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How to dissolve a company in Luxembourg
Liquidating a legal entity in Luxembourg is a complex and time consuming process, regardless of whether it is a voluntary closure. It usually requires organizing three meetings concerning dissolution, selecting a liquidator and auditor, bringing in a notary and reporting the details to the RCS.
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Let our team know. This guide is currently under development and we would appreciate any additional information you may have about the company's voluntary liquidation.
Read moreThe liquidation of a company is a legal process that requires compliance with applicable Luxembourg laws and regulations. This procedure may vary depending on the circumstances and the type of company. It should be noted that a distinction is made between voluntary liquidation of a legal entity (dissolution) and judicial liquidation.
It is important to note that we are talking about corporations and partnerships (SA, SARL, SCA, SCS), not sole proprietorships.
Voluntary dissolution of a company or its judicial liquidation differ in the amount of time spent on the process and the amount of paperwork involved. However, regardless of the voluntary or judicial nature of the process, there are a number of issues that need to be addressed prior to liquidation:
What to watch out for
Financial report
An annual financial report must be filed for the year preceding the year in which the decision is made to liquidate the company.
Financial liabilities
The financial background and condition of the company at the time of the decision to liquidate is clearly defined.
Account issues
No counterparties have questions about invoices issued on behalf of the company.
Exactly how these issues are resolved will affect the choice of liquidation process.
In addition, to properly liquidate a business, you need to understand:
- The legal form of the business (sole proprietorship, partnership, corporation, association, foundation, etc.).
- The number of partners and shareholders, if any.
- Under what conditions it is necessary to liquidate the legal entity.
- What is the reason for liquidation.
Reasons for voluntary dissolution
Achievement of goals
Disagreement between partners
Expiration of the set period of activity
Reasons for judicial liquidation
Violation of the law
Irreconcilable disagreement between partners
Bankruptcy
Voluntary dissolution or judicial liquidation in Luxembourg is regulated by the law on commercial companies, chapter 8, articles 141-151 is devoted to this issue.
The managers, directors or board members must call an extraordinary general meeting to discuss liquidation. That is, literally, the process begins with a resolution to approve voluntary liquidation.
Three requirements must be met for a liquidation decision to be recognized as legitimate.
Notary
The general meeting must be held in the presence of a notary. It is important to note that all decisions taken in the presence of the notary are published in the Luxembourg Commercial and Companies Register (RCS).
Minimum required
For SA, SCA or SECA
For these types of companies and partnerships, a minimum number of votes and a minimum amount of capital must be secured. In the case of capital, there must be at least 50% of the company's capital and 2/3 of the votes must support a voluntary dissolution.
For SARL, SENC and SECS
1/2 of the partners holding 2/4 of the capital must vote for voluntary dissolution.
These conditions apply unless the articles of association provide for stricter ones.
Financial report
This meeting approves the financial statement of the legal entity as of the date of the dissolution meeting.
From the moment the resolution on voluntary liquidation is adopted, the company exists only for the purpose of liquidation. From that moment on, all documents of the company state that the company is in voluntary liquidation.
At the first dissolution meeting, a liquidator is appointed, a decision is made on the method of dissolution, and minutes are taken of the meeting to record all the reasons for the decision to dissolve.
If the task of liquidation is sufficiently extensive, the General Assembly may, with the consent of the members, appoint any natural or legal person or group of persons as liquidators. If no such person has been appointed, the liquidators shall be those who managed the Company prior to the decision on voluntary dissolution:
SENC or SECS
Managing partners
SARL
Managers
SA or SCA
Directors or members of the board
In other words, the liquidator may be a director, an external specialist or a third party, depending on the company's articles of association.
The liquidator takes control of the company and the management or board of directors relinquish their powers. From that moment on, the liquidator represents the company and is responsible for its liquidation.
What is the role of the liquidator
Prepare a comprehensive plan of liquidation
This document details the proposed procedure for winding up the company, including the sale of assets, the discharge of liabilities and the distribution of remaining assets to shareholders. The plan must be submitted to the shareholders for approval.
Notifying the various authorities of the dissolution
Notice of the dissolution must be given to the authorities and bodies with which the company is registered.
For example, if it is a commercial company, the liquidator (if the director has not done so) must declare the cessation of trading to the various statutory authorities in order to cancel any existing authorizations and registrations.
Within one month
The Directorate General of Small and Medium Enterprises, namely the Business Establishment Permits Unit, must be notified. Postal address: BP 535 / L-2937 Luxembourg. Telephone: (+352) 247-74 700 from Monday to Friday from 9.00 to 12.00 and from 13.30 to 16.30, excluding weekends. The managing director must send the original business license to the General Directorate of Small and Medium Enterprises of the Ministry of the Economy, together with the termination form, a copy of the identity card or a copy of the passport, and the reason for the termination, addressing the package to the Minister of the Economy. In response, a ministerial order will come by mail.
Within 8 days of the cessation of activity
The company must deregister from the Centre commun de la sécuritésociale (CCSS) and dismiss any employees. Postal address: L-2975 Luxembourg. Physical address: 4, rue Mercie, L-2144 Luxembourg. Telephone : (+352) 40141-1 Monday to Friday from 08.00 to 16.00, except weekends.
Within 15 days of the cessation of business
The company must send a declaration of the cessation of these activities to the Office of Registration Fees, Real Estate and VAT.
Notifying creditors, selling assets and paying debts
The liquidator must be able to settle the company's existing debts and distribute the remaining funds (liquidation surplus) to the partners or shareholders.
The liquidator acts as the legal representative of the company, whose duties include
Realization of assets of the legal entity
Sale of securities in circulation
Preparation of data on existing creditors
Notifying all known creditors of the dissolution
Creditors are given a period of time to file their claims. The liquidator must carefully consider and settle these claims as part of the liquidation process.
