Reform of the right of establishment in Luxembourg: what to expect?

On April 8, 2022, the Minister of Middle Classes submitted draft bill n°7989 amending the law dated September 2, 2011 regulating access to the professions of craftsman, trader, manufacturer and certain liberal professions.

The reform aims to modernize the right of establishment in order to create a modern legal framework that will stimulate entrepreneurship.

The key proposals to achieve this objective are:

  • Principle of second chance after bankruptcy: The right to start a business a second time with a new business license following bankruptcy due to misfortune (e.g. loss of a prominent client, illness, pandemic) or mismanagement (e.g. mistake in the company's strategic choices) is facilitated.
  • Simplification of the requirements relating to the holder of the business license: It would no longer be necessary for the holder of the license to be a partner, shareholder or employee of the company. He should have a real link with the enterprise by (i) being the owner of the business if he carries out his activity in his own name or (ii) being registered with the Luxembourg Trade and Companies Register as representative if the enterprise is operated as a company. It is also clarified that the holder of the license may reside anywhere in the European Economic Area provided that he can demonstrate a regular presence in the establishment in Luxembourg.
  • Enhanced protection of any new director taking over the business following a previous malicious director who concealed the financial situation of the company in order to avoid any responsibility for the payment of public debts.
  • Facilitation of business transfers: An employee who has held a position in a company for three years - as opposed to ten years previously - would have the opportunity to take over the business license before acquiring the necessary professional qualifications within a period of five years.
  • Simplification of administrative procedures: Any changes made to the data entered with the Luxembourg Trade and Companies Register will be automatically exchanged with the Directorate General of Middle Classes.
  • Temporary business licenses: In the event of a departure of the holder of the business license, a provisional business license may be granted for 6 months in order to avoid any interruption in the company’s activity. Currently, no qualification requirement is necessary. According to the bill, a provisional license can now be granted only to a company that has already had a business license for at least six months.
  • Access to certain craft professions is simplified: The qualification requirement will be abolished for certain creative craft activities, such as photographer, designer...
  • Regulation of short-term rentals: The activity of short-term rental receives a framework in order to regulate any activity that is similar to the operation of an hotel. A cumulative threshold of three months over a period of one year from the last rental will be introduced, from which the operator will have to obtain a business license.