Luxembourg SARL Reform: Draft Bill Introduces 12-Month Deferral for Minimum Capital Payment

Background

Under the 1915 Law as currently applied to private limited liability companies (sociétés à responsabilité limitée, or “SARLs”), the minimum share capital of EUR 12,000 must be fully paid up at incorporation. This approach originates with the 1933 law that introduced the SARL and historically mirrored French law practice.

In practical terms, this has required the opening and funding of a Luxembourg bank account before incorporation, a step that can take weeks or months due to AML/KYC processes, thereby delaying transactions and time‑sensitive structuring.

What the Draft Bill would Change

The draft bill proposes to allow for the payment of the minimum share capital to be deferred for up to 12 months after incorporation, a period considered proportionate for completing banking formalities and satisfying capital payment obligations.

Full subscription of the share capital would still be mandatory at incorporation. However, the requirement for immediate, full payment in cash of any issue premium set at incorporation would be removed for SARLs (and simplified private limited liability companies or “SARL-S”), aligning with the reform’s flexibility objective.

This would lead to greater (timing) certainty, faster turnaround and probably less coordination, project management and coordination around the incorporation date.

Safeguards

The draft bill would introduce safeguards and strengthen accountability mechanisms to balance the increased flexibility, permitting deferred payment only for cash contributions, while contributions in kind would continue to require full payment on incorporation.

In addition, any capital amount above the minimum EUR 12,000 must be paid at incorporation and shares issued in subsequent capital increases must be fully paid at issuance.

Founders’ liability for unpaid capital would be aligned with the regime applicable to public companies (sociétés anonymes, or SAs), reinforcing responsibility for calls on unpaid amounts. Voting rights attached to shares for which capital calls remain unpaid could be suspended until payment is made, thereby protecting the integrity of corporate governance.

To ensure transparency, a list of shareholders with unpaid amounts and the sums due must be published with the annual accounts.

The Luxembourg Government’s explanatory memorandum emphasises that these adjustments seek to secure legal certainty while leveraging flexibility permitted by EU company law.

Rationale and Policy Context

The government states that the current “all paid on day one” model, imported in 1933, no longer fits contemporary business needs and disproportionately burdens founders relative to peer EU jurisdictions, some of which have abolished minimum capital requirements altogether.

The 12‑month window is presented as sufficient to open bank accounts and complete capital payments without undermining creditor protection or market integrity. More broadly, the objective is to preserve Luxembourg’s attractiveness, reduce administrative and banking frictions at formation and fully utilise flexibilities under EU directives.

Scope of Application

The bill indicates that the new rules would apply to SARLs upon entry into force. It also clarifies that SARL-S which are generally governed by the SARL rules, would also benefit from the same deferred payment mechanics.

Practical Implications

For sponsors, corporates and investors, the decoupling of incorporation from immediate capital payment and bank account opening could shorten critical path timelines for establishing acquisition and investment vehicles, pending completion of AML/KYC.

Term sheets, shareholders’ agreements and by-laws should anticipate call mechanics, consequences of non‑payment (including suspension of voting rights) and founders’ liability aligned with the standards applicable to public companies (SA’s), to ensure contractual alignment with the statutory safeguards.

Where an issue premium is contemplated at incorporation, parties may calibrate cash flow planning given that immediate full payment in cash would no longer be mandatory under the reform, while remaining attentive to any transparency and disclosure expectations. Contributions in kind will still need to be fully paid on day one, which should be factored into transaction structuring.

Next steps and timing

The draft bill has been submitted to Parliament and the Council of State for review and may be amended during the legislative process; entry into force will follow parliamentary adoption and promulgation. The government presents the measure as part of an ongoing effort to modernise company law processes and professional chambers and stakeholder bodies are expected to be consulted in line with better regulatory practice.

Key Takeaways

The reform allows SARLs and SARL‑S to be incorporated before the full minimum capital is paid, permitting payment within 12 months for cash contributions. However, it maintains the requirement for full subscription at incorporation and adds safeguards such as founders’ liability and suspension of voting rights for unpaid calls.

Consequently, banking timelines would become less critical for incorporation and less difficult to manage and predict, potentially accelerating vehicle set‑up while AML/KYC processes run in parallel. The bill is currently under review and subject to change before enactment.

We will continue to monitor material developments and provide updates accordingly.