22 Feb 22

Voluntary liquidation of unregulated companies in Luxembourg

In recent years, Luxembourg has attracted the incorporation of many companies to the Grand Duchy. As the number of incorporations in Luxembourg continues to increase, it is important to establish the full lifecycle of an organisation from the out-set including entry, holding and exit. With this in mind, liquidations of companies established in Luxembourg should be taken into consideration. For investors intent on establishing Special Purpose Vehicles (SPVs) for a particular investment or transaction, it is important to ascertain the exit costs of a structure as well as the costs of establishment and the day-to-day management during the holding period.

Luxembourg flag

In Luxembourg, the Law of 10 August 1915 on commercial companies, as amended (Luxembourg Company Law), specifies two voluntary methods of liquidation: Compulsory, due to a court order for example, or voluntary as a result of a shareholder or board decision. The process for a liquidation for unregulated companies in Luxembourg uses either the “one-step” or “three-step” method.

Typically, in Luxembourg a company utilises the three-step method entering the company into dissolution before it is liquidated. Whilst there are options for a “one-step” and “two-step” these are less common as they require various conditions to be met before a company can liquidate.

One-Step voluntary liquidation process

As described above, a one-step liquidation process is available where companies meet certain conditions. Otherwise known as a “simplified liquidation”, a one-step process takes into account some of the considerations required for a three-step liquidation but circumvents a lengthier process if factors have already been considered.

One identifying factor of a one-step liquidation process is that the company is held by a sole shareholder. As a sole shareholder is likely to appoint itself as a liquidator, it does not need to hold an Extraordinary General Meeting (EGM) to appoint itself, thus eliminating the need for the first step in a three-step liquidation.

If the sole shareholder can provide an updated interim balance sheet of the company and confirmation from the tax authorities that any outstanding amounts have been settled and, where applicable, the company has been de-registered for VAT and has confirmation from the social securities (Centre commun de la sécurité sociale - CCSS), it may qualify for a one-step liquidation.

Three-Step voluntary liquidation process
First step: Dissolution

The shareholder(s) of the company is required to hold an EGM with a Luxembourg notary, for the purposes of appointing a liquidator and entering the company into dissolution. It can be expected that the shareholder of the company or an entity within the same company structure is appointed as liquidator as the liquidator thereafter will assume all responsibilities for the remaining assets and liabilities of the company. For the liquidation to proceed, the most recent annual financial statements are required to be approved and filed.

Thereafter, the Luxembourg Business Registry (LBR), also known as the Registre de Commerce et des Sociétés (RCS), is amended to reflect the decision of the shareholder, that in effect the managers’ mandates have been terminated and that the liquidator has been appointed to assume all responsibility during the dissolution (or radiation) period of the company.

Second step: Appointment of auditor

The second step requires the company to appoint a supervisory auditor for the purposes of the liquidation, otherwise known as “Le commissaire à la liquidation” (Cafico International provides this service to any company requiring the appointment of a commissaire). The commissaire examines the liquidation balance sheet of the company prepared by, or on behalf the liquidator, to confirm that no other balances remain outstanding. The commissaire produces a report, or “Report de commissaire” which is attached to the interim and final liquidation accounts.

Once the company has entered into the liquidation process, the liquidator is responsible to ensure that any outstanding balances with the tax authorities and any other third parties are settled. Whilst there is no time limit on this, the liquidation cannot proceed to the final step until this task has been completed. It is recommended to file the tax return of any companies entering into liquidation up to and including the liquidation period as soon as practically possible in order to settle any outstanding balances with the Luxembourg tax authorities. A certificate from the tax authorities, and where applicable the VAT authorities and CCSS, is required confirming all balances have been settled before proceeding to the final step.

Final step: Liquidation

The final step of the liquidation process requires a shareholder meeting for the purposes of presenting a set of final liquidation accounts. The liquidation accounts must be updated to reflect the final balance sheet position and must be prepared within two months prior to the date of the shareholder meeting. Within the shareholder meeting, the shareholder(s) will approve the audit report, release the liquidator from their duties, refer to the location of where all records of the entity will be kept for 5 years (as is required by Luxembourg company law) and file the notice of dissolution with the RCS. Thereafter, the cash or any residual assets remaining on the balance sheet if not already transferred are transferred to the shareholder.

Important considerations

If for whatever reason new assets are discovered, then the liquidator must be re-appointed to transfer the assets to the company’s previous shareholders. Similarly, if new liabilities arise, it is the duty of the liquidator to assume responsibility for any outstanding creditors.


Should you wish to find out more about the liquidation procedure in Luxembourg, please reach out to Patrick Robinson or Alex Michael.