Luxembourg Corporate Law Reform to Enhance Flexibility in the Incorporation of Private Limited Liability Companies

Key Takeaways

Draft Bill No. 8669¹ (the Draft Bill), introduced to the Luxembourg Parliament at the end of 2025, proposes amendments to the Luxembourg law of 10 August 1915 on commercial companies by allowing the statutory minimum share capital to be paid within 12 months of incorporation, as opposed to the current position that requires all the initial share capital to be paid into the new company’s bank account prior to incorporation of a private limited liability company (société à responsabilité limitée) (SARL). If the Draft Bill is adopted, it would allow the incorporation of a SARL without having to open and fund a bank account before the incorporation, giving market players greater flexibility.

Context

Currently, a SARL has to be incorporated with a minimum share capital of€12,000 (or its equivalent in another currency), fully subscribed and paid up at incorporation. Although certain limited solutions exist (such as a contribution in kind instead of a contribution in cash or other electronic banking solutions), the law requires founding shareholders to open a bank account and deposit the entire share capital before the SARL can be incorporated. The consequence of this requirement combined with the practical complexity of opening bank accounts nowadays is that it takes longer for the SARL to enter the market and prevents a SARL from being incorporated at short notice.

Main Changes To Be Introduced By The Draft Bill

The Draft Bill preserves the requirement that all shares have to be subscribed for at incorporation but, importantly, allows shareholders up to 12 months following the SARL's incorporation to pay the cash contributions they have committed. This deferral option would be available for cash contributions (as opposed to contributions in kind still required to be made at incorporation) in the amount of €12,000. The Draft Bill provides that any amount exceeding the minimum share capital requirement would still need to be paid in full at the outset. This is likely to limit the ability of SARLs incorporated in a currency other than euro (a non-euro SARL) to benefit from the deferral proposed in the Draft Bill. Typically, a non-euro SARL would set a minimum share capital slightly higher than the exact equivalent of €12,000 in order to avoid possibly not meeting the mandated minimum share capital due to foreign exchange fluctuations. However, if the conversion is in excess of €12,000, the non-euro SARL is precluded from relying on the deferral. The Draft Bill also removes the immediate payment obligation in instances where an issue premium is paid in addition to the share capital and that issue premium is paid in cash.

It is important to note that the deferred payment regime is only permitted at the SARL’s incorporation. If further shares are issued after incorporation, those shares have to be fully paid at the time of issuance, as does any related issue premium.

If a SARL does propose to avail itself of the deferred payment, the terms and timing for the payment of the deferred amount must be set out in the SARL’s articles of incorporation. If a shareholder fails to pay the amounts due following a valid and due call for funds, the Draft Bill provides that the voting rights attached to the unpaid shares will be suspended until full payment.

The Draft Bill further aims to align the SARL regime with rules applicable to public limited liability companies (sociétés anonymes), notably by extending the founding shareholders’ liability to cover the effective payment of the capital, including where payment has not been made within the 12-month period.

Conclusion

If the Draft Bill becomes law, the process for establishment of SARLs would be accelerated, enabling managers of private equity, real estate and other alternative-asset investment vehicles as well as corporate groups to set up Luxembourg SPVs or subsidiaries swiftly for transactional purposes and with greater flexibility.

Timing

The Draft Bill is now with the Luxembourg Parliament and the Council of State for review. If the vote is positive, the provisions of the Draft Bill would apply to all SARLs incorporated after the date on which the Draft Bill enters into force.

We are monitoring developments in this area. A more detailed Dechert OnPoint will be published once the Draft Bill has been voted on.