Private limited liability companies (société à responsabilité limitée) (the SARL) are the ones being most affected by the changes, with a few ones relevant also for public limited liability companies (société anonyme) (the SA), and special limited partnerships (société en commandite spéciale)
(the SCSp). 

A non-exhaustive summary of the changes implemented by the New Law is set out below.

Transfer of shares in a SARL to a third party – no more uncertainty with respect to the company’s role

As per article 710-12 of the Corporate Law, shares of a SARL may only be transferred to third parties with the approval of the shareholders representing at least three quarters (or half, if the articles of association so provide) of the share capital.

The New Law removes an inconsistency in article 710-12 which suggested the company had the possibility to refuse the transfer and makes it clear that it is the shareholders only who intervene in the approval process.

If the transfer is not approved and unless the transferring shareholder abandons the contemplated transfer, the relevant shares can either be acquired by the non-transferring shareholders, or bought back by the company, within three months. Prior to the entry into force of the New Law, the company could only repurchase the relevant shares with the agreement of the transferring shareholder. The New Law removes such requirement for the transferring shareholder’s consent and confirms that the company can proceed with the repurchase of the transferring shareholder’s shares without such shareholder’s agreement. The option for the transferring shareholder to abandon the contemplated transfer is nevertheless preserved in the law as the sole reason preventing the company from carrying out the buyback. In addition, under the New Law the company has the possibility to keep the repurchased shares in treasury, as an alternative to reducing its share capital through the cancellation of such shares.

The possibility for the transferring shareholder to proceed with the transfer of shares to the third party in case the transfer is not approved and no action described in the preceding paragraph is taken by the nontransferring shareholder(s) or the company within the three months period remains unchanged.

No double-majority requirement for the opening of the liquidation of a SARL

The statutory double majority (requiring the vote of at least half of the shareholders and a qualified percentage of share capital) for the opening of a liquidation of a SARL has been eliminated from article 1100-2 of the Corporate Law. Following the entry into force of the New Law, the consent of the shareholders holding three quarters of the share capital will be sufficient to proceed with the opening of a SARL’s liquidation, unless the articles of association provide for a stricter majority.

Clarifications with respect to single-shareholder SARLs

Due to what appeared to be an unfortunate error, single-shareholder SARLs were excluded from the scope of application of certain provisions of the Corporate Law. The New Law corrects the situation and clarifies that, with effect as from its entry into law, SARLs with a sole shareholder can take advantage of the following flexible options (which are equally applicable to multiple-shareholder SARLs), subject to proper authorisation included in the articles of association:

  • the option to allow management to issue shares within the limits of an authorised capital procedure pursuant to article 710-26 third indent of the Corporate Law,
  • the option to have the company’s registered office transferred by the company’s management, without any intervention of the sole shareholder, pursuant to article 710-26 second indent of the Corporate Law, and
  • the option to take the decisions of a sole shareholder by telecommunication means pursuant to article 710-21 (2) of the Corporate Law.

In addition, the following rules will no longer apply in respect of sole-shareholder SARLs:

  • article 710-12 of the Corporate Law providing for a statutory pre-approval procedure for transfers of shares in SARL to third parties, and
  • article 710-22 of the Corporate Law governing the decision-making rules when different categories of shares are put in place in a company.

Modest yet welcome improvements in respect of shareholder meetings

Under the New Law, compared to the existing regime:

  1. It is no longer necessary to have a shareholder or a proxy physically present in  Luxembourg when holding shareholder meeting of SARLs remotely – thus   unifying the regime with the one applicable to SAs.
  2. As it is the case for SAs, repurchased shares shall not be considered for the  calculation of quorum and majority at shareholder meetings of SARLs.
  3. The shares with suspended or waived voting rights (be it in SARL or SA) are not to be considered for the determination of quorum at shareholder meetings.

Null and void leonine clauses do not trigger the nullity of the entire SCSp constitutive document

An agreement contrary to article 1855 of the Civil Code allocating all profits to one shareholder or exempting a shareholder from any contribution to the losses shall be null and void.

Pursuant to a special provision in article 100-18 of the Corporate Law applicable to most companies (but unfortunately not SCSps), the nullity sanction would touch only the clause contrary to article 1855 of the Civil Code rather than the entire agreement constituting the relevant company. The New Law extends the applicability of this special provision to SCSps and clarifies that leonine clauses, albeit being null and void, do not trigger the nullity of the constitutive instrument of the SCSp.

SA bonds governed by Luxembourg law – statutory provisions re: bondholder meetings may be disapplied

As from the 2016 reform, all Luxembourg companies (including SARLs) may issue bonds. The bonds issuance shall be governed by articles 470-1 to 470-19 of the Corporate Law providing inter alia for specific rules on bondholder meetings, unless such articles are disapplied by the bond documentation.

Prior to the entry into force of the New Law, a certain degree of uncertainty persisted regarding the possibility for a SA to disapply the statutory bond issuance regime in articles 470-1 to 470-19 of the Corporate Law when issuing bonds governed by Luxembourg law. The New Law cures the inconsistency, with the effect that all Luxembourg companies (including SAs) may disapply the statutory bond issuance regime when issuing bonds, whether governed by Luxembourg or foreign law.

Other corrections

In addition to the above, the New Law corrects certain clerical errors omissions, or inconsistencies of the 2016 reform works, and updates definitions and references to other laws that changed or were repealed since then.

On the cusp of change - Corporate Law under further scrutiny

Shortly before the New Law, the Corporate Law was also amended by the so-called law on digitalisation of notarial practice of 7 July 2023, effective as from 1 August 2023, mainly in order to allow for the online incorporation of certain companies, including SA or SARL, under certain conditions.

In addition, changes are to come into effect following the entry into force of the following laws:

  • The law of 7 August 2023 on business preservation and modernisation of bankruptcy law, to enter into force on 1 November 2023. If you wish to know more about this topic, make sure to check our R&I toolbox snippets published on LinkedIn.
  • The bill number 8158, that has been voted into law by the Luxembourg Parliament in July 2023, transposing the EU directive 2021/2101 on disclosure of income tax information by certain undertakings and branches, to enter into force as from the date of opening of the first financial year starting on or after 22 June 2024. This law imposes a mandatory disclosure of certain
    information relating to income tax on certain entities, and sanctions on management in case of noncompliance.

Exciting times are also expected ahead, with substantial changes to the Corporate Law being anticipated for future implementation once the following draft bills make their way into law:

  • The bill number 8053 transposing the EU mobility directive (Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers, and divisions) into Luxembourg law and amending the Corporate Law’s regime of mergers, divisions, and conversions. Even though the deadline for the implementation of this directive into national law has already lapsed on 31 January 2023, the bill is still pending its final vote in the Luxembourg Parliament. Updates by Loyens & Loeff to follow.
  • The bill number 8286 aiming at modernising the Luxembourg accounting law by making it more comprehensible and readable, submitted to the legislative procedure in the Parliament recently on 28 July 2023 – which is not expected to be voted prior to next year. See our previous article entitled Luxembourg - reshaping accounting law in 2023 for more background. 

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