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Luxembourg Audit Alert 2016-01

Luxembourg Audit Alert 2016-01




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Société d’Impact Sociétal (“SIS”)

On 23 November 2016, the Luxembourg Parliament passed draft law n° 6831 introducing a new type of company, the Société d’Impact Sociétal (“SIS”).

The purpose of this new law is to set up an appropriate legal framework for companies with a social or societal objective in Luxembourg, creating a favourable environment for their business development.

This new legal framework intends to fill a legal gap in particular for non-profit organisations (“ASBL”) engaged in economic activities and that currently operate out of the scope of the law of 21 April 1928 on ASBL.

Principles of the social and solidarity economy

The companies adhering to this type of economy must meet the below conditions:

  1. They must carry out a continuous activity, be it in production, distribution, or exchange of goods and services.
  2. They must, as a priority, pursue at least one of the two following objectives:
    • to support persons in a fragile situation at the economic, social, or personal level; those persons may be employees, clients, members, or beneficiaries of the company
    • to contribute to the preservation and development of social connections, the fight against exclusions and inequalities, gender balance, the maintenance and reinforcement of territorial cohesion, environmental protection, the development of cultural or creative activities, and the development of training
  3. They must have an independent management in place with the power to choose and dismiss their governance bodies and to control and organise their activities.
  4. They must reinvest at least half of their profits in the maintenance and development of their activities.

Characteristics of a SIS

  • Any S.A., S.à r.l. or Cooperative company respecting the principles of social and solidarity economy described above can obtain an agreement from the relevant Minister provided that its articles of incorporation include:
    • the description of its social purpose in accordance with one of the two objectives described under point two above
    • performance indicators enabling verification, in an effective and reliable manner, of the achievement of the social purpose
  • The share capital of a SIS is made up of at least 50% impact shares, which do not allow their holders to benefit from the profits, and the remainder may be composed of performance shares entitled to the SIS’s profits. The shareholders may, at any time, ask that their performance shares be converted into impact shares; impact shares, however, may not be converted into performance shares. The shareholders may, at their general meeting, resolve to distribute a dividend to the holders of performance shares, provided that the performance indicators demonstrate that the SIS has met its societal impact objectives.
  • The profit corresponding to the impact shares is reinvested in the achievement and development of the social activities of the SIS.
  • The annual remuneration of SIS employees may not exceed an amount corresponding to six times the minimum social wage.
  • A SIS is not allowed to enter, directly or indirectly, into any loan agreement with its shareholders or to issue debt instruments to them.
  • In the event of the liquidation of a SIS, the liquidation proceeds shall be allocated to one of the following:
  • another SIS carrying out similar activities
  • a Luxembourg foundation or non-profit organisation of public interest
    • A SIS whose capital is 100% made up of impact shares is exempt from direct taxes but remains subject to VAT.
    • Donations made to a SIS whose capital is 100% made up of impact shares are tax-deductible.

Role of the management of a SIS
The management of a SIS shall annually prepare an “extra-financial impact report” for the general meeting of the shareholders.

This report should detail the implementation of the performance indicators, as disclosed in the articles of incorporation, enabling the achievement of the social purpose to be verified in an effective and reliable manner.

Role of the Réviseur d’Entreprises agréé (“REA”) of a SIS
The annual accounts of a SIS shall be audited by a REA.

The REA should also annually certify:

  • the composition of the share capital, and whether the requirement of the share capital being made up of at least 50% impact shares is being met
  • that the SIS has not entered directly or indirectly into loan agreements with its shareholders or issued debt instruments to them
  • that the annual remuneration of the employees of the SIS does not exceed an amount corresponding to six times the minimum social wage

The report of the REA and the “extra-financial impact report” prepared by the management of the SIS must be communicated to the relevant Minister within two weeks after the general meeting of the shareholders.


The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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