Business termination

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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Steps

The 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.

Prepare the foundation for liquidation

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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.

Convene the first General Meeting and resolve the dissolution of the Company

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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

Minimum required

Financial report

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.

Selecting a liquidator and approving the liquidation plan

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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

Notifying the various authorities of the dissolution

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

Calling a second voluntary dissolution meeting and appointing auditors

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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.

Attend the final meeting and finalize the liquidation

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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.