Luxembourg SCOP companies
Cooperative companies (SCOPs) are legal entities generally created to meet the economic, social and cultural needs of their members, who are also owners. They operate under democratic principles giving each member one vote in decision-making regardless of the capital contributed.
SCOPs in Luxembourg can be formed with at least two members and can be incorporated as limited or unlimited liability entities. They are mainly characterized by a variable number of members, variable contributions and the absolute non-transferability of shares to third parties.
Cooperative companies allow great flexibility in the drafting of the bylaws, which gives the members the possibility of freely defining their responsibilities and determining how the society will function and be managed.
This type of company is ideal when the objective is not only profitability but also to encourage the active participation of members and democratic decision making. SCOPs are ideal for projects based on collaboration, where members work together towards a common goal, which is often the case in certain sectors such as agriculture or crafts, or in producer associations.
SCOP's main features in Luxembourg
Below we will examine in detail the main characteristics of the SCOP in Luxembourg, among which we find the modalities of incorporation and the particularities of the articles of association, the duration of the company, the characteristics of the associates and their shares, the share capital and the governance structure, among others.
Deed of incorporation and articles of association
If the cooperative company is constituted as a limited liability society it must be created through a notarial deed, on the contrary, if the cooperative society is constituted as an unlimited liability society it can be created by private act.
The articles of association must establish the following elements:
- The name of the company and its registered office.
- The object of the company.
- Whether the company has limited or unlimited liability.
- The form in which the share capital is or will be subsequently formed and the minimum amount of immediate subscription.
- The fixed proportion of capital in the case of cooperative limited liability companies.
Duration.
A SCOP may be formed for a limited or unlimited period, this must be set out in the articles of association. Failing this, the cooperative company will have an unlimited duration.
Share Capital
The capital is variable and no minimum or maximum amount is required. The articles of association must specify the form of constitution of the capital stock and the minimum amount of immediate subscription. In the case of limited liability cooperative companies, the articles of association must determine the fixed part of the capital.
Shareholdings
The capital consists of securities representing subdivisions of the capital stock and these may not be transferred to third parties. The admission of a new member increases capital, and if a member withdraws, the capital is reduced.
It is possible to create registered profit shares that do not represent a participation in the share capital. This refers to rights that the cooperative may issue that grant their holders certain economic benefits such as profit sharing or dividends without conferring voting or management rights.
Members
At least two people are required to create a cooperative company and there is no legal limit as to the maximum number. The liability of the members depends on whether a limited or unlimited liability legal form was chosen in the articles of association. If this is not specified in the bylaws the partners are indefinitely and jointly and severally liable and the profits and losses are distributed each year, half equally among the partners and the other half in proportion to their investment.
The conditions for admission and resignation must be established in the articles of association and when an admission or resignation is made, it must be recorded in the register of members, dated and signed by the member and a director.
Governance structure
The cooperative company is managed by one or more representatives who may or may not be members and are responsible only within the framework of the mandate they have received. The representative must be in charge of day-to-day operations, which includes hiring personnel, executing contracts, and legal representation in routine matters, but always under the guidelines approved by the General Assembly. On the other hand, the General Assembly is in charge of major strategic decisions and must approve the annual accounts.
The resolutions of the assembly are passed by majority vote and the conditions governing the required majority are defined in the articles of association or, failing that, in accordance with the rules applicable to corporations. All members have the right to vote unless otherwise provided for in the articles of association.
Tax and accounting obligations
Regarding tax obligations, cooperative companies are subject to the following taxes:
- A fixed registration fee.
- Property tax.
- Corporate income tax.
- VAT return depending on the annual turnover and the activity carried out.
As far as accounting is concerned, cooperative companies must keep an inventory, constitute a reserve and draw up a balance sheet, a profit and loss account and the annexes. However, small and medium-sized companies can prepare summarized versions of these last three elements. In addition, large cooperatives must submit a management report.
Steps to create a SCOP in Luxembourg
Now that we have in mind the characteristics of the SCOP in Luxembourg, we can get an idea of the requirements to form this type of company. We will now organize these requirements while adding others we have not yet mentioned to see what would be the step-by-step procedure to form this type of company.
Project and business plan preparation.
Before starting the legal process of incorporation, it is essential to carefully prepare the business project, this involves preparing a detailed business plan containing a market analysis, a marketing strategy, the organizational structure and financial projections.
This document is essential as it serves as a roadmap to guide the company's growth and make informed decisions. It is also a key tool for attracting investors, obtaining financing, assessing the viability of the business and anticipating challenges and opportunities.
Moreover, during this phase, it is crucial to define many of the aspects that will later be included in the bylaws, such as the type of company, the form of governance, the number of shareholders or partners and their contribution percentages. These elements help to structure the ideas, demonstrate the viability of the project and prepare the necessary documentation for the following steps.
Company domiciliation:
The SCOP must have a registered office in Luxembourg, this choice must comply with local regulations and be suitable for the business activity.
Choice of a name for the company and verification of its availability.
Before establishing a company, the entrepreneurs must choose a name for the company and check its availability. This is done by filing an application for a certificate of name availability electronically with the Luxembourg Business Registers (LBR).
Opening of a bank account and deposit of the share capital
Before signing the deed of incorporation it is necessary to open a bank account in the name of the company being formed and deposit the share capital. Upon doing so the bank will issue a certificate of blocking of funds which must be presented to the notary as proof. For this step the final articles of association of the company are not required but it is necessary to present at least a draft of the articles of association.
Drafting and signing the Articles of Association
To register the company it is indispensable to first draft its articles of association, these must contain essential information such as the name of the company, the registered office, the corporate purpose, the duration of the company and the capital and other details. Most of the elements to be included should have been prepared beforehand in the first step which deals with the definition of the project.
Once the articles of association have been drafted, they must be signed. If a limited liability legal form has been chosen in the articles of association, they must be signed before a notary, on the contrary, if the cooperative company is constituted as an unlimited liability society, the articles of association can be signed in a private act.
Registration with the Registry of Commerce and Companies (RCS).
Once the articles of association have been signed, it is necessary to register the company with the Luxembourg Register of Commerce and Companies (RCS), a step that is usually carried out by the same notary. This registration is mandatory and confers legal personality to the company, officially recognizing it as a legal entity in Luxembourg.
Publication in the RESA
Once registered with the RCS, the incorporation of the company must be published in the Recueil Electronique des Sociétés et Associations (RESA), which is the official gazette of Luxembourg where all acts related to companies are published. This publication is a necessary step to make the existence of the company known to the public and to ensure transparency about its incorporation, domicile, share capital and administration. In Luxembourg, the notary is generally responsible for coordinating this publication.
Application for an establishment authorization if this is necessary:
In certain cases, depending on the type of activity of the company it is necessary to apply for an establishment authorization. This authorization is mandatory for commercial, industrial, and artisanal activities and some self-employed activities.
It is possible to enter an establishment authorization request in two ways, either by submitting your establishment authorization request online via MyGuichet.lu, from your professional space. Or by sending a request for establishment authorization by postal mail to the General Directorate PME, craft and commerce.
General Directorate for SME, Craft and Retail:
- Phone: (+352) 24 77 47 00
- Address: B.P. 535 L-2937 Luxembourg
- Working Hours: Monday to Friday from 9:00 to 12:00 and from 13:30 - 16:30
Social Security registration
If the company is going to hire employees, it must register with the National Health Fund (CNS) to comply with social security and pension contribution obligations.
Registration for TVA purposes (if applicable).
If the company expects to invoice more than €35,000 per year, it must register with the TVA administration to obtain a TVA number.
Comparison with other company types
To conclude, we will make a comparison with other company types such as the SA and the SAS. The following table then shows this comparison.
| Aspect | SA | SAS | SCOP |
| Incorporation | By mandatory notarial act | By mandatory notarial act | By notarial deed if responsibility is limited or by private deed if responsibility is unlimited. |
| Statutory Flexibility | Limited to the provisions of law | High, customizable statutes | Remarkable flexibility in structuring and management but cooperative principles must be respected. |
| Duration | Limited or unlimited, must be set by the articles of association | Limited or unlimited, must be set by the articles of association | Limited or unlimited, must be set by the articles of association |
| Minimum Share Capital | 30,000€, at least 25% paid up | 30,000€, at least 25% paid up | Variable, no minimum or maximum requirements. |
| Shares | Nominative shares | Nominative shares | Capital divided into membership shares |
| Transfer of Shares | Generally free, unless restricted by statutes | May be restricted as defined in statutes (approval clauses, pre-emption rights, etc.) | Cannot be transferred |
| Stock Exchange Listing | Allowed | Not allowed | Not allowed |
| Number of shareholders or associates | One minimum, no limit | One minimum, no limit | Two minimum, no limit |
| Shareholders' Liability | Limited to the amount of their contributions | Limited to the amount of their contributions | Can be limited or unlimited, must be established in the articles of association. |
| Governance Structure | Board of Directors (minimum of three members) | Flexible, must have a president but may also include a collegial body | Administered by one or more representatives |
| Application Sector | Suitable for large companies and those seeking listing | Ideal for startups and private companies | Focused on collective, social, or common-interest projects. |
