La Loi sur l'immobilisation des titres au porteur au Luxembourg : une brève analyse.

The law dated 28 July 2014 on the immobilization of bearer shares and units and the obligation to keep a register of the registered and bearer shares was adopted in Luxembourg. Through this legislation, Luxembourg now complies with the requirements of the Financial Action Task Force (FATF) and the Global Forum on Transparency and Exchange of Information (GFTEI) concerning the identification of bearer shares holders.

This past January, the bill of law 6625, which modifies the regime on bearer shares issued by Luxembourg companies (the Bill) was commented by Cédric Buisine, Senior Associate at CMS DeBacker Luxembourg.

On 16 July 2014, the Luxembourg parliament finally adopted the Bill. The law dated 28 July 2014 (the Law) mainly amends article 42 of the Luxembourg companies law of 10 August 1915 (the Luxembourg Companies Law).

The Law stipulates that the board of directors/managers of Luxembourg public limited liability companies (sociétés anonymes) and partnerships limited by shares (sociétés en commandite par actions) is now responsible for appointing a depositary who will be in charge of keeping the bearer shares.

According to article 42 (1) of the Luxembourg Companies Law, the depositary should not be a shareholder of the company but a credit institution, asset manager, regulated professional of the financial sector, lawyer, notary, auditor or an accountant.

Consequently, the Luxembourg companies falling within the scope of the Law shall appoint a depositary within the six months following the entry into force of the Law. Existing bearer shares shall have to be deposited within the 18 months following the entry into force of the Law.

Following this 18-month period, shares will be suspended and eight years later, the bearer shares shall be definitely cancelled pursuant to a capital reduction.

Article 171-2 of the Luxembourg Companies Law provides for fines in case of non-compliance by the directors or by the depositary with article 42 of the Luxembourg Companies Law (i.e. the amount of the fine is between EUR 5,000 and EUR 125,000 for the directors and between EUR 500 and EUR 25,000 for the depositary not respecting their duties).

In addition, it is worth pointing out that prior to the adoption of the Law, the State Council (the Luxembourg institution advising the national legislature) rendered two advisory opinions regarding the Bill. However, most of the observations have been ignored.

The State Council took the view that bearer shares shall not be considered as shares in registered form and consist in a different category of shares even if a depositary has now become mandatory. Besides, the State Council considered the registration a formality which shall not affect the legal nature of the bearer shares. As a result, the reference in the Bill providing that "all transfers of ownership will have to be subject to the notification procedure as required under Article 1690 of the Luxembourg Civil Code" has been deleted.

One of the main suggestions presented by the State Council was to add to the initial article 42 (2) of the Bill (providing that the Bill does not apply to bearer shares admitted to trading market) that paragraph 42 (1) (referring to the obligation to appoint a depositary) does not apply to bearer shares admitted to the Multilateral Trading Facility (MTF). It is interesting to mention that article 42 (2) of the Bill has finally been cancelled and is not reflected in the final version of the Law.

Eventually, the State Council also suggested to clearly mention the profit shares in the scope of the Law, but the advice has been ignored.