The Luxembourg Parliament adopted on 18 October 2022 the bill of law number 6539B (the Law) introducing the administrative dissolution without liquidation procedure (the Administrative Dissolution Procedure).
The purpose of the Law is to implement a collaboration between the Public Prosecutor and the Luxembourg Trade and Companies Register (the RCS) in order to dissolve dormant and empty shell companies in a more time- and cost-efficient way by avoiding the formal judicial liquidation procedure.
2. Scope of Competence
The Administrative Dissolution Procedure is initiated only if the following three conditions are cumulatively fulfilled (the Conditions):
- The company is a commercial company falling within the scope of article 1200-1 §1 of law of 10 August 1915 on commercial companies, as amended, meaning that the company pursues activities contrary to criminal law or which seriously contravenes the provisions of the commercial code or the laws governing commercial companies (e.g. the failure to publish the annual accounts, the absence of a valid and real registered office, the absence of regularly composed corporate governing bodies).
- The company has no employees.
- The company has no assets.
Nevertheless, the Law provides that the following entities are excluded from the Administrative Dissolution Procedure:
- Credit institutions.
- Certain entities from the financial sector subject to prudential supervision.
- Insurance and reinsurance companies.
- The companies practicing the profession of lawyer.
3. Steps of the Administrative Dissolution Procedure
The main steps of the Administrative Dissolution Procedure are the following:
- Identification by the Public Prosecutor of the companies falling within the scope of the Law
The Public Prosecutor decides which procedure should apply (i.e. Administrative Dissolution Procedure or formal judicial liquidation procedure), as he has access to a whole range of information, such as information from the RCS or from relevant financial and administrative authorities.
Therefore, commercial companies that may be subject to the Administrative Dissolution Procedure are identified by the Public Prosecutor. Where there are specific and corroborating indications that a commercial company meets the Conditions, the Public Prosecutor requests the RCS to initiate the Administrative Dissolution Procedure.
- Opening, notification and verifications by the RCS
The RCS opens the Administrative Dissolution Procedure and publishes the decision in the Luxembourg Electronic Gazette (the RESA) within three days as of the Public Prosecutor’s request. In addition, the RCS notifies the company of the decision to open the Administrative Dissolution Procedure by registered letter with acknowledgement of receipt.
The RCS performs verifications to confirm that the company has no employees and assets. Once the relevant verifications are completed, the RCS informs the Public Prosecutor of its findings.
- Decision of the Public Prosecutor
Based on the verifications performed by the RCS, the Public Prosecutor takes a decision.
If the Conditions are fulfilled, the Public Prosecutor requests the RCS to complete the Administrative Dissolution Procedure. As a consequence, the company is dissolved.
If the Conditions are not fulfilled, the Public Prosecutor requests the RCS to stop the Administrative Dissolution Procedure, which decision will be published in the RESA.
The company dissolved through the Administrative Dissolution Procedure, as well as any interested third party who considers that the Conditions are no met, may form an appeal against this decision in front of the District Court dealing with commercial matters, within one month as of the publication of the decision.
5. Entry into force of the law
The Law will enter into force on the first day of the third month following its publication in the Luxembourg Official Journal.
For more information, please contact:
- Charles de Kerchove - Partner, Head of Tax & Transfer Princing
- Edouard Bubenicek - Director
- Tiziana Roos - Manager