New rights for minority shareholders

The Luxembourg law of 10 August 2016 modernising the law concerning commercial companies of 10 August 1915 (the “Company Law”) and modifying the Civil Code (the “New Law”) has introduced significant new rights for the minority shareholders which are applicable since 23 August 2016.

1 The liability actions towards directors

One of these rights, provided for in the new article 63bis of the Company Law, is the action ut singuli which is giving the possibility for individual shareholders or holders of profit shares representing at least 10% of all the votes entitled to be expressed at the annual general shareholders' meeting of a société anonyme (S.A.), a société par actions simplifiée (S.A.S.) or a société en commandite par actions (S.C.A.) to bring, on behalf of the company, a claim against the directors, or, in two-tier structures, against the members of the management board and the supervisory board for any harm caused to the company as a result of mismanagement or breach of the articles of association of the company or of the Company Law.

Before the legislative reform, the action on behalf of the company required the approval of a simple majority of shareholders, whereas minority shareholders could introduce proceedings on their own behalf but in a very limited number of cases.

The right is inspired by the Belgium law where the action ut singuli has showed itself to be effective. As of now, it is recommended that the members of the management take this new right into consideration when evaluating their liability risk.

2 The right to request information on management decisions

Inspired by the provisions applying to listed companies, another right, provided for in the revised article 154 of the Company Law, is the right of shareholders and/or holders of 10% of the whole capital or voting rights of all forms of companies to address written questions on management decisions with respect to the company’s and its affiliated entities’ operations. 

In the absence of a response by the management body within one month, the relevant shareholders may request the president of the district court sitting in commercial matters and in the form of summary proceedings (président du tribunal d'arrondissement siégeant en matière commerciale et comme en matière de référé) to appoint one or several experts to establish a report on the operations that were the subject of the written questions. The judge may decide that the costs of the investigation shall be advanced by the company.

Before the law of 10 August 2016, the request for an independent investigation was allowed to shareholders representing at least 20% of the share capital and was conditioned by the existence of "exceptional circumstances". This reform therefore considerably facilitates the access to an independent investigation and is expected to be a powerful tool for the minority shareholders.