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October 31, 2023
2023-1809

Monaco Legislature considers draft legislation to allow single-shareholder limited liability companies and innovation companies limited by shares; two new Double Tax Treaties signed

  • Legislative proposal No. 256 of 15 June 2023 would allow the formation of limited liability companies with only one shareholder.
  • Legislative proposal No. 257 of 15 June 2023 would allow the creation of "Monegasque innovation companies limited by shares" to encourage the formation of innovative startups.
  • In other news from Monaco, two new Double Tax Treaties have been signed.

Proposed legislation being considered in Monaco would make changes to the Commercial Code (promulgated on 5 November 1867 and declared executive from 1 January 1878) to allow the creation of two new types of companies.

Legislative proposal No. 256

Legislative proposal No. 256 aims to modify the provisions of the Commercial Code, adding article 35 bis, to create a "Limited Liability company with sole shareholder" (SURL), composed of a single member whose liability is limited to the amount of his contributions.

The rules regarding a "Société à Responsibilitée Limitée" (SARL) apply to SURLs.

The minimum share capital of SURLs is €5,000 if the sole shareholder is a natural person and €15,000 if the sole shareholder is a legal person.

The company is managed by one or more agents, whether partners or not, paid or acting free of charge, to the exclusion of any legal entity.

The transformation of the SURL into a SARL is not subject to the sole shareholder's release of a new declaration or administrative authorization to operate. The transformation of a sole proprietorship into a SURL is not subject to the issuing a new declaration or administrative authorization to operate.

Implications

This is an innovation that will allow greater flexibility in choosing the type of company to establish, permitting a sole shareholder (SURL) rather than a minimum of two shareholders (in the case of SARL), potentially resulting greater stability in management by avoiding conflicts between shareholders.

As this is a bill, updates will be posted as developments occur.

Legislative proposal No. 257

Legislative proposal No. 257, introducing article 44 bis to the Commercial Code, aims to create a "Company of Monegasque Innovation by Actions" (SIMA for "Société d'Innovation Monégasque par Actions"), allowing the development of innovative projects using a specific regime meeting the needs of both startup creators and investors.

The creation of the new SIMA companies will make it possible to develop and sustain their activity.

The main features of a SIMA company include:

  • A SIMA may be constituted by one or more legal or natural persons who only bear losses up to the amount of their contribution; this type of company can therefore be a "single shareholder." (Today, a limited liability company (SARL) and "Société Anonyme Monégasque" (SAM) must have at least two associates/shareholders.)
  • The minimum capital of a Monegasque innovation company is €20,000. (Today a SAM must have a minimum capital of €150,000 and a SARL requires €15,000.)
  • The share capital must be variable to facilitate the entry of new investors and fundraising for innovative companies. (Today, for existing corporate forms, variable capital is an option.)
  • SIMA shares are registered and dematerialized (i.e., moved from hard copy to electronic form). Their ownership results from registration in a register kept in digital form, either on the Monegasque sovereign cloud or by using distributed register technology.
  • Dematerialization of the shares: As of today the dematerialization procedure of shares (which should result in the possibility to issue electronic actions compared to the hard copy) has not been yet determined by Sovereign Order in Monaco.

As this is a draft law, updates will be published in the event of developments.

New Double Tax Treaties signed with Monaco

At the end of 2022 and in the first months of 2023, the Principality of Monaco signed the following bilateral conventions against double taxation:

  • Andorra — not yet in force
  • Montenegro — will enter into force on 1 January 2024

These conventions are in addition to those already in force with Monaco and initialed in previous years, specifically: France, Guernsey, Liechtenstein, Luxembourg, Mali, Malta, Mauritius, Qatar, Saint Kitts and Nevis, Seychelles, United Arab Emirates (not yet in force).

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For additional information with respect to this Alert, please contact the following:

Ernst & Young Société d'Avocats, Paris

Ernst & Young Audit Conseil & Associés, Monaco

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

 

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