Directorship services in Luxembourg, present, competent directors.
Directorship services give your Luxembourg structure directors with genuine powers and skills, who take decisions in Luxembourg and document governance, a factor that can contribute to ATAD substance. FSL provides directors and operational governance; the approval of fund officers is the CSSF's remit (fit & proper) and legal opinions are coordinated with our partner lawyers.
Directorship services consist of providing a company with resident, qualified directors who exercise a genuine function: board participation, decision-making in Luxembourg, oversight and documentation. They reinforce the substance and governance of a holding, a SOPARFI or a fund.
The director function is governed by the amended law of 10 August 1915 on commercial companies. The expected substance derives from the ATAD directives (laws of 21 December 2018 and 20 December 2019). For regulated structures, governance follows the AIFM law of 12 July 2013 and CSSF circular 18/698.
Key takeaway
- A directorship director exercises a real function, with genuine involvement in decisions.
- Director presence and competence can contribute to ATAD substance without, on their own, establishing it.
- FSL handles operational governance; reserved acts are coordinated with the lawyer.
What does a corporate directorship service actually deliver?
A corporate directorship service places one or more directors on a Luxembourg company who genuinely exercise their mandate. The engagement is not a signature: it covers preparing and holding board meetings, reviewing the files put to the vote, deciding, drafting the minutes and maintaining the registers.
The useful distinction is about the content of the mandate, not its title. A director who receives a set of pre-drafted resolutions and signs them without examining the file exercises no real function, however impressive the curriculum vitae. A director who receives a board pack in advance, asks questions, requests additional documents and has reservations recorded in the minutes exercises a real function. That difference is invisible in the articles of association and perfectly visible in the board archive.
It is that documentary trail that will be examined in a tax audit, in vendor due diligence, in a bank review or in a shareholder dispute. It is built board meeting by board meeting, never retrospectively.
The service articulates with the other components of local presence: domiciliation, bookkeeping and annual accounts, and calibration of ATAD substance. Taken separately these components achieve little; assembled and documented, they constitute a defensible file.
Nominee director or genuine director: the distinction that decides an audit
The Luxembourg market offers two very different services under the same word. The first lends a name to satisfy a formal requirement. The second exercises a mandate. The prices differ by a wide margin, and it is precisely that price gap that should alert the buyer.
The stakes shifted with the transposition of the ATAD directives. A source-state tax authority examining a Luxembourg holding no longer asks whether the company exists, it asks where decisions are taken. A board whose members are resident abroad, which never meets physically in Luxembourg and whose resolutions are systematically written, produces an unfavourable answer to that question.
One technical point is consistently underestimated: written resolutions, where the articles allow them, are perfectly valid as a matter of company law. Their exclusive use, however, is a weak signal on substance. Good practice reserves written resolutions for routine matters and holds physical board meetings in Luxembourg for structuring decisions: acquisitions, disposals, financings, distributions, approval of the accounts.
The reasoning extends naturally to the independent director where the structure must demonstrate genuine distance between the shareholder and the decision-making body.
How many directors, and which ones? Composing a board in Luxembourg
The amended law of 10 August 1915 leaves considerable latitude. A public limited company with a sole shareholder may have a single director; beyond that, the board must have at least three members. A private limited company operates with one or more managers and no mandatory board.
The legal minimum is nonetheless the wrong starting point. Composition is calibrated on the risk profile and on the parties who will examine the structure: a source-state tax authority, a partner bank, an investor, a potential acquirer. A holding with participations in three jurisdictions distributing significant dividends is not governed like a passive property-holding company.
Three parameters matter more than the headcount. The directors' effective residence, which determines where the board can genuinely meet. Their competence relative to the activity, because a director unable to explain the decisions they voted on weakens the file rather than strengthening it. And their availability: a mandate implying six board meetings a year is not the same engagement as one implying a single meeting.
We calibrate that composition with you and articulate it with board advisory and, for multi-jurisdiction groups, with cross-border governance.
Intercompany governance: related-party decisions, conflicts and the board's role
Intercompany governance is the most common weak point in Luxembourg structures, because the decisions involved look technical and inconsequential: an intragroup loan, a cash pooling agreement, a recharge of services, a guarantee granted to a subsidiary.
Those decisions are in fact where the risk concentrates. They set terms between related parties and must therefore be defensible as if they had been negotiated between independent parties. An intragroup loan whose rate rests on no analysis, a guarantee granted without consideration, a management fee agreement with no description of the services: each of these sits at the top of audit questionnaires.
Luxembourg company law adds a precise procedural requirement. A director with a financial interest conflicting with that of the company on a transaction submitted to the board must declare it, abstain from the deliberation, have the declaration recorded in the minutes, and the transaction must be reported to the next general meeting. The procedure is simple. Omitting it weakens the decision and is spotted immediately in due diligence.
The board's role is therefore twofold: document the economic rationale of every related-party transaction, and follow the conflict-of-interest procedure where it applies. Both reflexes cost little to execute and are worth a great deal at the moment the structure is examined.
Director liability in Luxembourg: what the mandate actually exposes you to
This is the question serious directors ask before accepting a mandate, and one providers routinely avoid. A Luxembourg director's liability operates on three levels.
Towards the company, the director answers for the performance of the mandate and for faults committed in management. Towards third parties and the company, the director answers for breaches of the company law and of the articles, and that liability is joint and several across the board, except for a member who did not take part in the breach and reported it. In insolvency, directors may be pursued where a management fault contributed to the shortfall of assets.
Three practical consequences follow. First, the law makes the record of an objection or reservation in the minutes the exoneration mechanism itself: without it, joint liability applies. Second, monitoring the financial position is not delegable in practice: a board that has never reviewed cash position or maturities is in a difficult posture if the company becomes insolvent. Third, directors' liability cover is negotiated before the mandate begins, not after the incident.
A director who understands that exposure behaves differently from one who does not: they request the documents, insist on a board calendar, and refuse to sign a resolution they do not understand. That is precisely the behaviour that produces the substance being sought, which is why assumed liability and governance quality are not two separate subjects.
What drives the cost of a directorship mandate in Luxembourg
A mandate price means nothing outside the perimeter it covers. Four variables explain most of the spread observed on the Luxembourg market.
First, the nature of the structure: a participation company under ordinary company law does not carry the same workload as an investment vehicle within the AIFM framework, where the director must oversee regulated delegates and document that oversight. Second, board frequency, which follows from the volume and complexity of the decisions to be taken. Third, the risk level of the activity, which sets the depth of review expected before each vote. Fourth, the scope of ancillary functions genuinely included: corporate secretarial, register maintenance, convening general meetings, coordination with external advisers.
The most frequent arbitrage error is comparing a nominal service and a genuine service on price alone. They do not deliver the same thing and do not carry the same risk. A nominal mandate saves a modest annual amount and can cost a recharacterisation, a denial of treaty benefits, or a discount at the point of sale.
The correct economic comparison sets the annual cost of the mandate against the exposure it covers: the distributions that depend on the participation exemption, the tax the structure saves, or the balance sheet value of the SOPARFI within the group. For investment vehicles, that reasoning combines with AIFM and management company support.
Who this is for
- Holdings and SOPARFIs needing defensible substance
- International groups and multi-jurisdiction structures
- Investment vehicles and funds (board, officers)
- Family offices and wealth structures
What we do
- Provision of resident, competent directors
- Participation in and running of boards in Luxembourg
- Documentation of decisions (minutes, board pack, registers)
- Coordination with domiciliation and corporate secretarial
- Calibration of substance to the risk profile
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