All creditors will be treated equally. Assets are distributed in proportion to the amount owed: fair and equitable.
To pay debts, the liquidator may:
Sell all securities and other assets of the company
Collect any payments
Borrow and lend money
What you need to know about debt settlement
Part of the settlement with creditors is considered a priority
Salaries to employees, if any, taxes and social security contributions, etc. have priority status and such debts should be repaid first.
The creditor's claim must be settled in any case
In other words, all monetary claims must be paid in full. If an invoice for services rendered has been received but the due date has not yet arrived, the claim must still be settled and payment made. If the creditor is known but could not be contacted for any reason during the voluntary dissolution of the legal entity, the liquidator must pay the full amount of the debt to the Caisse des dépôts et consignations. If there are insufficient assets, the liquidator files for bankruptcy on behalf of the company.
The assets are distributed on a residual basis and after taxes have been paid
Only after all debts to creditors have been paid or deposited in the Fund of Deposits and Consignations will the liquidator distribute the remaining assets to the partners or shareholders. When distributing these assets, the liquidator must pay any taxes that have accrued at the time of the company's liquidation. The tax authorities will then issue a tax exemption certificate on request: this certifies that all tax obligations have been met.
Make a report
If the liquidation lasts less than one year
The liquidator must prepare liquidation reports and also a financial report. This should reflect the actual financial position of the company at the time of liquidation.
If the liquidation takes more than one year
An annual report must be prepared showing the reasons why the liquidation could not be completed within one year, and the results of the liquidation must be presented to the general meeting. For SA companies, annual financial statements must also be published.
Once the liquidator has completed the tasks set out in the voluntary liquidation plan and approved the liquidation reports, a second meeting of the shareholders or partners is convened. A notary must be present.
Duties of the second meeting
To read all the reports of the liquidators and to verify that the debts of the creditors have been paid.
Appoint one or more internal* auditors to verify the accuracy of the liquidator's report.
Set a date for the final general meeting of shareholders or partners.
*Some large SAs and SARLs are required to have an external auditor
Two out of three conditions must be met simultaneously: 1) the balance sheet total is EUR 4.4 million, 2) the net turnover is EUR 8.8 million, 3) the average number of employees on the payroll for the financial year is 50.
The external auditor is bound to the company by a fixed-term service contract. His involvement can only be terminated if there are serious reasons for doing so.
The internal or external auditor examines
How thoroughly and in good faith the liquidator has carried out the tasks assigned to him or her
The extent to which the voluntary liquidation and the settlement of creditors have been carried out with due regard to the rights and interests of the shareholders
At the end of the work, the auditor will prepare a report reflecting the current financial situation of the company during the liquidation period. This report is presented at the third and final liquidation meeting.
The voluntary liquidation of the company is finalized at the third meeting. This time, the presence of a notary is possible but not mandatory.
Duties of the third meeting
To approve the reports of the liquidator and the auditor
To discharge the liquidator, auditor and directors from their duties
To determine where the company's records will be kept for the next 5 years
To decide on the distribution of surplus liquidation proceeds
Any company that ceases to operate, regardless of its legal form, must request its deletion from the Luxembourg Commercial Register (RCS) and publish a deed of dissolution. If the act of dissolution/liquidation has been registered by a notary, the notary will file the document with the RCS and publish a public notice. This must be done within 15 days of the last meeting.
The decision to dissolve the company is final. The notice of dissolution must be submitted to the Luxembourg Trade and Companies Register (RCS) for publication in the electronic register of companies and associations (RESA).
In the notification, it is mandatory to indicate:
- Where the company's books and records will be kept for the next 5 years;
- What measures, if any, will be taken to deposit funds that cannot be returned to creditors or shareholders.
If a company is in the process of voluntary dissolution or if it has already been removed from the RCS after filing the relevant notification, both statuses will be displayed on the Trade Register website.
«en liquidation judiciaire»
This inscription next to the company name appears in the search results on the RCS website if the company is in the process of voluntary liquidation.
«radiée»
This notation appears next to the company name for legal entities that have filed a notice and completed the liquidation process. You will then receive a document confirming the fact of the liquidation of the company - a certificate in French or German. The certificate of dissolution will state that this document confirms the deletion of the said entry in the RCS and will also state the date of deletion from the Commercial Register.
The dissolution will only be valid if the company submits a certificate confirming that all social security contributions, income tax, VAT, capital gains tax, etc. have been duly paid.
Upon notification by the RCS, the Luxembourg tax authorities will also remove the company from their registers after the close of the financial year and the financial audit. The legal entity is then considered to be completely liquidated.
Spotted a misstep?
Let our team know. This guide is currently under development and we would appreciate any additional information you may have about the company's voluntary liquidation.
We welcome your suggestions and invite you to collaborate. Contact us to submit changes, send us your best photos or highlight relevant information at editorial@luxtoday.lu.
Frequently Asked Questions (FAQ)
Who can liquidate a company in Luxembourg?
Depending on the legal form of the organization, it can be an individual entrepreneur, partners, shareholders, i.e. the direct founders of the legal entity.
How long does it take to liquidate a company in Luxembourg?
Usually up to one year, but it can take longer. It depends on the complexity of the arrangements with creditors and a number of other factors.
Why you need a liquidator and an accountant?
The liquidator is responsible for developing a liquidation plan, paying off debts, collecting actual financial data and other important liquidation issues. The auditor, on the other hand, checks the quality of the liquidator's work and whether the interests of the shareholders/partners have been respected in the liquidation process.
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Source: guichet.public.lu, guichet.public.lu, guichet.public.lu, guichet.public.lu
We took photos from these sources: Tim Mossholder for Unsplash
Authors: Kadriia
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