Independent director in Luxembourg: mandate, duties, substance and fees.
An independent director in Luxembourg is a non-executive board member with no tie to the shareholders or to management, who carries the duties set by the law of 10 August 1915. The mandate supports a company's economic substance when the director takes part in real decisions, at board meetings held in Luxembourg and documented. Fees: EUR 4,000 to EUR 6,000 per year excl. VAT for a company or holding, on scoping for a fund or regulated entity.
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In Luxembourg, an independent director sits on the board of an SA or the board of managers of a SARL, without operational management function and independent of shareholders and management. The mandate is governed by the amended law of 10 August 1915. A resident independent director takes part in effective decision-making in Luxembourg.
Amended law of 10 August 1915 on commercial companies (management bodies, directors' duties). Economic substance framed by the ATAD directives and, for intra-group financing companies, by circular L.I.R. n° 56/1 – 56bis/1 of 27 December 2016. Honourability and competence requirement ("fit & proper") for regulated entities and funds. A director who lends their name without exercising a real function creates no substance and exposes both the company and themselves.
Key takeaway
- No general rule requires an independent director on an unregulated company: the need comes from the governance model.
- It is most useful when decisions are taken outside Luxembourg, for a foreign group, or for a fund board.
- Substance comes from decisions taken in Luxembourg and their trail: meetings held locally, papers prepared, faithful minutes.
- Any link with a service provider (accounting, domiciliation) is reviewed before the mandate is accepted.
In-depth analysis: Luxembourg withholding tax on directors' fees.
What withholding tax applies to Luxembourg directors’ fees?
20 percent of the gross amount, raised to 25paying company. Declaration and payment fall due within 8 days, on form 510bis, filed electronically since 1 January 2025.
What does a Luxembourg director mandate actually expose you to?
Three distinct regimes. Mismanagement, assessed against the standard of a normally diligent director. Breach of the law or of the articles of association. And the action to cover liabilities, which reaches directors in law and in fact, requires serious and characterised fault, and may be brought only by the insolvency receiver.
Do you need an independent director?
Not necessarily. The law of 10 August 1915 does not require an independent director on an unregulated company, and a family company managed locally usually does without one. Specific requirements belong to regulated entities, listed companies under their governance rules, and funds, depending on the vehicle and its manager.
The need is high in three cases: a SOPARFI or holding whose decisions are taken outside Luxembourg, a foreign group that wants a local decision-maker able to challenge, and a fund board where investors expect an outside view. For a company already under a substance check, the file is reviewed before the appointment so that the mandate matches the actual decision flow.
What is an independent director?
An independent director is a board member who holds no operational management function and is independent of the shareholders and management. Their value lies in their own judgement: they analyse, question and vote in the company's interest, on the papers and not on instruction.
They differ from a non-executive director appointed by a shareholder: that director holds no executive function but is not independent. The usual market term is independent non-executive director.
Does an independent director create substance?
They contribute to it when they play a real role: they take part in decisions, attend board meetings held in Luxembourg, sign deeds and bear responsibility. RCS registration is not enough, and merely lending one's name adds no substance.
No Luxembourg text sets a minimum number of board meetings. For intra-group financing companies, circular L.I.R. n° 56/1 – 56bis/1 of 27 December 2016 expects key management decisions to be taken in Luxembourg and a majority of managers to be resident there. The proof rests on documents: a board calendar fixed in advance, papers circulated before each meeting, minutes that record the questions, the alternatives and the reason for each decision, an up-to-date conflicts register, and a link between each major transaction and the board decision that authorises it.
Independence when the same firm provides other services
Independence is assessed on substance rather than form. The ALFI guidance on director independence refers to criteria such as the absence of employment by the company or by a material service provider, and asks boards to apply them with regard to the reality of the links.
Where the firm supplying the director also keeps the books or provides the registered office of the entity, that link is reviewed before the mandate is accepted. We do not present as independent a director who would not meet the criteria applicable to the entity concerned, in particular for a fund board.
