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Luxembourg

Mergers

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).   

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.     

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).

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

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.

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

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

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 .

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.  

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.

Help & advice

Help & advice

The Espace entreprises run by the Chamber of Commerce and the Contact entreprise of the Chamber of Trades offer support and advice to entrepreneurs thinking of merging with another company.

E-mail a business organisation near you

The EU runs a network (Enterprise Europe Network) of local business organisations in most European countries that may be able to help you.

Choose your country and town and enter your enquiry below.

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