Luxembourg SARL Reform: Proposed Introduction of Deferred Capital Payments

On 16 December 2025, the Luxembourg Government introduced Draft Bill no. 8669 (the “Draft Bill”), proposing a significant modernisation of Luxembourg’s company law framework. If enacted, the Draft Bill would enable private limited liability companies, known as sociétés à responsabilité limitée (“SARL”) and société à responsabilité limitée simplifiées (“SARL-S”) to defer payment of the statutory minimum share capital and any share premium set at incorporation for up to 12 months following incorporation. The deferred payment regime applies exclusively to cash contributions. This represents a notable departure from the current regime, which requires full payment of capital in cash prior to incorporation.

Background and Rationale

Historically, the incorporation of SARL’s and SARL-S’ in Luxembourg have been hindered by delays associated with the opening of bank accounts and transferring the required share capital into an account opened in the name of the SARL/-S. These administrative challenges can be particularly disadvantageous to alternative investment structures and securitisation vehicles, where transaction timelines are often tight.

Recognising these inefficiencies, the Luxembourg Government has proposed the Draft Bill to enhance the jurisdiction’s competitiveness and provide greater procedural flexibility for SARL and SARL-S incorporations, thereby mitigating timing risks for investors and promoters.

Key Proposed Amendments

Under the Draft Bill, payments of the minimum share capital may be deferred for a period of up to 12 months from the date of incorporation. This window is considered a reasonable and proportionate timeframe within which banking arrangements can be finalised and capital payment obligations can be discharged.

It is important to note, however, that while payment may be deferred, the share capital must still be fully subscribed at the moment of incorporation. The reform does not eliminate the subscription requirement but merely postpones the corresponding monetary contribution.

Furthermore, the Draft Bill proposes to remove the obligation to immediately and fully pay any share premium at incorporation. This aligns with the overarching objective of the reform, to provide SARLs and SARL-S’ with a more flexible and commercially responsive capital structuring framework. However, the payment must be remitted in cash prior to the conclusion of the 12 month period.

Capital Flexibility Balanced with Legal Controls

Although the Draft Bill introduces welcome flexibility in permitting deferred payment of capital, it is accompanied by a series of legal controls designed to preserve the reliability of the current SARL capital regime. The ability to postpone payment applies exclusively to cash contributions. Where assets are contributed in kind, the traditional rule remains unchanged, that such contributions must be fully settled at incorporation, ensuring that non cash assets continue to support the company’s capital position from day one.

The draft legislation also maintains immediate payment obligations where the subscribed amount exceeds the statutory minimum of EUR 12,000. Any capital subscribed above that threshold continues to require full, instantaneous payment at incorporation. For future capital increases, the rules are equally clear; newly issued shares must be fully paid upon issuance, with no possibility of deferral.

Reinforcing Responsibility and Governance Integrity

To ensure this enhanced flexibility does not dilute accountability, the Draft Bill proposes to align the liability for unpaid amounts with the model applied to public limited companies. This adjustment reflects a deliberate effort to strengthen responsibility for meeting calls on unpaid capital and to avoid situations in which SARLs commit to capital without the means or intention to discharge it.

Failure to satisfy a call within the required timeframe, the corresponding voting rights may be temporarily suspended until the amount has been paid. The reform therefore embeds a governance safeguard that prevents shareholders in default from influencing the management or direction of the company. Transparency is further enhanced through a requirement for the annual accounts to include a list of shareholders who have unpaid amounts outstanding at year end, accompanied by the sums due. The aim is to provide creditors and stakeholders with a clear picture of the company’s capital position at any given time.

Companies Within Scope of the Reform

Once enacted, the new rules would apply to all SARLs. The Government has also confirmed that SARL S entities, which are generally subject to the SARL legal framework, would benefit from the same deferral mechanics. As a result, the reform is expected to have wide practical impact across the private limited company landscape.

For many transaction driven structures, particularly alternative investment and securitisation vehicles, the proposed decoupling of incorporation from immediate capital payment may shorten the critical path to vehicle establishment. Incorporation could occur in parallel with AML and KYC checks, reducing the pressure associated with slow bank account openings or cross border capital transfers.

In anticipation of these changes, promoters and advisers should consider adapting corporate documents. Shareholders’ agreements, by laws and term sheets will need to reflect the procedures for capital calls, the timing of payments and the consequences of non payment. Where a share premium is contemplated at formation, parties would gain greater flexibility in planning liquidity and funding flows. However, transactions involving contributions in kind will still need to secure day one funding, a point that should remain central to structuring considerations.

Anticipated Outcomes of the Legislative Amendments

If enacted, the reform will allow SARLs, and SARL-S entities, to be incorporated before the minimum capital is fully paid, provided the outstanding cash contribution is settled within twelve months. The proposal maintains the requirement for full subscription at incorporation while reinforcing accountability through liability and governance restrictions. It offers a practical and commercially meaningful solution to longstanding banking delays, with the potential to accelerate company formation timelines across a range of sectors. The Draft Bill remains subject to change as it progresses through the legislative process.

For more information on the above, please contact Arek Kwapien, Director of Corporate Services.