$Unique_ID{COW02259} $Pretitle{427} $Title{Luxembourg Chapter 2A. Business regulation, Part 1} $Subtitle{} $Author{Board of Economic Development} $Affiliation{Chamber of Commerce} $Subject{law permit des luxembourg qualification special conditions trade case de} $Date{1990} $Log{Industrial Park*0225901.scf Table 4.*0225901.tab Table 5.*0225902.tab } Country: Luxembourg Book: Investment in Luxembourg Author: Board of Economic Development Affiliation: Chamber of Commerce Date: 1990 Chapter 2A. Business regulation, Part 1 [See Industrial Park: Courtesy Embassy of Luxembourg, Washington DC.] Concept of trader A trader ('commer/cant') means any person who, in the capacity of principal or agent, earns his living by engaging in trade or industry. Except where otherwise provided by law on grounds of incapacity or incompatibility, a national of Luxembourg or of any other country can be a trader. Under Luxembourg law, the status of trader has three main consequences. 1. Disputes between traders are settled before a special court acting under simplified rules of procedure. 2. Only a trader can be declared insolvent, the effect of which is dispossession of his assets and the liquidation of his enterprise by the court. 3. A trader is subject to a number of special provisions governing economic activity they include rules on proof, advertising, accounts, competition and so on. Legal form An individual may trade in either of two legal forms: as a sole trader - which is best suited to smaller businesses - or as a company, of which there are six different types. Foreign enterprises may also establish a subsidiary in Luxembourg without a separate legal identity, or simply take orders via a foreign representative, sent for the occasion, and not even domiciled in Luxembourg. 2.1. Establishment permit 2.1.1. The principle of freedom of establishment Under the constitution of 1868 and its underlying principles, every citizen of Luxembourg is guaranteed freedom of trade and of industry as well as freedom of establishment. Under the Treaty of Rome of 25 March 1957, these rights are also secured to the nationals of the twelve Member States of the European Economic Community and to any other aliens who are nationals of a country which grants reciprocal arrangements to citizens of Luxembourg. 2.1.2. Activities subject to regulations For the purposes of administrative policy and in the interest of industrial and commercial enterprise, legislation has been enacted laying down the conditions for entry to and exercise of certain trades and professions and for the creation and management of undertakings. The Law of 2 June 1962 as amended by the law of 26 August 1975 makes all industrial and commercial activity subject to a Government permit in writing. A permit is also required for any alterations or additions to the object or structure of an undertaking for which a permit has been granted, and for any change of location. Activities subject to regulation These regulations cover especially: - traders, tradesmen and manufacturers, - representatives, agents on commission and commercial travellers, and - self-employed craftsmen, independent architects, engineers and auditors Holding companies do not need to obtain a permit. Banking, savings and credit institutions (see chapter 214) as well as pharmacists, wholesale dealers in pharmaceutical products, distillers and insurance companies and their agents do not require the permit provided for under the 1962 Law but they are subject to special and stricter regulations. Persons who have not settled in the Grand-Duchy but go there from time to time in order to solicit orders or do business in any of the ways mentioned are also subject to permit. Proof of professional qualification is only required in the case of handicraft work. 2.1.3. Conditions for the grant of an establishment permit The permit is issued by the Ministre des Classes moyennes on the recommendations of two separate committees, one of which considers the applicant's qualifications and the other his professional good standing. It is personal to the licensee and can be revoked on substantial grounds. It is normally valid for an indefinite period. However, it ceases to be valid if it is not used within two years of its date of issue, or if trading ceases voluntarily for more than a year. The permit is compulsory for both natural and legal persons. In the case of the latter application must be made by the manager or the managing director in his own name and in that of the company. In the event of a decision by the Minister refusing or revoking a permit, an appeal may be lodged before the Council of State within one month immediately following notification of the decision. Substantive conditions In applying for a permit, a natural person must produce certificates of good standing and professional qualification. Legal persons (corporations, etc.) must apply for a permit in the same way as natural persons in the case of legal person the above conditions must be satisfied by the board. For this purpose the professional qualifications need only be met by the head of the undertaking or the individual responsible for its management or control. The same provisions apply to subsidiaries of foreign companies. Evidence of good standing is normally provided by a certificate of solvency. In certain circumstances, the advisory committee may also require a certificate of good character and of a clean record from the police. In the commercial sector, qualification is normally demonstrated by the Certificat d'Aptitude Technique et Professionelle (CATP) certifying the completion of a theoretical and practical apprenticeship in the trade for which an application is being made. If the applicant does not satisfy this qualification he may prove his professional qualification with another diploma supported by practical experience in another business in the same industry. The minimum length of such experience varies according to the level of education followed: [See Table 4.: Education Levels] A ministry committee may certify