Luxembourg: New legal framework for nonprofit associations and foundations

13 Dec 2024    2 minute read
Nonprofit Associations (ASBLs) Foundations Governance Simplification Homologation Procedure Administrative Dissolution Without Liquidation Delegation of Management Financial Governance Public Funding Donations Oversight Luxembourg Nonprofit Sector

In brief

The law issued from draft Bill No. 8420, published on 4 December 2024 and entering into force on 13 December 2024, introduces key governance simplifications for nonprofit associations (ASBLs) and foundations. It abolishes the homologation procedure, extends the administrative dissolution process without liquidation to all ASBLs and foundations, and clarifies delegation rules for management responsibilities. These changes aim to streamline operations and establish uniform procedures across the sector.

In parallel, draft Bill No. 8447, currently under review, proposes stricter financial governance for nonprofits, including enhanced approval mechanisms for large transactions and increased transparency requirements. Together, these developments mark significant progress in modernizing Luxembourg's nonprofit framework and reinforcing public trust in the sector.

For further information on what these developments mean for you or your organization, please get in touch with your usual Baker McKenzie contact.

Contents

Key takeaways 

Simplifying governance and reducing bureaucracy

On 4 December 2024, the law resulting from draft Bill No. 8420, amending Articles 7 and 77 of the law of 7 August 2023 on nonprofit associations and foundations ("2023 Law"), was published. This law will enter into force on 13 December 2024, bringing significant changes to the governance framework for ASBLs and foundations.

Key changes include the following:

  • Immediate abolition of the homologation procedure: The homologation process for decisions such as amendments to articles of association is abolished for all ASBLs, including those governed by the transitional provisions of the former law of 21 April 1928.
  • Applicability of administrative dissolution without liquidation: This streamlined dissolution process is now extended to all ASBLs and foundations.
  • Clarification of delegation rules: The law corrects a material error in Article 7 of the 2023 Law, ensuring that only delegating management to a director (administrateur) requires prior authorization from the general meeting and a management report. This requirement does not apply to other roles, such as a managing director (directeur salarié).

ASBLs established before the enactment of the 2023 Law retain a transitional period until 23 September 2025 to amend their articles of association in line with the new legislation. However, the immediate applicability of these governance simplifications is expected to ease administrative burdens and create uniform procedures across the sector.

Looking ahead: strengthening financial governance

As Luxembourg continues to modernize the nonprofit sector, discussions are ongoing regarding draft Bill No. 8447, introduced on 10 October 2024. This proposal, developed in response to the Caritas affair, seeks to strengthen financial governance and public trust in organizations collecting donations or receiving public funds.

If adopted, the bill will amend the 2023 Law to introduce the following:

  • Stricter approval mechanisms for large transactions: Transactions exceeding EUR 10,000 will require enhanced ex ante approval, with additional controls for transactions over EUR 100,000. Furthermore, funding agreements with the state will need to be published in the Luxembourg Trade and Companies Register.
  • Enhanced transparency requirements: Significant decisions must be approved through in-person or documented remote meetings to ensure accountability and oversight.

While the draft is still under parliamentary review, these changes aim to bolster confidence in the nonprofit sector by mitigating risks of financial mismanagement.

Next steps

Nonprofit associations and foundations should review their governance and operational procedures to ensure compliance with the new law issued from draft Bill No. 8420. Additionally, organizations collecting public donations or receiving public funding should prepare for potential changes stemming from draft Bill No. 8447.

As legal experts, we are here to support you to with tailored advice and solutions, including the following:

  • Reviewing and updating your articles of association to comply with the new legal framework.
  • Advising on governance best practices and the delegation of management responsibilities.
  • Assisting with financial governance and compliance preparation in light of draft Bill No. 8447.
  • Providing ongoing legal guidance to ensure seamless adaptation to these regulatory changes.

Related content: Luxembourg: Non-profit associations and foundations reform

Contact Information
Jean-Francois Findling
Partner
Luxembourg
Read my Bio
jean-francois.findling@bakermckenzie.com
Elodie Duchêne
Partner
Luxembourg
Read my Bio
elodie.duchene@bakermckenzie.com

Copyright © 2024 Baker & McKenzie. All rights reserved. Ownership: This documentation and content (Content) is a proprietary resource owned exclusively by Baker McKenzie (meaning Baker & McKenzie International and its member firms). The Content is protected under international copyright conventions. Use of this Content does not of itself create a contractual relationship, nor any attorney/client relationship, between Baker McKenzie and any person. Non-reliance and exclusion: All Content is for informational purposes only and may not reflect the most current legal and regulatory developments. All summaries of the laws, regulations and practice are subject to change. The Content is not offered as legal or professional advice for any specific matter. It is not intended to be a substitute for reference to (and compliance with) the detailed provisions of applicable laws, rules, regulations or forms. Legal advice should always be sought before taking any action or refraining from taking any action based on any Content. Baker McKenzie and the editors and the contributing authors do not guarantee the accuracy of the Content and expressly disclaim any and all liability to any person in respect of the consequences of anything done or permitted to be done or omitted to be done wholly or partly in reliance upon the whole or any part of the Content. The Content may contain links to external websites and external websites may link to the Content. Baker McKenzie is not responsible for the content or operation of any such external sites and disclaims all liability, howsoever occurring, in respect of the content or operation of any such external websites. Attorney Advertising: This Content may qualify as “Attorney Advertising” requiring notice in some jurisdictions. To the extent that this Content may qualify as Attorney Advertising, PRIOR RESULTS DO NOT GUARANTEE A SIMILAR OUTCOME. Reproduction: Reproduction of reasonable portions of the Content is permitted provided that (i) such reproductions are made available free of charge and for non-commercial purposes, (ii) such reproductions are properly attributed to Baker McKenzie, (iii) the portion of the Content being reproduced is not altered or made available in a manner that modifies the Content or presents the Content being reproduced in a false light and (iv) notice is made to the disclaimers included on the Content. The permission to re-copy does not allow for incorporation of any substantial portion of the Content in any work or publication, whether in hard copy, electronic or any other form or for commercial purposes.