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LUXEMBOURG
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SOCIETE ANONYME
SOCIETE A RESPONSIBILITE LIMITEE
GENERAL PARTNERSHIP
LIMITED PARTNERSHIP
BRANCH OF OVERSEAS COMPANY
'HOLDING' COMPANY
RELATED INFORMATION

Forms of Company

In July, 2006, the European Commission ordered the government of Luxembourg to dismantle its system of tax breaks for financial holding companies, after concluding that the preferential tax regime in favour of Luxembourg’s Exempt, Milliardaire and 1929 Financial Holding companies violates EC Treaty state aid rules. (The existing regimes are described in Offshore Legal and Tax Regimes.)

"It distorts competition and trade by altering the level playing field between financial undertakings and induces them to create dedicated structures in Luxembourg to reduce their current tax liabilities," the EC stated.

In June 2005, Luxembourg amended the 1929 law by abolishing the exempt status for holdings receiving more than 5% of their yearly dividend income from participating companies which have not been subject to a tax comparable to the one applied in Luxembourg. While this narrowed the scope of the law, the EC argued that the regime still constitutes state aid, as the tax advantages remain unchanged.

Luxembourg did finally abolish the holding company regimes as of 1st January 2007, allowing existing companies to retain their tax benefits until 2010. As originally drafted, the legislation would have removed tax benefits from any company that changed its share-holdings during the 'grandfather' period.

However, in August, 2006, Tenaris, a leading global manufacturer of pipelines for the oil and gas industry, sought clarification of the decision by the European Commission. Tenaris believes, based on the reasons that led the EC to allow a transition period, that the above described effect should not apply to listed companies with publicly-traded securities.

"As neither listed companies nor their shareholders are able to prevent trading in the listed companies’ shares, a different interpretation would defeat the purpose of the transition period that the EC deemed necessary to accommodate the expectations and reorganization needs of such companies and their shareholders," the company stated.

An appropriate amendment was added to the law to deal with this point.

The replacement for the holding company regime is the Family Private Assets Management Company, or SPF, brought into being in 2007, and aimed at the wealth management sector.


Societe Anonyme (Joint Stock Company)

The Societe Anonyme, abbreviated SA, or joint stock company, is formed under the Commercial Companies Law 1915, as amended. SAs must have a minimum capital of EUR31,000 divided into freely transferable shares held by at least two shareholders, who may be resident or non-resident persons or juridical entities. The shareholders' liability is limited to the amount of their subscribed (not necessarily paid-up) capital. There is a Board of Directors (at least three), and day-to-day management may be delegated to a managing director.

Incorporation takes 2 or 3 days; the SA's statutes must be printed in French or German; a director must give his name, address and occupation. There must be registered office in Luxembourg, but only the share register need be kept there. Accounts need to be submitted annually to the Registrar of Companies, but need only be audited if a company exceeds a certain size: either the balance sheet is greater than EUR3.125m, or sales are greater than EUR6.25m, or there are more than 50 employees.

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Societee a Responsabilite Limitee (Limited Liability Company)

The Societe a Responsabilite Limitee, abbreviated SARL, or limited liability company, is also formed under the Commercial Companies Law 1915, as amended. The SARL must have a minimum paid-up capital of LUF 500,000 divided into 'participation certificates' which are not freely transferable. There may not be more than 40 shareholders, and they are liable for the amount of their paid-up capital. If there are fewer than 25 shareholders an annual gemeral meeting is not necessary.

In other respects, the SARL is similar to the SA.

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General Partnership

General Partnerships are recognised in Luxembourg law either as a Societe Civile (most professional partnerships take this form) or as a Societe en Nom Collectif (for instance, a family business might choose this form). The partners are liable jointly and severally for the full debts of the partnership. Partnerships must be registered with Greffe du Tribunal de Commerce.

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Limited Partnership

Limited partnerships in Luxembourg have general partners, who are responsible for management, and have unlimited liability, and limited partners, who are liable only to the extent of their capital contributions to the partnership. A limited partnership can either be a Societe en Commandite Simple in which case it is subject to the same rules as a general partnership, or it can be a Societe en Commandite par Actions, in which case the limited partners are issued with shares and the partnership is treated in the same way as an SA (see above) in most respects.

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Branch of Overseas Company

An overseas company can carry on business in Luxembourg through a branch office, but will need to obtain a permit as does every business. A branch office will normally constitute a permanent establishment from a tax point of view (see Domestic Corporate Taxation).

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'Holding' Company

The Luxembourg Holding Company and 'Soparfi' (Societe a Participation Financiere) are the forms which permit 'offshore' activity in Luxembourg: see Offshore Legal and Tax Regimes for a full description. However, they are not separate legal forms as such, and employ one of the above forms, either SA, SARL or Societe en Commandite par Actions, as a legal base.

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SOCIETE ANONYME
SOCIETE A RESPONSIBILITE LIMITEE
GENERAL PARTNERSHIP
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'HOLDING' COMPANY
RELATED INFORMATION

 

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