Special serie COVID-19 - n°8 How to deal with corporate law issues?

In the context of the COVID-19 outbreak, most companies are currently facing unprecedented legal issues within their organisations. As a result, they have to adapt significantly their way of working to go through this unique time in the best possible and efficient manner. In order to assist you in this task, we have identified several hot topics, which we will present in a separate newsletter, to be published over the coming days and weeks, where we will provide you with practical hints to approach the situation efficiently.

The Law of 12 May 2020 implementing the draft bill 7540 and extending certain deadlines applicable to supervised entities of the financial sector during the state of crisis has been promulgated and published in the official gazette, Mémorial A (the “Funds Law”).
On 12 May 2020, parliament adopted the law implementing the draft bill 7541 extending the deadlines for the filing and publication of annual accounts, consolidated accounts and related reports during the state of crisis, which should be published in the official gazette, Mémorial A in the coming days (the “Corporate Law”, and together with the Funds Law, the “Laws”).
In this eighth newsletter, we will explain that the purpose of the Laws is to grant an extension of 3 months in the deadline for approving and filing financial statements.
The Laws are immediately enforceable as from their publication date in the official gazette, Mémorial A.

     1.   The Corporate Law
The Corporate Law extends by 3 months the deadlines for filing of financial statements with the Luxembourg Trade and Companies Register (Registre de Commerce et des Sociétés, the “RCS”) and publication with the Electronic Official Gazette (Recueil Electronique des Sociétés et Associations, the “RESA”), namely:

Straight Consolidated Annual accounts and balance of accounts Consolidated accounts Management report Consolidated management report Audit report Consolidated audit report Report on payments to government Consolidated report on payments to government

It also grants an additional 3 months’ period to approve the financial statements, so that the annual general meeting can be held up to 9 months after the end of the financial year, instead of the usual 6 months.
This extension applies to companies whose financial year will close at the latest on 24 June 2020 (by reference to the law of 24 March 2020 extending the state of crisis declared by the Grand-Ducal regulation of 18 March 2020 introducing a series of measures in the fight against Covid-19, that extended the state of crisis for a period of 3 months) and for which the deadline for filing and publication expired at the earliest on 18 March 2020 (i.e. for a financial year closed after 18 August 2019).
In a nutshell, the financial years covered by the extension are the ones closing at the earliest on 18 August 2019 and at the latest on 24 June 2020.
The periods at stake are depicted in the following illustrative timeline (for a financial year closing on 31 December 2019):

Consequently, the Corporate Law now allows companies with a financial year ending on 31 December 2019 (thus effectively most Luxembourg companies) to file their financial statements until 31 October 2020, instead of 31 July 2020.
This goes beyond the two previous measures taken by the Government in the context of the Covid-19, as explained in our Newsletter Covid-19 n°2 “How to deal with corporate law questions?” (https://www.pwclegal.lu/en/publications/special-serie-covid-19-num-2.html), i.e.:

The freeze of the surcharge of fees for late filing of financial data granted since 18 March 2020 by the Luxembourg Business Register;
The provision from the Grand-Ducal regulation dated 20 March 2020 that, in practice, allowed companies with a financial ending earlier than 31 December 2019 to hold their annual general meetings until 30 June 2020.

Moreover, the Corporate Law extends by 3 months the timeline for triggering criminal sanctions for managers of directors who did not submit the financial statements for approval to the annual general meetings of shareholders within 6 months after the end of the financial year (although a fraudulent late filing of accounts is not covered by this extension).
As a consequence of the above, we recommend taking the following actions in the context of the Covid-19 quarantine:

If the last financial year of your company ends between 18 August 2019 and 24 June 2020, you may approve the annual accounts up to 9 months after the end of the financial year, and file the financial statements with the RCS up to 10 months after the end of the financial year;
If you convene an annual general meeting during the extended period, be transparent towards the shareholders that this is made in accordance with Luxembourg law and refer to the Corporate Law in the convening notice.

     2.   The Funds Law

As mentioned in our Special Series Covid-19 n°5- Impact on regulatory deadlines for investment funds, the aim of the Funds Law is to grant an extra period of time to certain supervised investment funds to make their annual/semi annual reports available to investors. The main change since our previous publication is that, as anticipated, that flexibility has only been granted whenever it was not in contradiction with a European directive or regulation. As such, similarly to UCITS, in order not to be in contradiction with the AIFM Directive[1], this extra delay is only possible for:

  • the annual report of SIFs and SICARs that are not managed by an authorised AIFM
  • the semi-annual report of Part II funds.

[1] Which provides that annual report must be made available to investors within 6 months from the financial year end.