Luxembourg’s corporate law overhaul
The Corporate Law of Luxembourg, dating back to 10 August 1915, has been updated following seven years of insights since its 2016 revision. The notable law firm, Loyens & Loeff, highlights changes to the law of 7 August 2023, also known as the “New Law”, which are scheduled to take effect from 22 August 2023.
Private limited liability companies (société à responsabilité limitée) or SARL are predominantly affected by these modifications. However, certain changes also resonate with public limited liability companies (société anonyme) or SA and special limited partnerships (société en commandite spéciale) or SCSp, says the Loyens & Loeff report.
Clarifying share transfers in SARLs
The New Law has brought clarity to the ambiguity that surrounded SARL share transfers. Previously, article 710-12 of the Corporate Law stipulated that a company could potentially veto share transfers to third parties. This has now been rectified to ensure that only shareholders are involved in the approval process.
Furthermore, if a transfer isn’t endorsed, the shares can be acquired either by non-transferring shareholders or they can be repurchased by the company within three months. A notable change is that companies now possesses the authority to repurchase without the transferring shareholder’s consent. However, shareholders retain the right to withdraw from the planned transfer.
Liquidation proceedings simplified for SARLs
The New Law has excised the previous double-majority requirement for commencing SARL liquidation from article 1100-2 of the Corporate Law. From its enactment, the assent of shareholders possessing three quarters of the share capital will be adequate, barring stricter specifications in the articles of association.
Single-shareholder SARLs: greater clarity and flexibility
Due to an oversight, single-shareholder SARLs were inadvertently left out from certain provisions of the Corporate Law. This oversight has been corrected, granting single-shareholder SARLs a plethora of flexible options that multiple-shareholder SARLs enjoy, given that they are properly authorised in the articles of association.
Moreover, two provisions, one involving a pre-approval process for transferring SARL shares to third parties and the other concerning decision-making for different share categories, will no longer apply to sole-shareholder SARLs.
Enhancements to shareholder meetings
The New Law introduces several tweaks to the current regime:
– Physical presence in Luxembourg is no longer obligatory during remote shareholder meetings of SARLs.
– Similar to SAs, repurchased shares will not factor into quorum and majority calculations at SARL shareholder assemblies.
– Shares with suspended or forfeited voting rights won’t influence quorum determination for both SARL and SA shareholder gatherings.
SCSp agreements: Leonine clauses and nullity
The New Law highlights that while leonine clauses–those which allocate all profits to a single shareholder or exempt them from any losses–remain null and void, they do not invalidate the entire SCSp agreement.
SA bonds: Eliminating ambiguities
The New Law provides clarity on the issuance of SA bonds. All Luxembourg firms, including SAs, now have the liberty to bypass the statutory bond issuance regulations, regardless of whether the bonds are governed by Luxembourg or international law.
Beyond these focal changes, the New Law amends a variety of typographical errors, omissions and discrepancies stemming from the 2016 revamp. It also revises certain definitions and references in line with other legal adjustments or revocations post-2016.
In summary, the New Law fine-tunes the Luxembourg Corporate Law to align with current needs and insights, offering clearer directives for businesses operating in the country.