The private limited liability company (société à responsabilité limitée or S.à r.l.) is, by number, the most widely used form of companies in Luxembourg. With the introduction of the simplified public limited liability company (société par actions simplifiée or SAS) within the Luxembourg legal framework, the question as to whether the SAS may become a credible alternative to the S.à r.l. arises.
Inspired by the French market, the SAS is characterised by a very high degree of flexibility and a very limited level of statutory prescription, notably as regards its mode of governance which can be tailored to the shareholders' needs. Another advantage of the SAS is the ability to include specific clauses in its articles of association aimed at regulating shareholder relations, thereby stabilising the control of the company. The SAS is also less regulated than the S.à r.l. in terms of share transfer restrictions, shareholders exclusion and standstill provisions. Contrary to similar provisions in a shareholders' agreement, such clauses are binding upon third parties if provided for in the articles of association.
The purpose of this client briefing is to highlight the main characteristics and differences between the S.à r.l. and SAS.
| S.à r.l. | SAS | |
|---|---|---|
| Legal form | private limited liability company | simplified public limited liability company |
| Legal personality | yes | yes |
| Fiscal Transparency | no but eligible for US tax purposes | no |
| Number of members | 1 to 100 | 1 to unlimited |
| Confidentiality of shareholding | - public record - share register can be inspected by any shareholder |
- no disclosure requirements of the
shareholders - share register can be inspected by any shareholder |
| Establishment | articles of association - notarial deed required | articles of association - notarial deed required |
| Publication requirements | - full publication of the articles of
association and amendments - annual accounts - details on managers - details on shareholders |
- full publication of the articles of
association and amendments - annual accounts - details on chairman and of directors (if any) |
| Duration | limited or unlimited | limited or unlimited |
| Minimum share capital | EUR 12,000 | EUR 30,000 |
| Nominal or par value of the shares | - new shares are issued at the nominal
value or, in the absence thereof, at par value - shares with different nominal value can be issued |
- new shares are issued at the nominal
value or, in the absence thereof, at par value - shares with different nominal value can be issued - shares without nominal value for a subscription price below their accounting par value can be issued in certain circumstances |
| Subscribed share capital | fully paid up | partially paid up: at least 25% of the shares |
| Contributions | in cash, in kind or by way of sweat equity (apports en industrie) | - in cash or in kind - contributions in kind are subject to a valuation report from an independent auditor (no valuation report is however required in the case of a contribution of a receivable held by the holder of the debt instrument against the company) |
| Liability of shareholders | limited to the amount paid-up / committed | limited to the amount paid-up / committed |
| Authorised share capital | authorised share capital permitted (subject to limitations if new shares are issued to a non-shareholder of a S.à r.l.) | authorised share capital permitted (subject to limitations if new shares are issued to a non-shareholder of a S.à r.l.) |
| Form of shares | registered shares | bearer or registered shares or dematerialised form |
| Non-voting shares | may not be issued | may be issued subject to specific conditions |
| Tracking shares, redeemable shares and alphabet shares | may be issued | may be issued |
| Beneficiary shares | may be issued – economic and voting rights freely determined in the articles of association | may be issued – economic and voting rights freely determined in the articles of association |
| Shares without consideration | cannot be issued | free shares can be issued to limited beneficiaries (notably to employees and management) |
| Preferential subscription rights | no | exercise period for preferential subscription rights limited to 14 days minimum |
| Transfer of shares | not freely transferable to non-shareholders | - freely transferable - rules relating to the transfer of shares can be freely set out in the articles of association, e.g. prior consent of the shareholders, right of preemption, tag-along, drag-along, etc. |
| Lock-up, approval and pre-emption clauses | no specific provisions but transfer of shares to non-shareholders can only be made with the approval of 75 % of the share capital (possibility to decrease the majority to 50%) | - lock-up clauses are valid provided that
they are limited in time - approval and pre-emption clauses are valid provided that the non-transferability period starting from the date of a transfer approval request or the invitation to exercise pre-emptive rights do not exceed 12 months |
| Put and call options - Drag-along and tag-along rights | valid but subject to limitations (transfer of shares to non-shareholders can only be made with the approval of 75 % of the share capital (possibility to decrease the majority to 50%)) | validity of arrangements organizing the transfer of shares that do not have as sole purpose the control of participation in profits and losses |
| Listing of shares | not permitted | not permitted |
| Voting rights | overall principle: one share = one vote but majority requirements at general meetings are based on the proportion held by a shareholder in the share capital | overall principle: voting rights proportionate to the nominal value of the shares (i.e. shares with nominal value of EUR 1 = one vote, shares with nominal value of EUR 2 = two votes) |
| Suspension of voting rights | management can suspend voting rights in case of defaulting shareholders | management can suspend voting rights in case of defaulting shareholders |
| Waiver of voting rights | waiver to exercise voting rights (in full or in part) possible on a permanent or temporary basis | waiver to exercise voting rights (in full or in part) possible on a permanent or temporary basis |
| Voting agreements | valid to the extent: (i) concluded in the corporate interest of the company (ii) do not jeopardise the principle of independent vote (iii) are limited in time |
valid to the extent: (i) concluded in the corporate interest of the company (ii) do not jeopardise the principle of independent vote (iii) are limited in time |
| Minority shareholders' rights | no specific rights | minority action may be launched by shareholders representing at least 10% of the voting share capital |
| Adjournment of general meeting | no specific rights | no specific rights |
| Right to request an independent investigation | shareholder(s) representing 10% of the share capital or holding 10% of the voting rights can address questions to the management. In the absence of response by the management within one month, an independent expert can be appointed by a Luxembourg court to establish a report on the operations of the company that ' the subject of the written questions. | shareholder(s) representing 10% of the share capital or holding 10% of the voting rights can address questions to the management. In the absence of response by the management within one month, an independent expert can be appointed by a Luxembourg court to establish a report on the operations of the company that ' the subject of the written questions. |
