Legal guide on domiciliation services in Luxembourg

What are domiciliation services?

The registered office is not just an address in Luxembourg, it represents the place from which the company is administered and managed. It is therefore the address where the company will receive all official correspondence, as well as the place where it must keep several official legal documents such as accounting documents, establishment authorizations, shareholders' register and even minutes of the Board of Directors' ordinary and extraordinary general meetings.

In our complementary article we have discussed the functions and benefits that domiciliation services offer as well as the companies that can use this type of services. This article aims to address a complementary point of view by reviewing the regulatory framework, exploring the companies that can offer domiciliation services in Luxembourg and the requirements that must be met in order to do so.

Legal and regulatory framework in Luxembourg

Given the importance of domiciliation services, this is a strictly regulated activity. The legal basis is provided by the law of May 31, 1999, on the domiciliation of companies, however, there are other laws and regulations that intervene in one way or another:

• Law of May 31, 1999, on the domiciliation of companies. This law is the main regulation governing domiciliation services in Luxembourg, it defines the conditions under which a company can be domiciled in Luxembourg and the obligations of the providers of these services.
• Régulation de la Commission de Surveillance du Secteur Financier (CSSF). The CSSF is the main regulatory body that supervises entities providing domiciliation services. The CSSF ensures that providers of these services comply with anti-money laundering (AML) and counter-terrorist financing (CFT) regulations and that they correctly apply know-your-customer (KYC) principles.
• Law of November 12, 2004, on the fight against money laundering and the financing of terrorism. This law imposes on domiciliation service providers in Luxembourg the obligation to carry out strict controls on their clients to prevent domiciliation companies from being used for illicit activities. 

• EU Anti-Money Laundering (AML) Directives. Luxembourg is subject to EU Directives and several of these have a direct impact on the operation of Luxembourg domiciliation companies. In particular, the 4th and 5th European Union Directives aimed at reinforcing the fight against money laundering.
• Law of January 13, 2019, and the register of beneficial owners (RBE). The law of January 13, 2019, introduced the Register of Beneficial Owners (RBE) and stipulates that every company must disclose its beneficial owners, that is, any natural person, who ultimately holds directly or indirectly, a percentage of shares or voting rights or participation of more than 25% in a legal entity. This obliges Luxembourg domiciliation service providers to ensure that their clients comply with this obligation by providing information on the true owners of the domiciled companies.

Eligibility criteria for companies

As the domiciliation of companies is a heavily regulated activity and involves multiple responsibilities, not just anyone can offer domiciliation services in Luxembourg. Only certain entities and licensed professionals can act as domiciliation agents in Luxembourg:

• Credit institutions.
• Other professionals in the financial and insurance sectors.
• Attorneys at law registered on list I.
• European lawyers, practicing by virtue of their original professional qualification, registered on list IV.
• Company auditors.
• Approved statutory auditors.
• Chartered accountants.

In addition, the authorization to act as a domiciliation agent of companies is subject to the presentation of documentary evidence of having completed a university degree in law, economics or business administration and of having financial assets of at least 125,000 euros.

Responsibilities and obligations of domiciliation providers

The various regulations mentioned above impose several obligations on the domiciliation agent. The first of these takes place even before signing any contract and involves verifying compliance with the legal provisions relating to the registered office of the company and knowing the real identity of the members of the governing bodies of the company to be domiciled.

After performing these verifications, the company offering domiciliation services must enter into a domiciliation agreement with the customer. The minimum content of this agreement includes:

• The details of the person in charge of the domiciliary agent.
• The details of the services being provided
• The particulars of the domiciliary agent's rights and responsibilities
• The anti-money-laundering (AML) obligations that apply
• The domiciliary agent's disclaimers
• The particulars of the rights and responsibilities of the domiciled company
• The means of communication between the parties to the agreement
• The cost for the services rendered
• The duration of the agreement and particulars of its termination
• The details of the revocation of the agreement without notice
• The applicable law, that is Luxembourg law.

The signing of the contract will formalize in writing the legal relationship between the domiciliation agent and the domiciliary detailing the terms of the agreement. This agreement also serves as proof of the establishment of the company in the Grand Duchy in place of a lease agreement and can be presented as evidence to government departments or financial organizations.

Supplementary services

Simple domiciliation in Luxembourg, without associated services, is prohibited. Companies offering domiciliation services then offer multiple associated services, among which the following can be found:

• Mail handling: Domiciliation companies receive correspondence on behalf of the domiciled company and can propose forwarding services and forward correspondence to its final destination either to directors, shareholders or other persons.
• Corporate secretarial services: These companies can also offer services for the organization of general meetings and board meetings. They can also take care of the company's corporate books, such as the shareholders' register, minutes of meetings or other official documents.
• Accounting and financial services: These companies can offer accounting services such as the preparation of annual accounts, balance sheets and financial statements. They can also prepare tax returns and even offer tax advice.
• Company incorporation and legal advice: Domiciliation companies can offer assistance in company formation and drafting of articles of association.

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Conclusion

Domiciliation services are a particularly convenient service by allowing companies to establish a presence in Luxembourg without having physical offices, however, given the implications that this represents, this type of service is heavily regulated. On the one hand, not all companies can access this type of services and on the other hand, not all companies can offer this type of services. In this article it has been presented an overview of the subject in order to clarify the existing regulations as well as the criteria to be met by companies wishing to provide domiciliation services in Luxembourg. It is natural however that there may be doubts about this subject or you may want to go deeper into the subject, if this is your case do not hesitate to contact us, EasyBiz is here to help you.