What are the main forms of business vehicle used in your jurisdiction? What are the advantages and disadvantages of each vehicle?
Luxembourg law recognizes seven different types of company, each of which has a legal personality distinct from that of its members:
Société anonyme (SA) – public limited liability company
Société à responsabilité limitée (S.à r.l) – private limited liability company
Société en commandite par actions (SCA) – partnership limited by shares
Société par actions simplifiée (SAS) – public simplified company
Société en nom collectif (SENC) – general partnership
Société en commandite simple (SCS) – common limited partnership
Société coopérative (SC) – cooperative company.
Luxembourg law also recognises the société en commandite spéciale (special limited partnership - SCSp) which does not have any legal personality.
Luxembourg has also faithfully implemented the EU legislation allowing for the incorporation of a company under the European Company form (Societas Europeae – SE).
The choice of a company type over another depends either on economic considerations (e.g. amount of share capital, capacity to raise funds from the public, credibility) and legal considerations (e.g. scope of member’s liability, flexibility of corporate organisation or free transferability of shares).
- Limited liability companies (SA, SAS, S.à r.l., SC and SE)
The SA and the S.à r.l. are the most widely used forms of company. The difference between them lies mainly in the fact that the S.à r.l. may not raise funds from the public by means of issuance of shares although they may issue public bonds.
Companies may have their share capital in euros or in other freely traded currencies. The minimum subscribed share capital for an SA or an SAS amounts to €30,000.- of which at least a quarter must be fully paid up as of the incorporation date. The minimum subscribed share capital for an S.à r.l. is fixed at €12,000.- and must be fully paid up. The SA, the SAS and the S.à r.l. can have one single shareholder. The SA is managed by one director or a board of directors (of at least 3 members) and must appoint a statutory auditor. The shareholders in a SA must meet at least once a year. The SA may also have a two-tier management system (with a board of directors and supervisory board). An SAS is managed by a single president and must appoint a statutory auditor. The S.à r.l. is managed by a single manager or a board of managers, acting solely or jointly, and the partners must meet at least once a year if their number exceeds 60.
The SA is designed for large businesses whilst the S.à r.l. is the most frequently used vehicle for mid-sized businesses and financial investments.
- Partnerships (SCA, SCS and SCSp)
A Luxembourg partnership’s share capital is held by a general partner, bearing an unlimited liability with the company and one or more limited partners, endorsing a liability limited to their contribution in the company.
The SCA is recommended when the management intends to retain full control of the company’s investments. The SCS and SCSp are generally used for their tax transparency efficiency (taxation of the SCS or SCSp is directly borne by the partners). The SCA, SCS and SCSp are the preferred vehicles for private equity houses or venture capital investors.