The simplified private limited liability company - S.à r.l.-S goes live!

The legal regime governing a simplified private limited liability company (hereinafter “S.à r.l.-S”), introduced by the Luxembourg Law of 23 July 2016, entered into force on 16 January 2017. It aims to create a lighter form of private limited liability company, whose goals are to encourage entrepreneurship and the entrepreneurial spirit.

Following new types of company in Germany (mini-GmbH), Belgium (SPRL-Starter) and The Netherlands (Flex-BV), this new legal regime intends to introduce a one-one-one type of private limited liability company (S.à r.l.) in Luxembourg.

One euro, one person, one day could be the slogan for this legal regime whose goals are to enable an entrepreneur (one person) who is young or has limited resources to start their own business via a rapid (one day) incorporation of their company, without needing a large initial investment (EUR 1 minimum share capital) and keeping the limited liability inherent in the S.à r.l.

As such, a simplified version of a S.à r.l. with the following relevant specifications may, from now, be incorporated:

• Share capital of between EUR 1 and EUR 12,000, immediately paid up (the partners’ contributions must take the form of a contribution in cash or a contribution in kind) with the obligation to retain, annually, at least 5% of its net profits in a reserve until the share capital reserve reaches EUR 12,000 (the law does not impose a time limit for reaching the S.à r.l. minimum share capital amount and this special reserve is set aside in parallel to the legal reserve).

• Only natural persons (under pain of nullity) can be partners or managers of only one S.à r.l.-S – if the person becomes partner of another S.à r.l.-S (S.à r.l.-S’s can be multi-partner), he will be considered as joint surety in the other S.à r.l.-S, except if he becomes partner causa mortis (the joint surety ceases when the company no longer assumes the form of S.à r.l.-S).

• The corporate object of the company must comply with the scope of application of the Law of 2 September 2011 concerning access to the professions of artisan, trader, manufacturer and some independent professions (a copy of the business licence shall be made available on registration of the company).

• The option to incorporate the company by private deed.

The gestionnaire of the Luxembourg Trade and Companies Register (hereinafter “RCS”) is in charge of verifying compliance with the conditions required to incorporate an S.à r.l.-S, before accepting its registration.

Consequently, the Grand-Ducal Regulation (“GDR”) of 23 December 2016 (which modified the GDR of 23 January 2003 and implemented the Luxembourg Law of 19 December 2002 on the RCS and the accounting and annual accounts of undertakings (RCS Law), introduces, after article 4, a new title (“Formalities of deposit applying to the simplified private limited liability company”) and a new article 5 concerning the conditions required for acceptance of the S.à r.l.-S registration.

In particular:

• the partners (natural persons) must indicate their identification number, as set out in the Luxembourg Law of 19 June 2003 concerning the identification of natural persons (if a partner is not in possession of such identification number, he will receive one); and
• the following documents must be deposited:

a) a copy of each partner’s identification document;

b) a sworn statement concerning proof of payment of the contributions in cash; and

c) if applicable, a sworn statement comprising a brief description and an assessment of the contributions in kind.

The GDR of 23 December 2016 also establishes the reasons for refusing the registration of the company or the registration of a partner. Although the legislator stated in the preliminary discussion of the legislative proposal that joint surety would be the sole consequence of becoming partner of more than one S.à r.l.-S, the above-mentioned GDR introduces the following as the only grounds for refusal:

• demand for registration of an S.à r.l.-S when one of the partners is already registered as partner of another S.à r.l.-S; and

• demand for registration of a partner who is already registered as a partner of another S.à r.l.-S, except if the shares are held causa mortis.

Despite all the criticisms made about this new legal regime when the legislative proposal was under discussion, the expected success of the S.à r.l.-S is evidenced by the daily deposit at the House of Entrepreneurship of 10 to 15 new files and by the issuance of a dozen temporary business licences in the first few days following the entry into force of this new legal regime.