"Fit & proper": honourability and competence
A director must present the expected guarantees of honourability and competence ("fit & proper"), particularly for funds and regulated entities. They must understand the company's activity, risks and obligations, and have the time needed to exercise their mandate.
Our independent director documents their independence from management and shareholders, the condition for the value of their judgement.
Boards, minutes and conflicts of interest
Good governance rests on board meetings genuinely held in Luxembourg, faithful minutes and rigorous conflict-of-interest management. The independent director ensures decisions are taken, reasoned and documented locally.
We coordinate this with corporate secretarial, accounting and compliance, and with the domiciliation provided by an attorney at law on List I, for coherent and defensible governance.
Who this is for
- SOPARFI and holdings whose decisions are taken outside Luxembourg
- Foreign groups seeking a local decision-maker and a point of challenge
- Investment funds and regulated vehicles (boards, committees)
- Companies exposed to a substance check or a tax audit
What we do
- Provision of a qualified resident independent director
- Effective participation in board meetings held in Luxembourg
- Preparation and keeping of minutes and resolutions
- Conflict-of-interest management and directors' duties
- Coordination with substance, accounting and compliance
Estimated timelines
Pricing indication
Indicative ranges, excluding 17 % Luxembourg VAT, disbursements and filing fees. Firm quote after scoping.
Full grid, terms and simulator: accounting pricing in Luxembourg.
Ready to structure your independent director?
First reply within 24 working hours, from a named adviser. Firm quote within 48 working hours once the scope is defined. NDA on request before any confidential document.
The process, step by step
Scoping & due diligence
Analysis of the company, governance and substance needs, mutual AML / KYC checks and an independence review before accepting the mandate.
Appointment
Appointment to the board, RCS registration, set-up of powers, signing rules and conflict-of-interest management.
First board in Luxembourg
Agenda set in advance, papers circulated before the meeting, minutes and resolutions drafted and kept.
Ongoing follow-up
Substance monitoring, coordination with accounting and compliance, annual review of governance and mandate scope.
Official sources and verification
This page is published under the editorial responsibility of Mickaël LOC for Financial Services Luxembourg (business permit 10077274). The rules cited should be checked against competent authorities and the circumstances of the case.
Frequently asked questions
What is an independent director?
It is a board member with no operational management function, independent of the shareholders and management, who exercises their own judgement in the company's interest. The duties come from the amended law of 10 August 1915 on commercial companies.
Does a Luxembourg company need an independent director?
Not as a general rule for an unregulated company. The need comes from the governance model: decisions taken abroad, a foreign group, an investor or lender requirement, a fund board. A family company managed locally often does not need one.
Must a director be resident in Luxembourg?
Company law sets no residence or nationality requirement. Residence matters for substance: for intra-group financing companies, circular L.I.R. n° 56/1 – 56bis/1 expects a majority of managers to be resident in Luxembourg.
Does an independent director create substance?
Only if they take part in real decisions: board meetings held in Luxembourg, papers circulated before the meeting, minutes that record the discussion, a trail of decisions. An appointment without that trail adds little.
What is the difference between an independent director and a non-executive director?
Non-executive describes the absence of a management function. Independent describes the absence of ties with the shareholders and management. A non-executive director appointed by a shareholder is not independent.
Can the firm that keeps my accounts provide my independent director?
In some cases, but the link limits what can be said about independence. It is reviewed before the mandate is accepted. For a fund board, the applicable criteria may exclude a director tied to a material service provider.
What does "fit & proper" mean?
It refers to the expected guarantees of honourability and competence for a director, particularly for funds and regulated entities. The director must understand the activity and risks and have the time needed to exercise their mandate.
How much does an independent director mandate cost?
A mandate for a company or holding runs from EUR 4,000 to EUR 6,000 per year excluding VAT. Position within the range is set by the number of board meetings held in the year, the vehicle type, the reporting burden and the liability profile of the mandate. Regulated entities and fund vehicles are priced on scoping. Firm quote within 48 h.
Request a quote: Independent director
First reply within 24 working hours, from a named adviser. NDA on request before any confidential document.