commonly referred to as a blocking certificate) confirming that the capital has been paid in, which is customarily provided to the notary prior to execution of the notarial deed of incorporation. Following execution of the notarial deed and completion of the incorporation formalities, the funds are typically released and become available to the company upon presentation of the relevant notarial documentation to the bank.

Contributions in kind

Where the share capital is paid in by way of contributions in kind, no blocked bank account is required. The contributed assets must be fully contributed at incorporation and are described and valued in the notarial deed. For a S.à r.l., no independent auditor’s report is required by law for contributions in kind, subject to the founders’ and managers’ responsibility for the valuation and effective transfer of the assets to the company

A Luxembourg S.à r.l. is incorporated by notarial deed. The company acquires legal personality upon execution of the notarial deed. Filing and publication with the Luxembourg Trade and Companies Register (RCS) are required for opposability vis-à-vis third parties.

The articles of association set out the constitutional framework of the Luxembourg S.à r.l. and must include, among other elements:

• the company name and legal form
• the registered office in Luxembourg
• the corporate purpose
• the subscribed share capital
• the classes of shares and the rights attached thereto, if any
• the form of the shares (which, in accordance with Luxembourg law, are issued in registered form)
• details of contributions in cash or in kind
• any securities or rights issued by the company that do not form part of the share capital, if applicable
• the governance and management structure and allocation of powers
• the duration of the company
• an indication of incorporation costs.

For a standard Luxembourg S.à r.l., the minimum share capital is EUR 12,000, which must be fully subscribed and fully paid up at incorporation.

A simplified S.à r.l. (S.à r.l.-S) may be incorporated with a lower share capital, subject to specific statutory conditions.

Contributions forming part of the share capital may be made in cash or in kind. Contributions in kind must be described and valued by the founders or shareholders and reflected in the articles of association; no independent valuation report is required under Luxembourg law.

Contributions in services, know-how or work (“industry contributions”) do not form part of the share capital but may entitle the contributor to profit participation and loss sharing to the extent expressly provided for in the articles of association and subject to statutory limitations.

Shares in a Luxembourg S.à r.l. are issued exclusively as registered shares, with or without nominal value.

In connection with the issuance of shares (parts sociales), a Luxembourg S.à r.l. may provide for the payment of a share premium (prime d’émission) in addition to the nominal value (if any) of the shares. Any such share premium must be fully paid up upon issuance and is recorded as a reserve, the distributability of which is subject to the provisions of Luxembourg law and the articles of association.

The articles of association may also provide for profit shares that do not form part of the share capital, provided that the rights attached to such shares are clearly defined.

Public offerings of shares or bonds are not permitted. Private bond issuances may be carried out, subject to compliance with Luxembourg law and shareholder approval where required.

Shares in an S.à r.l. are not freely transferable to non-shareholders.

Transfers to non-shareholders generally require the approval of shareholders representing at least 75% of the share capital, unless the articles of association provide for a lower threshold, which may not be below 50%. The articles of association may also provide for additional conditions or restrictions.

Unless otherwise provided in the articles of association, transfers between existing shareholders are generally permitted, subject to any statutory or contractual restrictions.

Share transfers must be evidenced in writing and become effective vis-à-vis the company and third parties only upon notification to, or acceptance by, the company, and following their recording in the shareholders’ register, in accordance with Luxembourg law.

An S.à r.l. is managed by one or more managers, who may or may not be shareholders and may be natural or legal persons, except in the case of a simplified S.à r.l. (S.à r.l.-S), where managers must be natural persons. Managers are appointed by the shareholders, either in the articles of association or by subsequent decision, for a limited or unlimited term.

Except for matters reserved to the shareholders by law or the articles of association, the manager(s) have broad authority to act on behalf of the company and to represent it vis-à-vis third parties. Where several managers are appointed, the articles may specify whether they act individually or jointly.

Shareholder decisions are taken at general meetings of shareholders or, where permitted, by written resolutions.

The shareholders’ meeting decides on key matters, including:

• amendments to the articles of association
• changes to the share capital
• appointment and dismissal of managers
• changes to the company name or corporate purpose
• change of legal form
• dissolution and liquidation

In a S.à r.l. with more than 60 shareholders, at least one general meeting must be held annually, in accordance with the timing set out in the articles of association. In smaller S.à r.l.s, written decision procedures may be used where permitted by laws and the articles of association.

Voting rights are generally proportional to the number of shares held. In a single shareholder S.à r.l., the sole shareholder exercises all powers normally attributed to the shareholders’ meeting.

Shareholders’ liability is limited to their capital contribution.

