Running a company in Luxembourg is not limited to handling day-to-day management. The manager of an SARL, like the director of an SA, takes on a set of legal, accounting, tax and social security obligations.
Failure to comply with them may engage their personal liability — including on their own assets.
Governed by the amended law of 10 August 1915 on commercial companies, these obligations deserve to be precisely understood. This article sets out an overview and recalls the good practices that protect the director.
I. Representing and managing the company
The manager is the legal representative of the company. In that capacity, they:
- bind it towards third parties and sign contracts;
- oversee the accounts and the cash position;
- ensure compliance with legal, tax and social security obligations.
They are responsible for the overall proper functioning of the structure. All their decisions must be taken in the corporate interest: this means avoiding conflicts of interest, not diverting the company’s opportunities for their own benefit and showing transparency in their management.
A decision contrary to the corporate interest may 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 that all of the company’s returns are complied with:
- direct taxes: corporate income tax, municipal business tax, net wealth tax;
- value added tax;
- social security contributions due to the Joint Social Security Centre;
- payroll statements.
A key point: delegating these tasks to a fiduciary does not release the director from their legal responsibility, which remains complete.
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’
One frequent confusion is worth clearing up: limited liability protects shareholders up to the amount of their contributions, but it does not protect directors.
The manager or director may be held personally liable in the event of:
- mismanagement or serious negligence;
- breach of the articles of association or of the law;
- misuse of corporate assets;
- delay in filing for bankruptcy;
- tax and social security offences.
Far from offering a shield, the position of director therefore carries a specific liability regime.
VI. Informing the shareholders
The director must keep shareholders informed of the financial and legal position of the company. Before the annual general meeting, they present the balance sheet, the profit and loss account and, where applicable, the management report.
Where losses exceed half of the share capital, they must convene a general meeting to decide on the future of the company (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 calls for 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 complying with their accounting, tax and social security obligations, holding their meetings and securing their decisions. Have you just taken up a management mandate, or do you want to secure your governance? Let’s talk.
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