By Simon Henin, Managing Director Ipes Luxembourg S.A.
One of the biggest changes in Luxembourg’s legislative history recently occurred when the Luxembourg Company law was modernised.
The long awaited amended law is now in force and applies to:
- new companies (which will have to be incorporated with articles of association compliant with the New Law); and
- existing companies (if specific clauses of their current articles of association require an adaptation, such clauses will remain applicable until their amendment, which must however be applied within a 2 year timeframe).
The bill of law n° 5730 was adopted by Parliament on 13 July 2016 and dated 10 August 2016 (the "New Law of 10 August 2016") was published in the Luxembourg official gazette on 19 August 2016 and became effective on 23 August 2016.
The modernisation of this law will ensure Luxembourg is best placed to offer flexible structuring options for investors and remain a jurisdiction of choice in a competitive market.
Sophie Laguesse, Partner at Elvinger Hoss Prussen says, "The new company law contains new opportunities but also additional constraints. As a result, the impact of such legislation should be carefully analysed not only for new entities but also for existing structures."
Some of the new opportunities of the New Law of 10 August 2016 but also some of its constraints may require specific actions, including appropriate provisions to be inserted in the articles or shareholders’ agreement but this will need to be analysed on a case-by-case basis, says Frédérique Lifrange, Partner at Elvinger Hoss Prussen."
Elvinger Hoss Prussen discuss some of the key changes below:
(a) Some key changes applying to SA, SCA and Sàrl:
- All types of companies (including Sàrls) will be allowed to issue bonds to the public.
- A shareholder of a SA, a Sàrl or a SCA may voluntarily give up all or part of his voting rights either temporarily or permanently.
- The legal recognition of the practice of issuing tracking shares.
- The right of shareholders of all types of companies and/or holders of 10% of the capital or voting rights to request information on management decisions with respect to the company and controlled subsidiaries.
(b) Some key changes pertaining to Sàrl:
- Amendments of the articles of association will be subject to a vote by the shareholders holding 3/4 of the capital (i.e. abolition of the additional mandatory headcount majority)The managers may decide distributions out of interim profit under the same conditions as for an SA.
- (but, with respect to existing companies, the legal regime of such interim distributions also depends form the content of the articles).
- The possibility to delegate day-to-day management to one of the managers.
- The maximum number of shareholders in a Sàrl is increased from 40 to 100.
(c) Some key changes pertaining to SA and SCA:
- The validity of lock up clauses in the articles of association is formally recognised with the consequence that any transfer made in breach of such articles is expressly null and void.
- Shareholders or holders of beneficiary units with voting rights representing at least 10% of all voting rights at the general meeting which decided upon discharge of directors may, on behalf of the company, bring an action against the board of directors, management board or supervisory board for mismanagement, breach of law or articles.
- The issuance of non-voting shares in the capital will no longer be limited to 50% of the corporate capital and non-voting shares do not necessarily need to receive a preferred dividend.
- Convening notice to registered shareholders may be sent by means other than by registered letters (such as email or courier service) provided that such alternatives are mentioned in the articles and have been approved by the relevant shareholders.
- An auditor’s report is no longer required for contributions consisting in a receivable (under certain conditions).
To contact: Frederique Lifrange, Partner, Elvinger Hoss - P: +352 446644 5330 or E: Frederiquelifrange@elvingerhoss.lu
or Sophie Laguesse, Partner, Elvinger Hoss - P: +352 446644 5365 or E: firstname.lastname@example.org
or Stéphanie Pautot, Counsel, Elvinger Hoss - P: +352 446644 7150 or E: StephaniePautot@elvingerhoss.lu
If you would like to discuss this topic in greater detail please contact me.
You can read the other articles from Ipes' Private Equity update (edition 23) at the following links:
BEPS – How safe are Private Equity Structures in the Channel Islands?
Ipes appoints new CFO