Founders and, in certain cases, managers may incur liability towards third parties in connection with capital subscription, payment obligations or inaccuracies in incorporation documentation.

Managers are liable towards the company for misconduct in the performance of their mandate.

A Luxembourg S.à r.l. must appoint one or more approved statutory auditors (réviseur(s) d’entreprises agréé(s)) only where it exceeds, for two consecutive financial years, at least two of the following statutory thresholds:

• a balance sheet total exceeding EUR 4.4 million;
• net turnover exceeding EUR 8.8 million;
• an average workforce exceeding 50 full-time employees.

In addition, in Luxembourg S.à r.l with more than 60 shareholders, the supervision of the company must be entrusted to one or more statutory auditors (commissaires), unless an approved statutory auditor has been appointed.

Where applicable, the auditor is responsible for carrying out the legal audit of the annual financial statements.

The annual accounts, together with the auditor’s report where applicable, must be approved by the shareholders and filed with the Luxembourg Trade and Companies Register within the statutory deadlines.

A Luxembourg S.à r.l. must prepare annual accounts in accordance with applicable Luxembourg accounting law, using Luxembourg GAAP or, where permitted or required by law, another applicable accounting framework (such as IFRS).

The annual accounts are prepared by the manager(s) and must be submitted for approval to the shareholders, either at a general meeting or, where permitted, by written resolutions.

Following approval, the annual accounts must be filed with the Luxembourg Trade and Companies Register (RCS) together with, where applicable, the management report, the approved statutory auditor’s report (where a legal audit is required), and any consolidated accounts.

As a general rule, filing must occur within one month after approval of the annual accounts and in any event within seven months after the end of the financial year, subject to any statutory extensions or specific regimes.

Depending on its size and structure, a Luxembourg S.à r.l. may benefit from abridged reporting formats and disclosure exemptions, or may be subject to additional reporting obligations, including consolidation requirements, in accordance with Luxembourg law.

A Luxembourg S.à r.l. is generally subject to corporate income tax (impôt sur le revenu des collectivités), municipal business tax and net wealth tax.

Corporate income tax and municipal business tax together result in an aggregate tax rate of approximately 23.87% for companies established in Luxembourg City (the rate varying depending on the municipality).

Under the Luxembourg participation exemption regime, dividends, liquidation proceeds and capital gains derived from qualifying participations may benefit from a full exemption from corporate income tax and municipal business tax, subject to the applicable statutory conditions being satisfied.

A Luxembourg S.à r.l. is subject to net wealth tax. As from 1 January 2025, net wealth tax is levied on a progressive fixed-amount basis determined solely by the company’s total balance sheet size, irrespective of the composition of its assets, as follows:
• EUR 535 for companies with a total balance sheet up to and including EUR 350,000;
• EUR 1,605 for companies with a total balance sheet between EUR 350,001 and EUR 2,000,000;
• EUR 4,815 for companies with a total balance sheet exceeding EUR 2,000,000.

Dividends distributed by a Luxembourg S.à r.l. are, in principle, subject to withholding tax at a rate of 15%, unless an exemption under Luxembourg domestic law or a reduced rate under an applicable double tax treaty applies.

Value added tax (VAT) may apply depending on the nature of the company’s activities. No subscription tax applies to a Luxembourg S.à r.l.

Our corporate team advises clients on the establishment and ongoing operation of a Luxembourg companies, including private limited liability companies (S.à r.l.); public limited liability companies (S.A.), corporate partnerships limited by shares (S.C.A.), common limited partnership (SCS) and special limited partnership (SCSp)and in particular:

• Advising on the choice and structuring of the appropriate Luxembourg corporate vehicle, taking into account your commercial objectives, governance requirements, shareholder arrangements, financing structure and tax considerations;
• Assisting with the incorporation of Luxembourg S.A., S.à r.l. and S.C.A., including the drafting of articles of incorporation, notarial deeds and relevant filings.
• Structuring and establishing holding companies, acquisition vehicles, financing companies, joint venture entities and special purpose vehicles (SPVs) in a Luxembourg and cross-border context.
• Coordinating with notaries, banks and other service providers, including assistance with bank account openings, and corporate secretarial set-up.
• Providing ongoing corporate and governance support throughout the life of the company, including amendments to the articles of association, changes to share capital, transfers of shares, reorganisations, mergers, demergers and liquidations.
• Advising on directors’ duties, shareholder rights and corporate governance matters, including board composition, delegation of powers and decision-making processes.
• Assisting with shareholder arrangements and ancillary documentation, including review and negotiation of shareholders’ agreements, investment agreements and related corporate documentation.
• Keeping clients informed of relevant legal and regulatory developments affecting Luxembourg corporate structures and company law.