Modernisation of Luxembourg company law

The draft law (Projet de Loi) no 5730 regarding notably a modernisation of the Law of 10 August 1915 on commercial companies (as amended) (the “Company Law”) has still not been adopted by the Luxembourg parliament despite the plan that was previously drawn to the attention of the reader of our newsletter for this to have happened at the end of 2015.

The draft law has been subject to further discussions and input from interested parties notably the Luxembourg Bar Association (Ordre des Avocats du Barreau de Luxembourg), the Association of Notaries (Chambre des Notaires), the Chamber of Commerce and the Council of State (Conseil d’Etat). The discussions have served to clarify certain imprecise wording and fill in gaps contained in the proposed bill.

Following such discussions, the bill has now been consolidated and sent back to the Council of State.

The following amendments to the proposed bill are noteworthy:

  • Clarification that the document containing the terms for the issue of a debt instrument can derogate from the provisions contained in the Company Law by providing for a different law or different provisions to govern such issue and that the issue of other type of securities (other than shares) can be submitted to the legal regime contained in the Company Law;
  • The minority action by shareholders holding at least 10% of votes against directors or members of the management or supervisory board can be brought even by those shareholders who have voted in favour of a discharge;
  • In respect of general meetings of a public limited company in which shareholders participate by using videoconferencing or similar communication devices, it will not now be necessary that a shareholder or a proxy of a shareholder be present in Luxembourg;
  • Despite criticism by the Bar Association and the Council of State, the bill maintains the requirement that in order to carry out a simplified liquidation a Luxembourg company needs in future to provide confirmations to the notary by the social security office, the tax office and customs & excise that such company has abided by all its obligations regarding social security and tax payments;
  • Clarification that for redemptions of shares to be carried out in a private limited liability company this can either be provided for in the articles in the form of redeemable shares or the company may, even if no disposition is inserted in the articles, redeem shares with the consent of the concerned shareholders;
  • If the shareholders of a private limited liability company have not approved the transfer of shares to a third party, the bill no longer requires the existing shareholders to acquire the shares being transferred but only gives them the option to do so.

We understand that the draft law is close to being finalised and should now be adopted in the course of 2016.