Despite the current coronavirus pandemic, companies still have to comply with their obligation to hold their annual general meeting (the AGM) and approve the 2019 financial year’s annual accounts. The Grand Ducal Regulation of 20 March 2020 (the Regulation) has provided companies with certain amount of flexibility in order to facilitate the approval of such annual accounts during the period of the state of emergency. However, as practice on the basis of the Regulation evolves, it is clear that companies are still faced with challenges and require clarification on certain matters.
In addition to the Regulation, on 27 March 2020, the Ministry of Justice submitted to the Parliament the draft bill n°7541 regarding the extension of deadlines in respect of the filing and publication of annual accounts, consolidated accounts and related reports (the Bill of Law) with the Luxembourg Trade and Companies Register (RCS). The Luxembourg Chambre de Commerce, the Conseil d’Etat and the Commission de Justice have published their respective comments and suggestions of amendments to the said Bill of Law.
The Q&A below aims to tackle some of the most frequently asked questions with respect to (i) the holding of the AGM and (ii) the filing and publication of the approved annual accounts, consolidated accounts and related reports (the Financial Statements) of companies with the RCS, from a best-practices perspective.
It should be noted that as (i) the practical application of the Regulation is still evolving and (ii) the Bill of Law has not yet been adopted and therefore is subject to changes, the Q&A might be updated to reflect potential new questions and emerging best practices.
1. What is the latest possible date to hold the AGM for the approval of the Financial Statements for the financial year ending in 2019?
Art. 1 (3) of the Regulation provides that notwithstanding other provisions in the articles of association, the company is authorised to convene its AGM until the latest of the following dates:
- six months after the end of its financial year; and
- 30 June 2020.
Further to the comments of both the Chambre de Commerce and of the Conseil d’Etat, the Commission de Justice included a new article 3 in the Bill of Law suggesting to include a 3 month extension regarding the holding of the AGM with regards to the approval of the annual accounts. The entry into force of the Bill of Law will consequently offer to all companies referred to under article 8 of the Commercial Code a filing extension of 3 months from the date of their AGM.
2. What difference does the Regulation or the Bill of Law make with regards to the approval of the Financial Statements for a company whose financial year ends on 31 December 2019?
A: Prior to the entry into force of the Regulation, a company whose financial year ended on 31 December 2019 would have had until 30 June 2020 to approve its Financial Statements.
This does not change following the Regulation.
However, if the company’s financial year ended on e.g. 30 September 2019, such company should have had approved its Financial Statements by 31 March 2020 at the latest. Now, pursuant to the Regulation, such a company can choose to delay such approval until 30 June 2020.
That being said, as of the entry into force of the Bill of Law (if adopted in its current state), a company whose financial year ends on 31 December 2019 will have up to 9 months to hold its AGM and approve its annual accounts, meaning until 30 September 2020. This approach seems more in line with the stated intention of granting more flexibility to companies to allow them to comply with their legal requirements.
3. What is the latest possible date to file the approved Financial Statements for the financial year ending in 2019 with the RCS?
According to current statutory provisions, a company has to file its Financial Statements with the RCS (and publish a notice in this respect to the RESA (Recueil Electronique des Sociétés et Associations)) within one month as of their approval.
The Bill of Law submitted to the Parliament offers a legal and statutory basis for the delay of the filing and publication of Financial Statements. On the basis of the Bill of Law, companies will be offered a 3-month extension of the deadline applicable to the filing and publication of the Financial Statements.
The 3-month extension provided for by the Bill of Law only applies to companies whose obligations to file and publish Financial Statements have not expired prior to 18 March 2020 (being the date of the declaration of the state of emergency), being companies whose 2019 financial year ended on or before 18 August 2019.
The Bill of Law will is subject to parliamentary proceedings and will enter into force subject to and as of its publication with the Journal Officiel.
The Bill of Law also proposes a suspension of 3 months in respect of the criminal charges provided by article 1500-2 of the law on commercial companies dated 10 August 1915, as amended (the 1915 Law), to which the managers or directors of companies who do not timely comply with the obligation to submit the Financial Statements for the approval of the general meeting or to file and publish such Financial Statements within the statutory deadlines may be subjected. There was an inconsistency in this respect in the initial text of the Bill of Law, as the Bill of Law did not expressly extend the term during which managers and directors may submit Financial Statements to the general meeting, but only the term during which the Financial Statements may have to be filed and published. The comments and amended draft Bill of Law published by the Commission de Justice on 9 April 2020 address this inconsistency by including a 3 month delay for the holding of the AGM for the approval of the annual accounts. It is however yet to be seen how the final text of the Bill of Law will read.
4. What Financial Statements are covered by the Bill of Law?
The Bill of Law initially covered the documents and reports named under:
- Title 2 of the law of 19 December 2002 on the register of commerce and companies and on the accounting records and annual accounts of undertakings, as amended (the 2002 Law); and
- Title XVII of the law of 10 August 1915 on commercial companies, as amended (the 1915 Law).
As highlighted by the comments of the Luxembourg Chambre de Commerce with respect to the Bill of Law, the financial documents for listed companies are not covered in the scope of the Bill of Law.
To avoid different treatment among companies as to the 3 month deadline extension regarding the filing and publication of the financial statements, the Chambre de Commerce has suggested inserting a catch-all article which would state as follows: “Are extended by 3 months the publication deadlines of all reports, policies, and other information that must be published further to the annual general meeting approving the annual accounts and/or consolidated accounts, or together with the latter.”.
5. What is the effect of the administrative extensions announced by the RCS?
The RCS announced, on 18 March 2020, that an additional administrative period of 4 months is offered to companies with regard to the filing of the 2019 Financial Statements. The companies can thus file their Financial Statements with the RCS until 30 November 2020, without being subject to any late filing charges by the RCS.
The extension announced by the RCS is a mere administrative one and does not have any impact on the legal obligations of managers and directors to ensure that Financial Statements are filed and published in accordance with the time periods outlined in the answer to Question 3 above and does not impact the resulting liability of managers and directors. The only effect of the extension announced by the RCS is the suspension of the administrative late filing charges for the 2019 Financial Statements filed until 30 November 2020.
6. What happens when the shareholders have already been convened to the AGM before the entry in force of the Regulation and cannot, in view of the current situation, organise physical meetings?
According to the Regulation and notwithstanding other provisions in the articles of association, the company is allowed to hold a general meeting without an actual physical meeting of the shareholders. For further detail, please take a look at our first Q&A on the Regulation here.
If the shareholders have already been convened to a physical AGM but the company would like to change the means of holding the AGM, it shall publish its decisions and as the case may be, notify its shareholders and/or other participants via the same form taken for the convening or by way of publishing the new notice on its website at least three business days before the meeting.
7. Does a company still have to fulfil the requirement of making certain documents available before the AGM?
Yes, in accordance with the 1915 Law, shareholders are entitled to inspect certain documents, including the annual accounts, the management report and/or the auditor’s report at the registered office of the company in advance of the annual general meeting.
As the possibility of a shareholder travelling to and inspecting such documents at the registered office is currently heavily restricted by emergency measures put in place in connection with the COVID-19 pandemic, it would be prudent to consider whether such documents may be made available to shareholders in a more easily accessible manner (for example, electronically).