Starting a business in Luxembourg

1. Introduction

KLEYR GRASSO is an independent full-service business and litigation law firm serving international and domestic clients for over 28 years in Luxembourg with the highest professional standards and entrepreneurial culture. Its teams of strongly committed partners and lawyers of different nationalities support local and international clients throughout their projects from inception to implementation.

The multilingual lawyers advise local and multinational companies from all industry sectors, leading institutional investors, private equity houses, banks, investment funds, and numerous other businesses in corporate M&A, restructuring and insolvency, private equity, capital markets, banking and finance, investment funds, real estate and construction, social and employment, dispute resolution and insurance and reinsurance.

Our Employment & social team of 19 lawyers and 1 paralegal is one of the biggest stand-alone Employment practice in Luxembourg. With a well-established presence within the Luxembourg market and an excellent reputation for the high quality of our services in a very large range of social and employment matters, we are able to handle a tremendous volume of individual and collective contentious and non-contentious matters for local and international employers across all sectors.

We prepare labour law contract(s), assist clients in collective bargaining agreement negotiations, advise on specific employee categories (such as staff delegates, members of the joint works council, posted and protected employees and expatriates), advise in relation to the permitted surveillance of employees, deal with national and cross-border transfer of undertakings related issues and social plans as well as redundancy programs.

Clients consult us for individual and collective employment termination advice and their employment litigation before Luxembourg labour courts, as well as social security courts (“Conseil Arbitral des Assurances Sociales)”.

We also assist clients in the scope of collective labour litigation concerning employee representative claims before the Labour Inspectorate and the administrative jurisdictions. We advise across the full range of Luxembourg social and employment law issues and provide tailor-made in house and external client seminars and trainings in four languages.

2. Labour and Employment Law Requirements

A. EMPLOYER POLICY REQUIREMENTS

In Luxembourg, employers are in principle not required by legislation to create and implement employment policies. However, there are a number of policies that employers should create. These policies will help an organization manage employee relations and mitigate the risk of legal liability in the future. The following are thus recommended but not mandatory policies and may be included in a sole policy through an internal regulation or as an attachment to the employee’s employment contract:

• A health and safety policy;
• A flexible working time policy, describing the general rules regarding working time;
• An overtime policy;
• A right to disconnect policy;
• A telework policy;
• A remuneration policy;
• A whistle-blowing policy;
• A company car policy;
• An equality and diversity policy;
• An IT and communications systems policy;
• A policy regarding sick leave;
• An on-call policy;
• An anti-bribery/corruption policy;
• Policies surrounding the use of employer tools (computer and mobile phone use, internet use, social media, physical tools, etc.) to ensure employees are aware of the expectations surrounding employment;
• A maternity and parental leave policy;
• A harassment policy;
• A disciplinary policy concerning the employees’ performances;
• A travel and business expense reimbursement policy;
• A confidentiality and data protection policy.

For the financial sector, the following policies might also be useful:

• Written Investment Guidelines and a written occupation Investment Risk Management Policy;
• An execution and due diligence policy, for example with regards to broker services and investment funds;
• A conflict of interest policy;
• A remuneration policy;
• If the supervised entity intends to introduce telework, it is mandatory to i) carry out a risk analysis prior to the introduction of telework (operational, legal, information and communication Technology (ICT), professional secrecy, compliance and reputational risks) and ii) set up a telework policy which must foresee specific clauses (e.g. the functions and/or activities of the operational units/departments which must always be carried out on the premises of the supervised entity; the minimum number of staff who must work simultaneously on the premises in Luxembourg at entity level and, where appropriate, at operational unit or department level).

Exception: The Banking and Insurance Sector:

• The collective bargaining agreements (CBA) in the banking and insurance sectors provide for the obligation to implement a policy of prevention and protection against harassment and violence at the workplace.

B. EMPLOYEE TRAINING REQUIREMENTS

Employers are required to complete certain training activities.

Concerning all companies:

• They must ensure that a sufficient number of employees are trained regarding fire safety and security rules and the subsequent evacuation of employees;
• They must ensure that all employees are appropriately informed and trained so that work can be carried out efficiently and safely. For example, for employees who use a computer on a daily basis for continuous or near continuous spells of time of an hour or more, the employer must provide them with information on working at computer workstations and train them appropriately;
• In addition, the employer has the possibility to grant further training measures, but they are not obligated to.

Concerning banks:

• The CBA prescribes that banks shall, where appropriate, give access to further training measures for employees who have been absent because of an interruption of their career; the purpose of this training is to equip them to perform their tasks. The relevant procedures shall be determined by the banks in consultation with the Works Committees or in their absence the staff delegations. Banks shall respect this due to the adhered principle of equal opportunities for men and women in respect to access to occupational training and promotion and of working conditions and salary. (Article 28 to 31 of the CBA for Bank Employees)
• Banks are also obligated to provide training to employees, both workers and managers on the policy of prevention and protection against harassment at the workplace
• Furthermore, in this specific sector, induction training is often provided and is intended to impart a basic familiarity with the specific features of the Luxembourg financial centre, the banking techniques and general professional knowledge required by the position; if necessary, this programme will be supplemented by further training to provide the requisite knowledge of languages, information technology and economics, etc. However, depending on the degree of compatibility of the individual profile with the position concerned, the induction period may be omitted. (Annex 1 Training Agreement)

Concerning insurance companies:

• Insurance companies must inform and train their employees, both workers and managers, on the policy on prevention and protection against harassment and violence at work. (Annex Sectoral Agreement on harassment and violence at work of 25 June 2009)
• Equally in this sector, induction training is often provided and is intended for learning insurance techniques and general professional knowledge required by the job function; this program is supplemented, if necessary, by upgrades in languages, office automation and economics etc. However, depending on the degree of compatibility of the individual profile with the position concerned, the induction period may be omitted (Article 12 collective bargaining agreement for Insurance Companies Employees)
• The collective bargaining agreement prescribes that insurance companies shall, where appropriate, give access to further training measures to employees who have been absent because of an interruption of their career; the purpose of this training is to equip them to perform their tasks. The relevant procedures shall be determined at the level of the insurance companies in consultation with the Works Committees or, in their absence, the staff delegations. Insurance companies shall respect this due to the adhered principle of equal opportunities for men and women in respect of access to occupational training and promotion and of working conditions and salary(Article 18 collective bargaining agreement for Insurance Companies Employees)

C) EMPLOYMENT AGREEMENTS

The employment contract must be established in writing and signed for each individual employee at the latest when the employee starts working (duplicate copy: one for the employer and one for the employee).

