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30.1 Legal Framework: Commercial Code Requirements

Overview​

Luxembourg financial reporting is governed by a comprehensive legal framework that combines European Union directives with Luxembourg-specific legislation. Understanding this framework is fundamental to compliance.

Law of 19 December 2002 (Accounting Law)​

The Law of 19 December 2002 concerning the register of commerce and companies, as well as accounting and annual accounts of enterprises (commonly referred to as the "Accounting Law" or "Loi Comptable") is the primary legal source for financial reporting in Luxembourg.

Key Provisions:

  • Title II: Accounting and annual accounts of enterprises
  • Defines the structure and content of annual accounts
  • Establishes accounting principles (LUX GAAP)
  • Sets filing and publication requirements

Commercial Code​

The Commercial Code (Code de Commerce) provides additional requirements for:

  • Business registration (RCS)
  • Commercial activities
  • Company forms and structures

European Union Directives​

Luxembourg has transposed several EU directives into national law:

  1. Fourth Directive (78/660/CEE): Annual accounts of certain company forms
  2. Fair Value Directive (2001/65/CE): Valuation rules for annual accounts
  3. Modernization Directive (2003/51/CE): Modernization of accounting directives
  4. Transparency Directive (2006/46/CE): Transparency requirements

Scope of Application​

Entities Subject to the Accounting Law​

The Accounting Law applies to:

  • Commercial companies with legal personality:

    • SA (SociĂ©tĂ© Anonyme) - Public limited company
    • SĂ rl (SociĂ©tĂ© Ă  responsabilitĂ© limitĂ©e) - Private limited company
    • SE (SociĂ©tĂ© EuropĂ©enne) - European company
    • SC (SociĂ©tĂ© en Commandite) - Limited partnership
    • SCA (SociĂ©tĂ© en Commandite par Actions) - Partnership limited by shares
    • SCS (SociĂ©tĂ© en Commandite Simple) - Simple limited partnership
    • SNC (SociĂ©tĂ© en Nom Collectif) - General partnership
    • Cooperatives

  • Economic Interest Groupings:

    • GEIE (Groupement d'IntĂ©rĂŞt Économique)
    • GIE (Groupement EuropĂ©en d'IntĂ©rĂŞt Économique)

  • Luxembourg branches of foreign merchants, foreign commercial companies, GEIE, and GIE

  • SOPARFIs (SociĂ©tĂ©s de Participations Financières)

Exceptions​

The following entities are exempt from certain provisions:

  1. Sole traders (commerçants personnes physiques) with annual turnover (excluding VAT) not exceeding EUR 100,000

  2. SNC and SCS with annual turnover (excluding VAT) not exceeding EUR 100,000, unless all unlimited liability partners are SA, SĂ rl, SCA, or comparable foreign companies

  3. Credit institutions (établissements de crédit)

  4. Insurance and reinsurance companies

  5. Financial sector enterprises subject to CSSF prudential supervision (except PSF de support)

Company Size Classifications​

The Accounting Law distinguishes between small, medium, and large companies based on three criteria:

Large Companies​

A company is considered large if it exceeds two of the following three criteria:

  • Total balance sheet: > EUR 17.5 million
  • Net turnover: > EUR 35 million
  • Average number of employees: > 250 (full-time equivalent)

Requirements:

  • Full financial statements (balance sheet, income statement, notes)
  • Management report
  • Audit required (if exceeding all three criteria)

Medium Companies (Article 47)​

A company is considered medium if it exceeds two of the following three criteria:

  • Total balance sheet: > EUR 4.4 million and ≤ EUR 17.5 million
  • Net turnover: > EUR 8.8 million and ≤ EUR 35 million
  • Average number of employees: > 50 and ≤ 250 (full-time equivalent)

Requirements:

  • Full balance sheet
  • Abbreviated income statement (allowed)
  • Abbreviated notes (allowed)
  • Management report
  • Audit may be required

Small Companies (Article 35)​

A company is considered small if it does not exceed two of the following three criteria:

  • Total balance sheet: ≤ EUR 4.4 million
  • Net turnover: ≤ EUR 8.8 million
  • Average number of employees: ≤ 50 (full-time equivalent)

Requirements:

  • Abbreviated balance sheet (allowed)
  • Abbreviated income statement (allowed)
  • Abbreviated notes (allowed)
  • Management report (simplified)
  • Audit generally not required (unless specific conditions)

Size Classification Rules​

  1. Assessment Date: Size is determined at the balance sheet closing date

  2. Two-Year Rule: If a company crosses size thresholds, the change takes effect only if it occurs for two consecutive years

  3. Recommendation: Changes should apply from the end of the second year of threshold crossing

  4. Listed Companies: Companies with securities admitted to trading on a regulated market in an EU member state cannot use small/medium company exemptions

Legal SourcePurposeKey Requirements
Law of 19 Dec 2002Primary accounting lawAnnual accounts structure, LUX GAAP principles, filing requirements
Commercial CodeBusiness registrationRCS registration, company forms
EU DirectivesHarmonizationFair value, modernization, transparency
Règlement Grand-DucalImplementationPCN structure, eCDF format, technical details

Luxembourg Compliance Note​

All SMEs operating in Luxembourg must:

  1. Know their size classification (small, medium, or large)
  2. Prepare accounts according to their classification (full or abbreviated)
  3. Comply with filing deadlines (7 months after fiscal year end)
  4. File electronically through eCDF platform
  5. Maintain records for 10 years

Failure to comply can result in:

  • Administrative penalties
  • Legal sanctions
  • Business registration issues
  • Audit requirements

Think It Through​

Sophie's bakery has:

  • Total balance sheet: EUR 450,000
  • Net turnover: EUR 380,000
  • Average employees: 8

What size classification applies? What are her financial reporting requirements?

Concepts in Practice​

Example: Tech Startup Classification

A Luxembourg tech startup (SĂ rl) has:

  • Total balance sheet: EUR 2.5 million
  • Net turnover: EUR 1.8 million
  • Average employees: 12

Classification: Small company (does not exceed 2 of 3 criteria)

Requirements:

  • Can prepare abbreviated financial statements
  • Must file within 7 months of fiscal year end
  • Audit generally not required
  • Must file electronically via eCDF