Mergers - Luxembourg

Updated 01/2010

Legal requirements

Types of merger

Any company can take part in a merger operation, either by absorption or by creating a new company. In either case, the process involves pooling all the assets or activities of two or more companies.

A merger operation produces three legal effects:

transferring the net assets of the absorbed company to the absorbing company or to the new company arising from the merger;
dissolving the absorbed company;
paying for the contributions of the absorbed company (the shareholders of the absorbed company must receive shares in the absorbing company in return for their contributions).
Tax implications of maintaining separate identities or integrating into the acquiring company (company mergers)

Normally, each of the legal steps of the merger is taxed in a different way:

dissolving a company involves taxing the liquidation profit, particularly the capital gains resulting from the operation;
an absorbed company must pay the registration duties for capital increases;
the shareholders of the absorbed company are taxed on the capital gain resulting from exchanging the shares and securities.
Tax implications of changing the type of company

To keep the tax costs of the operation within bounds, a concessionary system has been put in place. This involves deferred taxation of hidden reserves.

Companies planning to merge can set up an economic interest grouping (EIG) and pool certain operations. The equivalent option at European level is called a European Economic Interest Grouping (EEIG).

Characteristics of an economic interest group
Characteristics of a European economic interest group

Buying an existing company, with an already established structure, can be a good way of expanding your business.

Takeovers — Luxembourg

Administrative procedures

When a merger results in a new company, the former companies disappear. The administrative procedures are identical to those for setting up a business.

Setting up a new business - Luxembourg

With an absorption, only the absorbing company continues. The administrative procedures are similar to those for taking over a company.

Taking over a business - Luxembourg

The Centre de formalités (Chamber of Trades) and the Espace entreprises (Chamber of Commerce) provide help with formalities and administrative procedures.

Centre de formalités - Chamber of Trades
Espace entreprises - Chamber of Commerce

Registration

To set up a company, you need an , Ministry of Small Firms and Traders incorporation permit issued by the Ministry of Small Firms and Traders .

Forms on the Business portal
Incorporation permit
Incorporation of a company - formalities

Other procedures also need to be carried out, including:

registration in the Trade and Companies Register;
request for a VAT number from the Luxembourg Registry;
initial declaration for the Direct Taxation Authority ;
initial declaration for the Joint Social Security Centre ;
registration with professional chambers.
Forms: "Paper" submissions - Trade and Companies Register
Forms: "Electronic" submissions - Trade and Companies Register
eVAT online
Forms from the Direct Taxation Authority
Forms from the Joint Social Security Centre
Professional chambers

When setting up an economic interest group (EIG), you need to carry out certain formalities, including drawing up and signing a contract of incorporation, registering in the Trade and Companies Register, submitting and publishing information and decisions, etc.

Registering and notifying changes to the articles of association with the Trade and Companies Register (RCS)
Forms: "Paper" submissions - Trade and Companies Register
Forms: "Electronic" submissions - Trade and Companies Register

Check also the legislation on this topic in: