Managing a company in Luxembourg is not limited to running its day-to-day operations. The manager of a SARL, like the director of a SA, takes on a set of legal, accounting, tax and social obligations whose breach can engage their personal liability — including over their own assets. Framed by the amended law of 10 August 1915 on commercial companies, these obligations deserve to be precisely understood. This article provides an overview of them and recalls the good practices that protect the director.
I. Representing and managing the company
The manager is the company’s legal representative. As such, they bind it towards third parties, sign contracts, oversee accounting and treasury, and ensure compliance with legal, tax and social obligations. They bear responsibility for the overall proper functioning of the structure. All their decisions must be taken in the corporate interest: this requires avoiding conflicts of interest, not diverting the company’s opportunities for personal gain, and acting transparently in their management. A decision contrary to the corporate interest can engage their personal liability.
II. Keeping the accounts and filing them
The director must ensure proper bookkeeping, the preparation of the annual accounts, their approval by the shareholders and their filing with the Trade and Companies Register within seven months of the financial year-end. Failure to file exposes the company to fines and, ultimately, to an administrative dissolution procedure.
III. Meeting tax and social obligations
The manager ensures compliance with all of the company’s filings, whether direct taxes (corporate income tax, municipal business tax, net wealth tax), value added tax, social contributions due to the Joint Social Security Centre or payroll statements. A crucial point: delegating these tasks to a fiduciary does not relieve the director of their legal responsibility, which remains full and entire.
IV. The liabilities incurred
The director’s liability operates on three levels.
- Civil liability. It is engaged in the event of mismanagement, breach of the articles or gross negligence (art. 441-9 for SARLs, art. 59 to 63-1 for SAs).
- Criminal liability. It covers in particular misuse of corporate assets, tax fraud or forgery of documents.
- Liability in the event of bankruptcy. It applies where the cessation of payments is not declared in time or in the event of characterised mismanagement (art. 495 to 496-2), and can extend to a ban on managing.
V. The limits of ‘limited liability’
A common misunderstanding deserves to be dispelled: limited liability protects shareholders up to their contributions, but it does not protect directors. The manager or director may be held personally liable in the event of mismanagement or gross negligence, breach of the articles or the law, misuse of corporate assets, delay in declaring bankruptcy, or tax and social offences. Being a director, far from offering a shield, therefore exposes one to a specific liability regime.
VI. Informing the shareholders
The director must keep the shareholders informed of the company’s financial and legal situation. Before the annual general meeting, they present the balance sheet, the income statement and, where applicable, the management report. Where losses reach more than half of the share capital, they must convene a general meeting to decide on the company’s future (art. 100).
VII. Delegation and joint management
The articles may organise individual or joint management. But even in the case of joint management or delegation to a third party, each director remains responsible for the acts falling within their area of intervention. The internal allocation of tasks does not erase each person’s legal responsibility.
VIII. Good practices
Several habits make it possible to significantly reduce the risk.
- document important decisions and deliberations;
- consult an expert or a lawyer before any sensitive transaction;
- take out directors’ and officers’ (D&O) liability insurance;
- regularly check accounting, tax and social compliance.
Conclusion
The role of manager or director in Luxembourg demands rigour, prudence and transparency. The 1915 law strictly frames these obligations in order to protect the company, its shareholders and third parties — and the director’s personal liability is the direct corollary. At Ease Advisory, we support directors in meeting their accounting, tax and social obligations, holding their meetings and securing their decisions. Have you just taken on a management mandate, or do you wish to secure your governance? Let’s talk.