All employment contract must include:

the identity of both parties;

the date on which the contract takes effect;

the place of employment or, in the absence of a fixed or main place of employment, the contract must state that the employee will be employed in various locations or abroad and must specify the head office or the employer’s residence;

the nature of employment and a description of the employee’s tasks at the time of hiring, without prejudice to any subsequent change;

the employee’s normal working hours;

the normal working schedule;

the base salary or remuneration and, as the case may be, additional and fringe benefits, bonuses and agreed participations as well as the payment’s periodicity of the remuneration to which the employee is entitled;

the number of paid holidays or the method for determining the entitlement and the conditions of paid holidays;

the length of the notice period in the event of termination of the employment contract;

the length of the trial period;

reference to additional clauses agreed by the parties;

where applicable, reference to collective bargaining agreements governing the employee’s working conditions and;

where applicable, the existence and the description of a supplementary pension scheme, the optional or compulsory nature of this scheme, the rights to related benefits as well as the existence of any personal contributions;

Specific terms should be added depending on the type of employment contract involved (e.g.: fixed-term, part-time, student employment contract, etc.) and some provisions must be expressly provided for in writing to be applicable: trial period, non-competition clauses, etc.

Fixed-term employment contracts must not exceed 24 months, possible renewals included.

If a fixed-term employment contract does not fulfil the above conditions, it will be considered as a permanent employment contract.

• The employment contract, whether for an indefinite period or for a fixed period, must be concluded at the latest at the time of entry into service of the employee and put down in writing for each employee individually. (Article 121-4 of the Luxembourg Labour Code)
• The contract must be passed in duplicate, the first being given to the employer, the second being given to the employee. (Article 121-4 of the Luxembourg Labour Code).
• Finally, the employment contract must include a number of indications, such as for example the identity of the parties, the starting date of the employment agreement, the place of work, the nature of the employment held and the normal work schedule. Further details and all the required indications are listed in Article 121-4 of the Luxembourg Labour Code. As mentioned above, the applicable policies of the company may be attached to the employment contract.
• Current practice is Luxembourg is still the conclusion of global employment contracts, i.e. contracts between 1 employee and more than 1 employer, to render the withholding and payroll obligation much easier.

A draft bill which modifies certain aspects of the permanent employment contract (including some of the above mentions), and of the fixed-term contract, is in progress.

3. Corporate Law Requirements

In order to incorporate a company in the Grand-Duchy of Luxembourg (Luxembourg), there are a number of steps and requirements that are needed to ensure legal compliance. Those main steps and requirements (for unregulated companies, meaning companies not submitted to the supervision of any Luxembourg authority, such as the Luxembourg Supervisory Authority of the Financial Sector or the Luxembourg Supervisory Authority of the Insurance/Reinsurance Sector) are as follows:

• choose the form of commercial company to be adopted (such as: private limited liability company (Société à responsabilité limitée), public company limited by shares (société anonyme), partnership limited by shares (société en commandite par actions), etc.);
• prepare articles of incorporation;
• define the organization’s capital structure (amount of capital (required legal minimum to be respected), number of shares, rights attached to shares, etc.);
• define and establish the initial registered office/ address of the company (either proper offices (leased/acquired) or with a Luxembourg based domiciliation agent);
• define and establish a board of directors/ of managers (the Board) (Note: in Luxembourg for substance reason usually the Board has a majority of Luxembourg resident members (often partially provided by the domiciliation agent));
• choose and open a bank account of the company with a Luxembourg based bank (the “Bank”), subject to the satisfaction of “know-your-client” obligations and account opening procedures;
• create all the necessary organization and foundational resolutions, such as first Board meeting;
• if applicable, or wished by the client, drafting of a shareholder agreement and/or regulations restricting powers of the Board;
• payment of the corporate capital into the company’s bank account opened with the Bank and delivery by the Bank of a blocking certificate to the Luxembourg notary, stating that the capital has been paid into the bank account;
• signing of the notary deed of incorporation before a Luxembourg notary (can be made under power of attorney), the signing of the incorporation deed being subject to the delivery of the blocking certificate by the Bank to the Luxembourg notary);
• registration of the company with the Luxembourg register of commerce and companies (will be done by the Luxembourg notary); it being stressed however that under Luxembourg law the company comes into existence promptly upon signing of the incorporation deed before Luxembourg notary;
• if a commercial activity is exercised, corresponding with the Luxembourg tax authorities, to complete all necessary application steps to obtain a tax/VAT/business ID number (which is used in most corporate documents and declarations);
• register trademarks or other intellectual property protections, where applicable.

Our law firm will be able to assist you in the setting up of a company in Luxembourg and has established a long term relationship with domiciliation agents, further service providers or experts in the above business law requirements and will be able to assist the client and to coordinate the work as wished by the client.

4. Payroll and Benefits Providers

We work with third party companies regarding payroll and benefit services. Contact details can be provided upon request.