Form now, pay later - How does Luxembourg bring more flexibility to the minimum share capital payment for SARLs?

Under this new regime, the €12,000 minimum share capital of a SARL must still be fully subscribed at incorporation, but payment may be deferred for up to 12 months (or a shorter period if specified in the articles of association or in the deed of incorporation), subject to the limits below.

This flexibility applies exclusively to cash contributions made at the time of incorporation towards the initial share capital of the SARL and only up to the amount of the statutory minimum share capital. It aims to facilitate the incorporation of an SARL without the need to open a bank account and transfer funds prior to incorporation.

This pragmatic approach reflects the challenges of opening bank accounts in Luxembourg, where verification and compliance procedures may not always align with transaction timelines.

What are the scope and limitations?

The Bill introduces a number of important safeguards and limitations:

• the deferred payment of the statutory minimum share capital must be made in full no later than 12 months following incorporation;
• any amounts allocated to the initial share capital and exceeding €12,000 must be fully paid up at incorporation and cannot benefit from a deferred payment;
• contributions in kind (and any related share premium) must be fully paid up at incorporation;
• shares issued after incorporation must still be fully paid up at the time of issuance, together with any related share premium;
• if a share premium is provided for at incorporation it must be paid up full at that time.

The scheme is extended to SARL-S, with the difference that the payment deferral mechanism may apply to the entire capital subscribed at incorporation, rather than just the statutory minimum share capital as is the case with a SARL; otherwise, the same restrictions apply.

What safeguards are in place to protect creditors and ensure good corporate governance?

To ensure adequate protection of third parties and creditors, the Bill introduces measures largely aligned with those applicable to Luxembourg public limited liability companies (sociétés anonymes):

• founders are liable for the effective payment of the subscribed capital once the payment becomes due;
• voting rights attached to shares that have not yet been paid up following valid calls for payment shall be suspended until such payment has been made in full;
• the identity of shareholders who have not fully paid their shares, together with the amounts outstanding, must be published alongside the annual accounts, enhancing transparency for third parties.

What is important in the legislative process and in the feedback from stakeholders?

The Bill received broad support during the legislative process.

Among others, the Luxembourg Bar Association described the reform as “a significant step forward for the financial centre, and for corporate practice in particular”, and the Chamber of Commerce expressed support, while highlighting “it would be useful to provide clarifications regarding the arrangements for the suspension of voting rights, the lifting of that suspension”.

Whilst supportive of the reform, stakeholders nevertheless called for safeguards and clarification on practical aspects.

Hence, following the various opinions and positions expressed regarding potential risks of abuse, the possibility of a deferred payment has been limited to the amount of the minimum share capital of €12,000, excluding any share premium.

This restriction arguably represents a proportionate approach that reconciles the objective of simplifying and speeding up the process of setting up SARLs with the requirements of legal certainty and the protection of third parties.

For whom is this interesting?

The reform is expected to be particularly relevant for:

• international corporate groups using Luxembourg SARLs as holding, financing or acquisition vehicles; and
• private capital and investment structures, where rapid incorporation is often required ahead of deal execution.

By removing the need to immediately fund the minimum share capital, the new rules are likely to speed up the formation of new standard Luxembourg special purpose vehicles in the form of SARLs.

This reform marks an important step forward for Luxembourg corporate law, aligning it with neighbouring jurisdictions and addressing a long-standing practical concern: the time required to set up SARLs when contributions are made in cash.

If you are considering incorporating Luxembourg SARLs or have questions about how these changes my affect your structures, we’d be delighted to assist.

Authored by Alexander Koch, Benoît Serraf, Elena Apopei, Marine Bauchet, Nihad Agadazi, and Laurence Heinen.