Legal Reserve in Luxembourg

The certificate of incorporation must contain certain information required by law, such as: The legal regime applicable to the premium and the 115 account is characterized by its flexibility. Account 115 („equity contribution not remunerated by securities”) mentioned in the Luxembourg chart of accounts and the premium account of a Luxembourg company constitute freely distributable reserves, unless otherwise provided in the company`s articles of association. These are neither capital-based reserves, i.e. capital contributions by shareholders, nor profit-related reserves, i.e. actual profits made by the company as a result of its activities, but contribution-related reserve accounts, i.e. contributions from shareholders that are not capital contributions. There is no legal definition of the share premium as such. However, Luxembourg legal writers unanimously consider that the premium exceeds the issue price above the nominal value of the shares. This additional contribution from a shareholder is not included in the share capital of the company concerned. Concept of distributable profit: this includes profit for the financial year, plus profit carried forward (distributable reserves) minus past losses minus amounts allocated to minimum reserves.

In other words, distributable profits mean, „I like service. It`s a huge time saver, very convenient, very relevant and very up-to-date. The best new legal resource I`ve come across in a long time. And to get started for free! Please continue to make it available. An LLC can have between 2 and 100 shareholders. Shareholders may be natural or legal persons. Article 461-2 also provides that „no distribution may be made to shareholders of an amount exceeding the amount of profits of the previous financial year closed, plus undistributed profits and deductions from the reserves available for this purpose, less losses carried forward and sums to be allocated to reserves by law or by the articles of association”. The so-called 115 account was introduced in 2009 by the new Luxembourg Standard Accounting Plan (PCN) and refers to a shareholder`s contributions to equity without issuing shares. The NCP has formalised the Luxembourg practice. The main reason for using account 115 of the contribution is to allow distributions to shareholders without capital reduction, even in the absence or insufficiency of distributable reserves and profits. Although the contribution to Account 115 is different from an issue premium payment, it is part of the same section of the NCP (Section 11 – Share Premium and Similar Premiums).

It should be noted that Account 115 should also be distinguished from the Reserve Accounts (Section 13 of the NCP), which contain distributable reserves. Such a refund cannot therefore be made if the distribution results in the net assets declared at the balance sheet date of the preceding financial year being less than the amount of the subscribed share capital plus reserves, the distribution of which is prohibited by law or by the statutes. There is no legal definition of the share premium as such. However, the Luxembourg legal literature unanimously considers that the share premium represents the excess of the issue price over the nominal value of the shares. This additional contribution from a shareholder is not contributed to the share capital of the company concerned. Subject to the foregoing, the share premium/account of 115 shares is freely available to the Company, which may freely distribute/redeem it or use it in any other way to offset losses, etc. The company`s articles of association may derogate from this principle and stipulate, for example, that a portion of all premium accounts/115 accounts represent non-distributable minimum reserves. They could also provide, subject to the prohibition of the Leonin clauses, that these amounts are reserved only for certain classes of shareholders. „I love the service. It`s a big time saver, very convenient, very relevant and very up-to-date.

The best new legal resource I`ve come across in a long time. And it`s free! Please continue to provide it. Nevertheless.dem two opposing schools of thought among Luxembourg lawyers regarding the possibility of reassigning from another reserve account of the company (e.g. premium account and/or account 115) to the legal reserve account: a dividend is part of the profit that a company makes and distributes to its shareholders from distributable amounts within the meaning of Luxembourg law. It should be noted that ordinary dividends may also be distributed from distributable reserves with no annual net income. Subject to the foregoing, the 115 share premium/account is freely available to the Company, which may freely distribute/reimburse it or otherwise use it to offset losses, etc. The company`s articles of association may derogate from this principle and provide, for example, that part of all premium accounts/account 115 constitutes non-distributable minimum reserves. They could also provide, subject to the prohibition of the Leonin clauses, that these amounts are reserved only for certain classes of shareholders. No text prohibits a general meeting other than the annual general meeting from resolving the distribution of a dividend from the balance sheet reserves recorded by the previous general meeting. Consolidated financial statements provide an overview of the financial health of a group of companies. Consolidation applies to a group of companies with different legal personalities but dependent on a common decision-making centre (the parent company).

Consolidation is the process. The reimbursement of the share premium and account 115 is the subject of debate. We cannot equate the distribution/redemption of the share premium/account 115 with all aspects of the payment of dividends/distribution of interim dividends, as it is not a distribution of distributable profits and reserves. However, there are some limits to premium distribution/redemption/account 115. As mentioned above, Article 461-2 of the Luxembourg Companies Code refers to „distributions”. This is a broader concept than the simple distribution of profits/dividends and these provisions seal the pillar of all distribution restrictions. Therefore, the reimbursement of the premium/account 115 should in any case comply with the conditions of article 461-2 of the law.