Main new features for Associations (ASBLs) and Foundations: Towards modernising the legal framework

Associations' general and board of directors meetings can now be held virtually, using video conferencing technology, and notices of meetings can be sent electronically. For foundations, these options are available only for board of directors meetings. Meetings held using such means of telecommunication are deemed to have taken place at the association's registered office. It is important to note, however, that associations may avail themselves of these new options only if they are explicitly stipulated in their articles of association.

Associations may now hold their members' register in electronic form at their registered office and no longer need to file a list of their members with the RCS every year.

Under the previous law, at least 3 members were required to form an association. Under the new law, only 2 members are required. Greater flexibility in this area could lead to more initiatives, as 2 people who want to put their ideas into practice no longer need to find a third founder just to meet a legal requirement.

The procedure that involved seeking the district court's approval for amendments to an association's articles of association, or for an association's dissolution, has been withdrawn.

The new law introduced the ‘single filing’ principle. This means that foundations no longer need to forward a copy of their financial statements to the Ministry every year. In addition, associations recognised as being of public interest no longer need to re-file documents that had already been filed with the RCS when applying for recognition of public-interest status. This applies to associations, associations recognised as being of public interest and foundations, when applying to the Ministry of Justice for approval of donations.

To better accommodate their special needs, associations are now classified into 3 categories: small, medium-sized and large. Each category has its own accounting requirements. For an in-depth explanation of the accounting requirements, please refer to the ‘Guide to Accounting for Small Associations’, which can be downloaded in the 'Accounting' section.

Associations/foundations are now permitted to own immoveable assets that have no direct connection with their purpose. Under the previous law, associations and foundations had to sell any real property bequeathed to them within 6 months, if such property was not made use of to achieve the association's/foundation's purpose. Now, associations and foundations can keep such property and use the income it generates to finance their activities.

Good-character checks for directors of associations recognised as being of public interest, and for foundations' directors and founders, were introduced with the aim of fostering greater trust among stakeholders by guaranteeing directors' integrity. This preventive measure mitigates financial and reputational risks, and also promotes a culture of good governance. Putting measures in place to ensure directors' integrity not only protects the organisation against wrongdoing, but also enhances its legitimacy and credibility in the eyes of the public and its partners.

This requirement ensures that associations and foundations must be able to demonstrate that they conduct a tangible and significant part of their activities in Luxembourg, thereby enhancing their legitimacy and credibility. However, this does not prevent associations and foundations from engaging in operations abroad. In emphasising this requirement, Luxembourg has sought to ensure that such organisations are genuinely established and active in the country, while at the same time acknowledging their international scope.

New mechanisms have been introduced to make it easier for associations and foundations to undergo reorganisations through transformations and mergers. Associations and foundations are now allowed to keep their legal personality in the event of a transformation, and to transfer assets and liabilities to the new or the acquiring association/foundation in the event of a merger. In the case of an association, the members of an association that will cease to exist will automatically become members of the association that is formed as a result of the merger.

 A new ‘administrative dissolution without liquidation’ procedure has been introduced with the aim of keeping RCS data up to date, in compliance with Financial Action Task Force (FATF) Recommendation 8. The LBR (Luxembourg Business Registers) has established 2 objective conditions that must be met to trigger this procedure: no data updates for 6 months, and no filings with the RCS for at least 5 years. If no action is taken within the time frames mentioned above, the ‘administrative dissolution without liquidation’ procedure will be triggered.

The amount of the initial endowment is set at EUR 100,000 in cash, with the option to make use of no more than half of the assets (EUR 50,000). This adjustment has been prompted by economic realities and provides foundations with greater flexibility.

The procedure for forming a foundation has been made more transparent. The new law clarifies the process of setting up a foundation. It provides full details on the documents that must accompany the application, ensuring that the process is fully transparent. This change not only simplifies the procedure for those considering setting up a foundation, but also ensures that all foundations satisfy the same strict criteria right from the outset, thereby fostering greater trust on the part of the public and stakeholders.