Law of 20 June 2020: enhanced flexibility for shareholder and board resolutions of Luxembourg companies post state of emergency
As the state of emergency came to an end on 24 June in Luxembourg, the measures introduced in this specific context granting flexibility to companies also ceased to apply.
A set of legislative measures have now been introduced to ensure that companies may temporarily continue to benefit from a regime similar to the one applicable under the regulation of 20 March 2020, most recently with the law dated 20 June 2020 extending the measures regarding the meetings held by companies and other legal entities.
During the three-month emergency period triggered by the COVID-19 pandemic, Luxembourg companies benefitted from certain enhanced flexibility in adopting shareholder and board resolutions via remote means by reason of the measures enacted under the Grand Ducal Regulation of 20 March 2020 introducing certain measures concerning meetings of companies and other legal entities (the Regulation).
The application of the Regulation ended on 24 June 2020 with the end of the state of emergency being declared by the Luxembourg government.
The Regulation was in the meantime completed by a set of legislative measures which are aimed at ensuring that companies may continue to benefit from a regime similar to the one applicable under Regulation for a certain period of time after the end of the state of emergency on 24 June 2020.
To this end, the following pieces of legislation were adopted:
- the law dated 22 May 2020 extending the deadlines of the filing and publication of the annual accounts, the consolidated accounts and the related reports during the state of crisis (the May 2020 Law); and
- the law dated 20 June 2020 extending the measures regarding the meetings held by companies and other legal entities (the June 2020 Law).
A summary of the provisions of the May 2020 Law may be found in our legislative newsflash which may be accessed here.
What changes with the June 2020 Law?
As of 25 June 2020 (the date of the entry into force of the June 2020 Law), Luxembourg companies will continue to have the option to adopt shareholder and board resolutions without the physical presence of the relevant members.
As regards general meetings, irrespective of whether such measures are expressly allowed by the company’s articles of association and regardless of the expected number of participants in said general meeting, companies are allowed to request their shareholders to cast their votes:
- in writing; or
- via electronic means allowing the identification of shareholders,
provided that in each of the cases above, the full text of the resolutions or decisions to be taken has either been published or sent to the attention of shareholders in advance of the vote.
A shareholder may also attend the meeting by a proxy designated by the company.
Special reference is made to listed entities which are subject to the Law of 24 May 2011 on the exercise of the general meetings for listed companies where a shareholder or any other participant has designated an agent different to an agent designated by proxy as mentioned above but in line with article 8 of such law. In such case, this agent can only participate to the general meeting by the means provided at paragraphs (i) and (ii) above.
As regards the resolutions adopted by other corporate bodies, notwithstanding any provision to the contrary in the company’s articles of association and although not explicitly allowed by the company’s articles of association, the members of such bodies may:
- adopt resolutions by way of circular resolutions; or
- attend a meeting held by video conference other telecommunication means allowing the identification of the participants.
The shareholders or members of other corporate bodies which participate in decision-making through the alternatives presented here above will be deemed present for the calculation of the applicable quorum and majority requirements.
The measures proposed by the June 2020 Law are similar to the ones set out by the Regulation. A summary of the key considerations with respect to the application of the Regulation (which, given the similarity of the text of the two instruments, may be relevant for the application of the June 2020 Law) may be found here.
To whom does the June 2020 Law apply?
The June 2020 Law applies to all Luxembourg companies.
The Law’s scope also includes legal entities, not covered by the definition of “companies” as per article 8 of the Luxembourg commercial code, such as: non-profit associations (associations sans but lucratif) and foundations (fondations), mutuelles, (European) economic interest groups (groupements (européens) d’intérêt économique), unions (syndicats), Fond du logement, Institut of company auditors (Institut des réviseurs d’entreprise) and National association of chartered accountants (Ordre des experts comptables) and grants the latter, when applicable, with the same possibilities and alternatives for holding their general meetings and/or their management or other statutory meetings.
One particular aspect to consider is that only a limited number of companies benefit from the provisions of the May 2020 Law, being companies whose financial year ended in the period from 19 August 2019 to 24 June 2020.
As the legislator seems to have intended that the application of the June 2020 Law and that of the May 2020 Law are synchronized, it appears (although certain questions of interpretation remain) that the June 2020 Law is intended to apply for a period of nine months after the closing of the financial year of companies which ended in the period from 19 August 2019 to 24 June 2020.
Until when does the June 2020 law apply?
According to its text, the June 2020 Law applies for the duration of the extension provided by article 3 of the May 2020 Law.
The cross-reference to article 3 of May 2020 Law is not entirely clear, but, applying a reasonable interpretation, this cross-reference applies the June 2020 Law for a period of nine months as from the closing of the relevant financial year of a company (being a financial year which closed in the period from 19 August 2019 to 24 June 2020).
For example, companies whose financial year ends on 31 December 2019 may benefit from the provision of the June 2020 Law until 30 September 2020.
The duration for which companies benefit from the application of the June 2020 Law therefore depends on the date on which their financial year ends.
Please contact one of our experts in the field should you have any question on the topic.
Frédéric FranckxPartner Attorney at law / Avocat à la Cour
Frédéric Franckx, partner, heads the Corporate / M&A Practice Group in our Luxembourg office. Frédéric focuses mainly on private equity and mergers and acquisitions. He is an active member of our Region Teams US, Canada and Latin America.T: +352 466 230 301 M: +352 691 919 614 E: [email protected]
Ira VladiAssociate Attorney at law
Ira Vladi, associate, is a member of the Corporate Practice Group in our Luxembourg office. She advises both Luxembourg based and foreign clients on Luxembourg corporate law matters, and more specifically, international restructurings, mergers & acquisitions and corporate finance transactions.T: +352 466 230 648 E: [email protected]