New law on non-profit organisations and foundations

On 28 June 2023, the Luxembourg Parliament adopted the Law on non-profit organisations and foundations ("Law") aimed to simplify and modernise the existing legal framework from 1928 on non-profit organisations and foundations. While providing for enhanced flexibility and some innovative mechanisms, the Law also covers important updates from the Financial Action Task Force ("FATF") Recommendations, particularly Special Recommendation VIII concerning non-profit organisations, establishing a new international standard in the field.

Key provisions

In substance, the Law proposes the following key changes:

  • Simplified administrative procedures and more flexibility: administrative procedures related to the establishment and management of non-profit organisations are streamlined. Notably, the yearly obligation to submit a member list to the Trade and Companies Register (Registre de Commerce et des Sociétés, "RCS") has been abolished. Instead, non-profit organisations are now required to maintain an updated member list at their registered office. The Law also brings greater flexibility to governance rules by allowing board meetings and general meetings to be held remotely.
  • Enhanced transparency and customized accounting system: a new, size-specific accounting system for non-profit organisations has been introduced. Non-profit organisations are categorised based on their size in terms of personnel, revenues, and assets, providing a more flexible and proportionate approach to accounting obligations.
  • Adjustment of a foundation's initial endowment: initial funding requirements for foundations have been aligned with current economic conditions. The initial endowment has been lowered from EUR 250.000 to EUR 100.000, allowing foundations to use their assets as long as their net worth does not drop below EUR 50.000.
  • New restructuring mechanisms: non-profit organisations and foundations can now make use of new conversion mechanisms or proceed with a merger while retaining their legal personality and by transferring their assets and liabilities to a new or absorbing entity.
  • Real estate ownership: non-profit organisations and foundations are now allowed to own real estate that is not directly necessary for achieving their purpose.
  • Administrative dissolution without liquidation: the importance of maintaining updated and accurate data for non-profit organisations and foundations registered with the RCS has been emphasized. New provisions allow the RCS to initiate a data update procedure if an entity fails to update its data within six months or has not made any filing with the RCS for at least five years, aiming to enhance accountability and transparency among non-profit organisations and foundations. Failure to reply within this time limit may result in the administrative dissolution of the organisation or foundation without the opening of a judicial liquidation.

Repealing and transitory measures

The Law of 21 April 1928 has been repealed. Within 24 months from the entry into force of the Law, the statutes of non-profit organisations and foundations must be aligned with the new law. Meanwhile, such non-profit organisations and foundations remain subject to the previous law.