that an applicant with no educational qualification meets the qualification requirements after three years' practical experience. The Ministry may grant a dispensation from qualification requirements in the case of an applicant proposing to open or take over a small business with limited resources and restricted premises - normally employing only himself. In the hotel and restaurant trade, professional qualification is usually the result of training in the industry, and the Diploma of the Ecole Hoteliere de l'Etat or a CATP. Failing such training, an alternative diploma plus practical experience may demonstrate qualification. In the licensed trade the applicant may produce evidence of training in the hotel and restaurant trade, or gain practical experience for a certain time in licensed premises, or finally, pass the final test of the accelerated course organized by the Chamber of Commerce. Self-employed representatives must have a normal trading permit salaried representatives must obtain a representative's card (Carte de representant), which is issued by the Ministere des Classes Moyennes in the same way as an establishment permit, except that no evidence need be produced of professional qualification. For the road transport industry (goods and passengers) a number of special conditions are laid down by the Law of 17 November 1978. Except in the case of enterprises in the building industry, no qualification is required for industrial activity, an expression which includes establishments engaged in a complete manufacturing process and, in consequence, operations on a fairly substantial scale. Nor is any qualification required from hirers of plant for industrial purposes. Qualification is governed by special regulations in the case of businessmen, craftsmen and carriers. The same applies to industrial property consultants. These conditions are imposed in the interests of the trade or profession concerned. Once the applicant has satisfied them, the permit cannot be refused for reasons of expediency. Application must be made in writing to the Ministry for Small and Medium-Sized Firms and Trades ('Ministere des Classes Moyennes') an ordinary letter will suffice. Procedural requirements The application must be accompanied by the following documents: 1. A registry stamp for Lfrs 1000 issued by the Department of Registration and Properties ('l' Administration de l'Enregistrement et des Domaines'). This sum may be paid by non-residents by cheque into the Department's Post Office account. (CCP no 87-92-62) Applicants should enclose the paying-in slip with the application.) 2. Documentary evidence of the applicant's good standing (certificate of police record, certificate of solvency, certificate of good character, etc.) 3. Documentary evidence of the applicant's professional qualification (copy of degree or diploma, certificate of trainership or apprenticeship, statement by a social security authority certifying that the applicant has actually been employed in the field of occupation concerned,etc.) 4. Documents necessary to satisfy any special requirements prescribed (e.g. a copy of a company's memorandum and articles of association). Applications fulfilling the above conditions are examined by the two special committees at the Ministere des Classes Moyennes. As a rule these administrative procedures do not take longer than two months from the time the application and supporting documents are submitted to the Ministry. The permit is issued in the form of a card which must be shown on demand. 2.1.4. Banks, savings and credit institutions insurance and reinsurance companies Banks The formation of a bank, a saving and credit institution is governed by the Law of November 27, 1984, on the supervision of the financial services sector as amended by the Law of January 28, 1986. This law details, the conditions which must be fulfilled by all banking and savings institutions, regardless wether they are limited liability companies or a branch of a foreign bank, before they will be granted a banking license. The license is given by the Minister in charge of the Luxembourg Monetary Institute (Institut Monetaire Luxembourgeois,IML) after examination of the application by this Institute. The information required by the Law is as follows: - Professional experience and integrity of at least two executives who will be responsible for the management in Luxembourg. - Professional integrity of the proposed members of the board, statutory auditors and influential shareholders. - An independent accountant with duly professional experience. - Proof of the adequate resources. Luxembourg banks must have a minimum subscribed capital of Lfrs 350 million of which at least Lfrs 250 million must be paid up. Non-banking financial establishments must have a minimum subscribed and fully paid capital of Lfrs 25 million. Branches of foreign banks should have at their permanent disposal sums amounting to at least Lfrs 250 million and in the case of non-banking financial establishments of Lfrs 25 million. - Demonstration of the adequate credit to carry out the objectives intended to be pursued. Insurance companies A license to carry on insurance or reinsurance must be requested from the Ministry of Finance, after an examination of the requests by the "Commissariat aux Assurances." The Law of February 24, 1984 stipulates the conditions required for the license, especially concerning the solvancy margin, guarantee fund and admitted assets conditions. It also confers a general supervisory mandate to the "Commissariat aux Assurances," which participates also in the development of the regulatory apparatus and is entrusted with the task of coordinating the orderly expansion of insurance and reinsurance undertakings in the Grand-Duchy. 2.1.5. Entry in the trade register Every natural or legal person and any branch engaged in commercial or industrial activity is required to apply within one month for entry in the trade register kept in the Luxembourg and Diekirch districts courts. The type and nature of the entry are prescribed by the law. Entry is subject to fee which varies according to the amount of the undertaking's capital. 