Public petition n°4097

Petitioner: Philippe Nowak

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I. Subject of the petition The petition asks the Chamber of Deputies to amend the law of 10 August 1915 on commercial companies (the "Company Law") in order to expressly recognise the possibility, for an existing shareholder, to contribute equity to a Luxembourg company without receiving new shares in return. This practice, common in Luxembourg, is currently provided for only by accounting law, and not by company law. The absence of a statutory framework creates legal uncertainty for companies, shareholders, and creditors. The petition further asks that the tax treatment of such contributions be clarified, either by way of an amendment to the law of 4 December 1967 on income tax, or through a circular issued by the tax authorities. II. Background and current legal situation Contributing equity to a company without receiving new shares in return is a common operation in Luxembourg, particularly within groups of companies. It allows the equity of a company to be increased quickly, without the costs of a traditional capital increase by notarial deed. Yet this operation is only governed by accounting law (under capital account 115 of the Luxembourg Standard Chart of Accounts). Neither the Company Law nor any other company-law text sets out its legal effects, the conditions under which it may be carried out, the rights and duties of the contributing shareholders, or its consequences in the event of insolvency, liquidation or transfer of shares of the company. This absence of a legal framework has already given rise to unfavourable court decisions. In 2022, the Higher Administrative Court ruled that such contributions are not taken into account for the purposes of the parent-subsidiary tax regime. The result is a mismatch between the accounting treatment (which considers them as equity) and the tax treatment (which disregards them), to the detriment of legal certainty and the attractiveness of Luxembourg.

The legal recognition of these contributions in the company law would serve four general-interest objectives: 1. Legal certainty: enshrining the mechanism in the law would end the current uncertainty and protect both shareholders and creditors. 2. Coherence of Luxembourg law: aligning company law, accounting law, and tax law in the treatment of a single economic operation. 3. Competitiveness of Luxembourg: Belgium, Finland, Germany, and Switzerland have enshrined this mechanism in their company law. Luxembourg is comparatively behind in this respect. 4. Administrative simplification: confirming that such contributions can be made without a notarial deed would reduce the burden on Luxembourg companies and support the modernisation of corporate practice.