The Grand Duchy of Luxembourg is a very open and cosmopolitan country in the heart of Europe. Over the past years, Luxembourg’s wealth has been created to a large extent by its financial sector. This unprecedented growth was enabled, amongst several other factors, by the extremely rash and flexible legal framework.
Since the recent economic slowdown and the increasing regulatory requirements for the financial sector, the discussion over the importance of other sectors has become more dynamic and imminent. Sectors such as ICT, Biohealth or Logistics are now at the core of Luxembourg’s growth plans, not forgetting of course the further development of the financial sector.
However, in order to encourage the growth of these sectors, Luxembourg needs to adapt and modernize legal aspects such as company law and bankruptcy law. The business world has changed a lot these past years and it continues to change at an incredibly rapid pace. Just look at how “UBER” changed the way the taxi business works or how “Airbnb” is changing the hotel business. Customers want their services to be accessible quicker, easily consumable and adapted to their lifestyle. To satisfy these needs, Luxembourg needs a business friendly and contemporary legal environment.
The SARL Simplifiée is a big step in the right direction, a step towards establishing Luxembourg as a business hub next to its reputation of being one of the most important financial centers in the world. Luxembourg did not invent this type of company structure; the Dutch, for instance, have the “Flex-BV” and our Belgian neighbors, the “SPRL Starter”, which are similar legal forms. The UK has its own “LTD” which can be created within minutes from anywhere in the world online for around 100 pounds.
It is also important to note that the SARL Simplifiée has not as a sole objective to enhance the entrepreneurial spirit but rather to provide the whole business community with a new and contemporary tool to do business. The SARL Simplifiée will be quicker, faster and easier to incorporate than the traditional SARL and the whole registration process will be available online. This will contribute significantly to the government’s constant effort of cutting red tape.
As already briefly touched upon earlier, the way we do business today has fundamentally changed and it continues to change every day. Businesses are not created anymore to build a legacy and to pass it on to the next generation. No. Businesses are created to satisfy a customer need.
This need might be short lived but nevertheless highly interesting for an entrepreneur if lucrative enough during this short period. Entrepreneurs these days have understood this and organize their structures accordingly. With this in mind, it seems clear that we need flexible instruments that can be created very quickly. Timing is of essence here, being at the right place at the right time is a major key for success.
Moreover, in the era of “lean start-up” and bootstrapping as much as possible to keep costs at a manageable level, entrepreneurs also need a possibility to test a new product or service. Let’s take for instance 3 students here at the University of Luxembourg who have programmed an app. Before conquering the world market with Luxembourg as a home base, they need to test if there is a real demand and they need to find out first how customers react. If these students have to invest 12.500€, go to the notary, etc. they will be completely discoursed to go ahead.
The “Sàrl simpifiée” is a great first step. But we should not stop modernizing here. The basis of the Luxembourg company law, for instance, dates back to 1915, so 100 years. There is a reform process of the company law going on and we would welcome a bold and efficient modernization effort that would inject some dynamism into the whole economy. By creating an instrument that helps quickly setting up a business, we can’t forget how important it is to have the appropriate instruments in place if ever the venture would go wrong.
The bankruptcy law is in need of a serious make-over. I would welcome an approach based on beforehand actions and life-long-learning initiatives. This would reduce bankruptcies in the first place. But, we, as a society, need to stop judging entrepreneurs who fail but rather see them as entrepreneurs who hopefully have learned from their failure and will succeed the next time. Many investors say that they usually only invest in entrepreneurs that have failed at least once because you learn more from your failures than your successes !