2.1.6. Other administrative procedures In addition to the establishment permit, Luxembourg law provides for a number of special authorizations and prior declarations. The following paragraphs outline only the most usual administrative requirements, but the Chamber of Commerce will be pleased to answer any further enquiries. Places of work where conditions are difficult or hazardous to health or safety fall into one of three categories according to the risk involved: some must have a permit from the Ministere du Travail, others must be approved by the mayor of the district, whilst a third category must simply be notified to the Administration du Travail et des Mines. Firms trading in the collection and export of waste must obtain a special permit from the Ministere de l'Environnement. The installation of equipment for the storage, treatment or disposal of waste is also subject to authorization by the Ministere de l'Environnement. A special licence is granted by the Administration des Contributions Directes et des Accises in respect of any business selling alcoholic drink. Any business selling alcohol for consumption off the premises must likewise notify the same department and pay an annual licence fee. The opening or transfer of any premises selling beers, wines or distilled spirits within one kilometre of the Luxembourg border with Germany or France requires special authorization from the Administration des Douanes (Customs). This Administration grants also authorizations for the trade of tobacco. Traders who regularly sell on credit, and finance institutions regularly involved in financing credit sales, require a special licence issued by the Ministere de l'Economie et des Classes Moyennes. Under the laws on protection of privacy a special permit is required from the Ministere de la Justice for the operation or exploitation of a computer-based data bank. To ensure that they meet their tax obligations businesses are required to register with the Administration des Contributions Directes et des Accises and with the Administration de l'Enregistrement et des Domaines. Lastly, the laws relating to Social Security provide for registration as follows: sole traders are registered with the Caisse de Pension des Artisans, des Commer/cants et des Industriels staff employees are registered with the Caisse de Pension des Employes Prives manual employees are registered with the Caisse Nationale d'Assurance Maladie des Ouvriers. Businesses employing staff must also register with the Association d'Assurance contre les Accidents. 2.2. Commercial companies or corporations Legal basis Legislation In the Grand Duchy of Luxembourg, company law is based on the Law of 10 August 1915 as amended mainly by the Law of 18 September 1933 on the establishment of a limited liability company ('Societe a responsabilite limetee'), the Law of 23 November 1972 on the adaptation of the Law of 1915 to Directive No 68/51 of the Council of the European Communities of 9 March 1968 and the Law of May 4, 1984 with the provisions of the Fourth EEC Directive for corporations. Luxembourg legislation in this field is largely based on the Belgian Law of 1913 on the same subject. On any questions of interpretation, therefore, reference must be made to Belgian case-law and commentaries. 2.2.1. Normal rules for formation The formation of a company is subject to three conditions: Act of incorporation 1. Completion of the act of incorporation. The act of incorporation is drawn up - by the founder shareholders, either by notary's deed or by deed under private seal in the case of a general partnership, a partnership with limited liability or a cooperative society or - in the case of a joint stock company, a partnership limited by shares or limited liability company, by notary's deed: this is a mandatory requirement which must be fulfilled on pain of annulment. Registration 2. Registration of the act of incorporation This must be effected by a notary within 15 days or by the parties within three months. Publication 3. Publication The act of incorporation and the names of the directors appointed must be published in full in the case of a joint stock or public company, a partnership limited by shares or by extract in the case of a general partnership or a partnership with limited liability. Publication is carried out in two stages: first by deposit at the registry ('greffe')of the Tribunal de Commerce (Commercial Court) within one month of completion of the act of incorporation and by subsequent publication in the Memorial (Official Gazette), Part C, under the heading "Special List of Companies and Associations" within one month of deposit at the Registry. An act or extract therefrom is valid against third parties only with effect from its date of publication in the Official Gazette. Any subsequent amendment of the articles of association must, on pain of annulment, be made in the form required for the formation of the company. The law makes no provision regarding the language in which these documents are drafted but an opinion of the Council of State restricts it to French, German and English. In practice a French translation is required if the original is in English. The company's capital may be expressed in foreign currency. There is no statutory authority to ensure that companies are properly registered. This is normally the responsibility of notaries. 2.2.2 Principal charges on constitution The founder members of a company are responsible for meeting the following charges on the company's formation. 1. The fees of the notary who acts at the request of the parties or by requirement of law. The scale of charges is laid down by law. 2. The registration duty or capital contribution duty which, for the countries of the EEC, is fixed at 1% of the nominal capital. 3. The fee for enrolment in the Trade Register and publication in the Memorial. 4. The fees of any legal or other adviser engaged. [See Table 5.: Schedule of Charges]