Luxembourg Company Law Reform: Less than three months to adapt
In 2016, the Luxembourg Company Law of 10 August 1915 on commercial companies (the 1915 Act) was significantly amended by the law of 10 August of that same year (the New Law). Following the enactment of the New Law, the 1915 Act was further subject to a complete overhaul of the numbering and organisation of its different sections by virtue of the Grand-Ducal Regulation of 5 December 2017 (the Regulation), with both the New Law and the Regulation resulting in the current restated version of the 1915 Act (the Amended 1915 Act).
The end of the transitory period for adapting the articles of association of Luxembourg companies in light of the changes introduced by the New Law is now approaching, and will result in the mandatory provisions of the New Law becoming directly applicable, whereas the Regulation had already entered into force on 19 December 2017.
The transitory period of 24 months provided for in the New Law is expiring on 23 August of this year. From that date, the articles of association of all Luxembourg companies shall be fully governed by the Amended 1915 Act. The impact thereof concerns the full range of constitutional documents of Luxembourg companies established prior to the entry into force of the New Law (i.e. prior to 23 August 2016), which shall be affected in the following manner:
- in the event of statutory provisions contrary to the mandatory provisions of the Amended 1915 Act, the latter shall prevail ipso jure
- if a matter is not expressly dealt with in the articles of association, it shall be governed exclusively by the Amended 1915 Act
- if the articles of association refer expressly to a specific article of the 1915 Act, the relevant article of the Amended 1915 Act shall apply directly
- if any extra-statutory arrangements are in place, they should be revised in case of any conflict with the New Law, so as to secure their enforceability.
By way of illustration, the Amended 1915 Act now provides for a comprehensive procedure pertaining to the transfer of the shares in an SARL (i.e. société à responsabilité limitée – private limited liability company) to a third party. The Amended 1915 Act provides that several stages must be observed in order for the existing shareholders to approve in advance the envisaged transfer by especially imposing the orderly exit of the transferring shareholder within a maximum period of 6 months. Notwithstanding any statutory provision to the contrary, the shareholder willing to transfer his shares will in all cases be allowed to exit the company.
It is worth noting that the legislator allowed for any amendment to the articles of association of a company solely required in view of the renumbering or the repeal of a legal provision pursuant to the New Law, to be implemented by the board of managers/directors without the need for a general shareholders’ meeting. However, the directly applicable Regulation has not provided for any such faculty in favour of the management, implying that all changes, even those limited to the numbering of the articles, should now be made by decision of shareholders, at least for the companies for which this is required.
As there are less than three months left to implement the Amended 1915 Act, it is now time for Luxembourg companies to review and consider the amendment, if required, of their articles of association as well as of other extra-statutory arrangements of theirs (e.g. shareholders’ agreements, voting arrangements, etc.) and comply to, as well as benefit from, the modernised new legal framework of the Amended 1915 Act.
This article was written by Victor Regnard and Evgenia Kyriakaki. For more information please contact Victor on +352 26 48 68 48 or at victor.regnard@crsblaw.com.
