Entrepreneurship: It is up to parliament to pass the proposed bill to simplify company registration, Luxembourg’s justice minister has told Amcham.
Photo: Steve Eastwood
Being able to “create a company in one day should be a reality in the near future,” Luxembourg’s Green justice minister has told the international business community. But the bill allowing for faster, simpler and cheaper company formation is still winding its way through the legislative process and there is no firm date for a final vote, Félix Braz said during a conference organised by the American Chamber of Commerce on Monday evening.
Amcham started lobbying for the law the minute it was floated in the current government’s coalition agreement in 2013, said Pedro Castilho, a small business owner (the Verbalius public speaking consultancy) and a member of Amcham’s new business and entrepreneurship committee. Last year Amcham came up with the catchy “1-1-1” name which signifies that one person can start up a firm in one day with just €1 in capital.
The bill would introduce a new type of company, a “simplified société à responsabilité limitée” (simplified limited liability company). Under current law companies must put €12,500 into a capital reserve account and have a “notaire” (a specialised solicitor) draft articles of incorporation before the entrepreneur can place their firm on Luxembourg’s company register.
Under the proposed law, the “notary act” would be optional and a “simple private deed can be used for the company register”, Braz said. “The total set up cost should be less than €100 per company.”
But the capital requirement is not the biggest problem, argued Linda Bos, an independent designer and co-founder of Lëtz Go Local, a not-for-profit group that promotes Luxembourg producers and artisans. Rather it is more “finding the right person to find the right information”. People are often sent in the wrong direction or given incomplete details while navigating administrative matters, she said, summarising the experience of the roughly 120 members of her association.
Social insurance contributions
1-1-1 companies face the same taxes and social charges as all other firms, Castilho explained.
Asked by two audience members if steep social charges stop people from starting or growing a business, Braz could not agree that in the Grand Duchy: “social security charges are too high. That’s our competitive advantage compared to neighbouring countries.”
Bos noted that you “can ask the CNS [Luxembourg’s state health insurance administration] for dispensation if you didn’t make enough money. It’s possible” to get the charges waived and it just takes filling out one form. That is an example of “hidden” information, she noted.
Braz also rebutted the Chamber of Employees warning that 1-1-1 companies would lead to a rise in “fake self employment.” He said: “This is a labour law problem” that also “could be noticed in classic” company structures. “But if this question needs to be addressed I would not hesitate to do it.”
The bill is currently “the responsibility of parliament and the council of state,” Braz stated. “I hope parliament will move quickly to a vote”.
Paul Schonenberg, head of Amcham, said his chamber plans to add a new category of membership for 1-1-1 firms. They will pay €100 per year instead of the small business rate of €400.