| Issue of bonds | private and public placement subject to limitations for the issue of convertible bonds | private and public placement |
| Shareholders' circular resolutions | can be passed by circular resolution, unless a notarial deed is required | can be passed by circular resolution if provided for in the articles of association, unless a notarial deed is required |
| Annual general meeting | not necessary to convene annual general meeting to approve annual accounts if not more than 60 shareholders. If no annual general meeting is held, the resolution approving the annual accounts must be passed by circular resolution | not necessary to convene annual general meeting to approve annual accounts except if provided for in the articles of association. If no annual general meeting is held, the resolution approving the annual accounts must be passed by circular resolution. |
| Matters subject to shareholders' approval | - approval of the annual accounts and
allocation of results - appointment and removal of managers and their remuneration - appointment and removal of auditors and their remuneration (if applicable) - discharge of liability of managers and statutory auditors (if applicable) - acquisition of the company's own shares, without cancelation of the acquired shares - liability action against the managers and auditors - amendments to the articles of association (including inter alia the following: change of corporate purpose, change in the legal form of the company, increase and reduction of the share capital and capital reduction by way of the acquisition of the company's own shares, with their subsequent cancelation) - the commencement of voluntary liquidation and related matters - a merger, de-merger or similar re-organisation - prior approval for transfer of shares to non-shareholders - changing the nationality of the company - increasing the shareholders' commitments |
shareholders have to be consulted on
certain decisions only: - increase or reduction in the share capital - merger or de merger - dissolution - transformation into another legal form - appointment of the auditors - approval of the annual accounts other decisions can be taken by the chairman if decided in the articles of association |
| Quorum / majorities | - ordinary resolutions: no quorum and
simple majority of votes - extraordinary resolutions (modifications of articles of association): majority of 75% of the share capital - modification of rights attached to different classes of shares require approval by each class - approval of a new shareholder: majority of 75% of the share capital (can be reduced to 50 %) |
the articles of association determine the modalities of the consultation, the quorum and the conditions of majority. A simple, relative, absolute or qualified majority can be stipulated |
| Interim dividend | subject to the following
conditions: - interim accounts shall be drawn-up showing sufficient funds available for distribution are sufficient - the amount to be distributed may not exceed total profits made since the end of the last financial year for which the annual accounts have been approved, plus any profits carried forward and sums drawn from reserves available for this purposes, less losses carried forward and any sums to be placed to reserves pursuant to the requirements of the law and of the articles of association - the decision of the board to distribute an interim dividend may not be taken more than two months after the date at which the interim accounts referred to under the first item above have been made up - the internal or the external auditor (if any) shall verify whether the above conditions have been satisfied |
subject to the following
conditions: - interim accounts shall be drawn-up showing sufficient funds available for distribution are sufficient - the amount to be distributed may not exceed total profits made since the end of the last financial year for which the annual accounts have been approved, plus any profits carried forward and sums drawn from reserves available for this purposes, less losses carried forward and any sums to be placed to reserves pursuant to the requirements of the law and of the articles of association - the decision of the board to distribute an interim dividend may not be taken more than two months after the date at which the interim accounts referred to under the first item above have been made up - the internal or the external auditor (if any) shall verify whether the above conditions have been satisfied |
| Management | - one or more managers - if several managers, they form a board of managers only if specifically provided for in the articles of incorporation |
- the sole legal requirement is to
provide for a chairman who is the only person entitled to represent
the SAS vis-à-vis third parties - the articles of association set the rules on internal organisation (e.g. management structure, collective decisions and information to the members) - therefore, the articles of association can entrust the management of the company to a sole chairman, or to a board of directors |
| Delegation | daily management can be delegated | delegation to directors possible |
| Representation vis-à-vis third parties | - as determined in the articles of
association - unless otherwise provided for in the articles of association, each manager can represent the company vis-à-vis third parties |
- chairman represents the company - The articles of association may also provide for the appointment of managing directors (directeurs généraux) who also have the power to represent the company |
| Revocation of the managers / chairman | only for cause unless provided for by the articles of association | the articles of association can organise the conditions of dismissal of the chairman or the circumstances when he/she can lose his/her mandate (e.g. modification of the control of the company, decrease of his stake, loss of his quality of shareholder, etc.) |
| Preparation and publication of annual accounts | - must prepare annual accounts and annual
accounts must be published - annual accounts to be approved within six months following the end of the financial year |
- must prepare annual accounts and annual
accounts must be published - annual accounts to be approved within six months following the end of the financial year |
| Audit / consolidation | - statutory auditor only if more than 60
shareholders - external auditor mandatory if certain thresholds are met |
- statutory auditor / supervisory board
mandatory - external auditor must be appointed if certain thresholds are met |
| Losses | no specific requirements | - if the value of the net assets of the
company falls below 50% of the share capital, management will be
required to issue a special explanatory reports (which can be
waived) that includes proposals regarding whether or not to
continue the company's activities - management must convene an extraordinary general meeting of shareholders so that it is held within a period not exceeding two months from the time at which such losses were or should have been ascertained by them and such meeting must decide on whether the company is to be dissolved or not |
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Disclaimer
This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
