A few weeks after the adoption of the simplified private limited liability company (société à responsabilité limitée simplifiée), the Luxembourg legislator has decided to profoundly amend the legal regime applicable to the private limited liability company (société à responsabilité limitée) (“SARL”) pursuant to the law dated 10 August 2016 modernizing the law regarding the commercial companies dated 10 August 1915 (the “Law”). The key points to this reform are thus the following but remain subject to any contrary provision of the articles of association (“AoA”):
1 Legal requirements
- The minimum share capital required for the incorporation of a SARL was reduced from EUR 12,500 to EUR 12,000. It still must be fully paid-up; and
- The maximum number of shareholders has been raised from 40 to 100.
2 Management of the company
The Law now recognizes:
- The board of managers (collège de gérance) (“Board”) as the executive body of the SARL in case of a plurality of managers; and
- The possibility to delegate to one or several managers the daily management (gestion journalière) of the SARL who may thus bind the company by his/her/their signature(s).
3 Issuance of securities – Authorized share capital
- Possibility for a SARL to issue:
(a) Tracking shares (parts sociales traçantes) which allow the holder(s) to receive distributions based on the performance of one or several assets or of underlying assets;
(b) Redeemable shares (parts sociales rachetables) which, if provided by the AoA, may be redeemed by a mere decision of the Board, instead of a decision of the general meeting of the shareholders, provided that all the shareholders are equally treated;
(c) Securities not giving access to the share capital of the company but entitling its/their holder(s) to economic and, as the case may be, political rights,
- Beneficiary shares (parts bénéficiaires) which are nominative and freely transferable shares if not vested with voting rights;
- Shares issued in the context of a contribution of industry (apport en industrie) which are not freely transferable;
(d) to third parties, convertible bonds or instruments giving access to the share capital of the company subject to the fact that the rules related to the transfer of the shares or to the prior approval of the shareholders shall apply.
- Authorized share capital (capital autorisé): the Board may now be authorized pursuant to the AoA for a maximum period of 5 years, renewable, to increase the share capital of the SARL in an amount and under the terms and conditions determined in the AoA subject to the fact that the shares are issued in favor of existing shareholders or to third parties preliminary approved by the shareholders. The Board may also decide to redeem the redeemable shares and to resolve upon the subsequent share capital reduction which shall be further recorded by a notarial deed.
4 Transfer of the shares and beneficiary shares
The transfer of shares or of beneficiary shares requires the prior approval of the shareholders representing at least three quarter of the corporate units. The same rule applies to the dismemberment of the right of ownership.
The company must be notified by any shareholder who contemplates selling its shares or beneficiary shares. In case of refusal and unless the contemplated transfer is abandoned by the transferor, the shareholders may either acquire the shares or the company may decide to reduce its capital by the amount of the nominal value of the shares and to redeem them. Otherwise, the selling shareholder may proceed to the transfer.
Subject to the provisions of the AoA, the transfer of shares by reason of death to persons who are not shareholders also requires the prior approval of the shareholders unless if the shares are transferred to rightful heirs, to the surviving spouse or partner or to other legal heirs (if the AoA authorize such transfer).
The Law now also provides rules related to the determination of the price for the redemption of the shares and a specific procedure for any disagreement regarding this price.
5 General meetings of the shareholders
- Holding of general meetings of the shareholders is compulsory only in case of any amendment to the AoA or regarding the annual general meeting where the number of shareholders exceed 60. In any other case the attendance by videoconference, by telecommunication means permitting identification or through voting forms is recognized.
- Decisions of the general meetings:
- any change to the AoA shall be resolved upon by shareholders representing at least three quarters of the share capital: the former condition of double majority (majority of shareholders representing 3/4 of the share capital of the company) is no longer required;
- the unanimity is no longer required for the change of nationality but is maintained for any decision that leads to an increase of the shareholders’ commitments.
- Determination of the voting rights of the shareholders
- Waiver of the voting rights: a shareholder may decide in its name and on its behalf, on a permanent or temporary basis to waive its voting right and its right to take part in decisions, during a general meeting, as shareholder of the SARL;
- Suspension of voting rights: the Board may decide to suspend the voting rights of any shareholder in breach of its obligations under the AoA or under its subscription commitments;
- Voting agreements: any shareholder may agree in advance upon how it shall exercise its voting rights. However is void any agreement which is contrary to the Law and the corporate interest of the company and is made in accordance with directions given by the company, any bodies of the group or an affiliate. Votes cast in a general meeting or by written resolutions in virtue of such void agreement shall invalidate the related resolution unless they have no impact on the result of the vote; and
- Dismemberment of ownership: the Law provides general principals regarding the allotment of voting rights between the usufructary (usufruitier) and bare-owner (nu-propriétaire) which may be organized differently pursuant to the AoA. Moreover the Law recognizes a right for the usufructary (usufruitier) and bare-owner (nu-propriétaire) to access to certain documents before the general meeting.
6 Interim Dividends
The Law acknowledges the possibility for a SARL to proceed to the payment of interim dividends based on the rules already applicable to the public limited companies (sociétés anonymes) if provided by the AoA.
7 Conversion of a SARL
The Law introduced general rules related to the conversion of companies and other entities clarifying and simplifying the previous rules. However an enhanced regime has been implemented for any conversion of a SARL into a public limited company (société anonyme) or a corporate partnership limited by shares (société en commandite par actions) when (i) a SARL has benefited from a contribution in kind or a quasi-contribution within a period of two years prior to the members’ decision to proceed with the previous mentioned conversion, and when (ii) that contribution in kind or quasi-contribution has not been subject to a report by a statutory auditor (réviseur d’entreprises) and where such report would be required for a public limited company (société anonyme) or a corporate partnership limited by shares (société en commandite par actions).