Luxembourg’s proposed company law reform heralds greater flexibility

Luis Marques Guilherme and Stéphanie Raffini of Pinsent Masons in Luxembourg were commenting after the government introduced a draft bill which would modernise the capital rules applicable to incorporations of S.à r.l. and simplified Luxembourg private limited liability companies (S.à r.l.S). 

The bill, No. 8669, which was submitted on 16 December 2025 to Luxembourg’s parliament and the Council of State for review, aims to facilitate the incorporation process for these two types of companies.

Currently articles 710-5 and 710-6 of the Luxembourg Law of 10 August 1915 on Commercial Companies – Luxembourg’s primary law governing commercial companies – require the subscribed corporate capital of a new S.à r.l. or S.à r.l.S to be paid entirely at the time of incorporation. Usually, founders open a bank account for the new company and undergo know your customer (KYC) and anti-money laundering (AML) checks.

However, the law is criticised for its rigidity compared to other legal regimes and for unnecessarily delaying the preparation of deals in which investors need rapid access to a Luxembourg SPV, which, more often than not, is required for cross-border investments and transactions. 

In its current wording, the draft legislation would allow founders to defer the payment of the minimum share capital required by law for a period up to 12 months after incorporation.

The deferral would comply with the terms in the articles of association regarding contributions to be made in cash. Conversely, contributions in kind must continue to be fully paid at incorporation and any amount of subscribed capital which is made exceeding €12,000 must be fully paid up at incorporation.

In terms of creditor protection, the bill envisages keeping the requirement of full subscription of issued corporate capital, even if not fully paid at issue.

Transfers of partly unpaid shares would also remain possible under the current proposals. After proper notification and publication, the transferor would no longer be liable for debts incurred after the transfer but would retain recourse against the transferee and subsequent holders.  

If a shareholder fails to respond to a valid call for funds, the voting rights attached to the unpaid shares would be suspended until their full payment. 

The rationale behind the bill is to make S.à r.l. incorporations more practical and aligned with the regimes already available in France, Germany and Belgium. If passed, the bill is expected to accelerate incorporations since it removes dependence on bank account opening and inherent timelines.

Founders would be jointly and severally liable for any part of the initial capital that has not been validly subscribed and, in case of deferred payment, for ensuring that the capital is effectively paid within the 12-month period.

The draft legislation is now subject to parliamentary review and may be amended during the legislative process. If passed, the change would mark the biggest shake-up for company law in the country since reforms of the Luxembourg law on commercial companies were passed in August 2016. These were followed by additional legislation passed in July 2023 to address some minor technical inconsistencies in the 2016 reform.

If enacted, Stéphanie Raffini, a tax and corporate law expert at Pinsent Masons, said the new law would be particularly relevant for investments and transactions which are concluded with set delays. “In situations where the signing of initial agreements and related documents with terms of transaction often requires the incorporation of the investment company formed as S.à r.l. to be completed in priority of defining the final terms of the deal, permitting the free flow of funds to be invested, this is a much-needed release of initial obligations,”

Luis Marques Guilherme, a corporate law expert at Pinsent Masons, said: “Moreover, the closing of transactions requiring actual cash flows generally occur only at a later moment, so the focus on initial capital is often perceived as being misplaced.”

Commenting on the draft law, David Maria, a tax and corporate law specialist at Pinsent Masons, added: “This innovative measure is expected to significantly simplify and accelerate the incorporation process, offering greater flexibility for investors and businesses.”