Luxembourg: Luxembourg Corporate Law - Modernisation 2016

Last Updated: 20 July 2016
Article by Laurent Thailly

Following extensive consultation, Luxembourg has enacted a far-reaching and meaningful modernisation of its corporate law. This provides a more modern, flexible and attractive corporate law framework whilst still rooted firmly in Luxembourg corporate law core principles: contractual freedom for shareholders and security for third parties.

As this new piece of legislation (the Law) has just been enacted, this briefing focuses on:

  • (i) the key changes that have been brought to the three most widely-used corporate forms: the private limited company (SARL), the public limited company (SA) and the limited partnership issuing shares (SCA); and
  • (ii) the new form of company introduced into Luxembourg law: the simplified public company (SAS).

SARL – Private limited company

As a flexible and quasi-partnership company, the SARL was already operating within a light set of statutory requirements. The Law further enhances its attractiveness by making it more flexible, adding useful new tools to its existing regime and providing legal certainty for certain already well established practices, as detailed below, in addition to the additional changes of general application outlined in the below section relating to all three types of companies (SARL, SA, SCA):

  • the maximum permitted number of shareholders is raised from 40 to 100, and except in case of an amendment to the articles, there is no need to hold shareholders' meetings unless there are more than 60 shareholders
  • the minimum required share capital is reduced to EUR 12,000
  • SARL are now formally authorized to issue:
    •  the very flexible "beneficiary units" (parts bénéficiaires), which do not form part of the share capital, and whose rights, including in relation to voting and profit sharing, are exclusively determined by the articles, for maximum flexibility
    • specifically redeemable shares, with conditions and modalities also exclusively determined by the articles
    • debt securities to the public, although the public issue of shares and beneficiary units remains prohibited
  • SARL may have an authorized share capital (in addition to the issued share capital), allowing it to issue shares within the limit of the authorisation granted by the shareholders, without the need to hold a shareholders' meeting before notary
  • the shareholders' approval required to transfer shares to third parties may now be lowered to only half of shares of the Company (the same applies to beneficiary units with voting rights)
  • unanimity is no longer required to change the company's nationality
  • the articles may authorise the directors to suspend the voting rights of shareholders not complying with their obligations
  • separately, shareholders may waive permanently or temporarily the exercise of their voting rights
  • voting agreements between shareholders are now formally recognized, subject to conditions
  • the articles may authorise the directors to cancel shares redeemed by the company and decide on a corresponding share capital reduction
  • a change to the articles now only requires the approval of shareholders representing 3/4 of the share capital: the historic "double majority" requirement to also have a numeric majority of shareholders has been abolished
  • the daily management of the company may be delegated (whether to a board member or to a third party)
  • the use of telecommunication devices at board and shareholders' meetings is formally recognized
  • the articles may authorise the directors to pay interim dividends, subject to the same rules currently applicable to SA.

SA – public limited company

Depending on the activities or transaction structuring, the SA is less frequently encountered in practice, partly due to the more extensive statutory environment which applies to it. Whilst this statutory environment will remain more prescriptive than that of a SARL, it will benefit from the following flexibilities:

  • the minimum required share capital is reduced to EUR 30,000
  • subject to certain conditions, shares without nominal value may now be issued below their par value
  • shares of unequal value or without nominal value may confer voting rights proportional to the portion of the share capital they represent (unless otherwise stated in the articles)
  • a specific regime is introduced for the allocation of free shares of the company to its or certain of its affiliates' employees or directors
  • time-limited lock-up clauses providing for restrictions on the transferability of shares, beneficiary units (parts bénéficiaires), subscription rights and certain convertible debt securities, are now formally recognized
  • the regime governing non-voting shares has been simplified (notably, the limitation to 50% of the share capital and the need to attach preferential financial rights to such shares have been abolished)
  • more flexible rules relating to the company's management have been introduced:

    • specific recognition of the possibility to create committees
    • ability for the board of directors to delegate a large portion of its management powers to a general director or a management committee (who may also be authorised to represent the company)
  • minority shareholders/holders of beneficiary units (holding at least 10% of the voting rights at the shareholders' meeting which resolved on the relevant discharge) may take legal action against the company's management or supervisory board, as applicable
  • unanimity is no longer required to change the company's nationality
  • the articles may authorise the management body to suspend the voting rights of shareholders not complying with their obligations
  • separately, shareholders may waive permanently or temporarily the exercise of their voting rights
  • voting agreements are now formally recognized, subject to conditions
  • the procedures to convene shareholders' meetings have been simplified when all the shares are in registered form: with the consent of shareholders, convening by e.g. express or electronic mail can now be formally adopted.

SCA – limited partnership issuing shares

All the above changes relating to the SA also apply to the SCA.
It is to be noted that the Law helpfully clarifies that when a legal entity is appointed as manager of the SCA, it does not need to appoint a permanent representative.

Changes of general applications

The following also apply to all SARL, SA and SCA:

  • tracking shares are now formally recognised
  • the bonds issuance regime has been both standardized (any type of company may now issue bonds) and rendered more flexible
  • a specific regime regarding the changes of corporate form has been introduced, providing clarity on companies' transformations
  • the articles can authorize the management body (ie no longer the shareholders only) to transfer the registered office of the company within the Grand Duchy of Luxembourg and amend the articles accordingly
  • clear rules governing voting and economic rights of shares bearing usufructs have been introduced
  • the "simplified" liquidation regime, long-used in practice by way of a single deed before notary, has been formally recognized, under certain conditions.

Transitory period

A transitory period of two years (from the date on which the Law takes legal effect) has been introduced for existing companies to comply with these new legal provisions.
However, when an amendment to the articles is required due to the very fact that they refer to a legal provision which has been abrogated or whose numbering has changed, the management body of the company is authorised to carry out the required modifications in the articles.
At the end of this two years transitory period, any provisions of the articles not at that time updated to comply with the Law, will be deemed extinguished and the new statutory rules will directly apply.

SAS – société par actions simplifiée - simplified public company

A new simplified form of public limited company has been introduced into Luxembourg law, the SAS. Inspired by the French market and now an option to consider for joint venture vehicles for instance, the SAS is primarily regulated by the rules applicable to SA but with almost limitless flexibility with respect to corporate governance. The main points of differences concerning governance are that:

  • the SAS is managed by a president, which can be either an individual or a legal entity
  • the president represents the company on dealings with third parties
  • the articles may provide that the president can be assisted by one or more directors.

It is to be noted that the SAS cannot issue shares to the public.
To discuss further any question relating to this briefing and the scope of corporate vehicles, please contact Laurent Thailly, Managing Associate, or your usual contact at Ogier Luxembourg.

Click here to open the Amended Law of 10 August 1915 relating to commercial companies (in French).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions