Law clarifying and confirming the non-applicability of the financial assistance prohibition set out in the Luxembourg Companies Act to private limited-liability companies enters into force on 16 August
The long-awaited amendment of Article 1500-7 of the Companies Act, clarifying that the financial assistance prohibition does not apply to Luxembourg private limited-liability companies (sociétés à responsabilité limitée), enters into force on 16 August 2021 (see also our newsflash of 19 March 2021).
The financial assistance prohibition applies to Luxembourg public limited-liability companies (sociétés anonymes). Article 430-19 of the Companies Act provides that such companies may not, directly or indirectly, advance funds, extend loans or provide security with a view to the acquisition of their own shares by a third party. Furthermore, Article 1500-7 of the Companies Act provides that penalties, including a prison term and/or fine, may be imposed on any person who, in his or her capacity as a director, auditor (commissaire), manager (gérant) or member of the supervisory board of a company, knowingly lends or advances company funds or provides security with a view to the acquisition of the company’s own shares or a pledge of the company's shares.
The former wording of Article 1500-7 of the Companies Act also referred to “units”, which gave rise to some uncertainty as to whether the financial assistance prohibition set out in Article 430-19 also applied to private limited-liability companies.
The amendment of Article 1500-7 has now put an end to this uncertainty.