What is the Stop the Clock Directive?
The so-called "stop the clock" directive (the Directive) is an integral part of the "Omnibus Package", i.e. a set of proposals to simplify inter alia European Union (EU) rules on sustainability reporting and sustainability due diligence, which was published by the European Commission (the Commission) on February 26, 2025.1 Due to its impact on the timing of sustainability reporting rules already applicable, the Directive was treated with high priority and approved by the European Parliament and the Council on 14 April 2025, outlining the EU commitment towards the enhancement of legal certainty and competitiveness.
The European Parliament and the Council have given their greenlight to the Commission's proposal to postpone (i) by two years the entry into force of the Corporate Sustainability Reporting Directive2 (the CSRD) requirements for large companies that have not yet started reporting and listed SMEs, and (ii) by one year the transposition deadline and the first phase of the application (covering the largest companies) of the Corporate Due Diligence Directive3 (the CSDDD).
The Directive entered into force on 15 April 2025 and must be transposed by Member States by 31 December 2025.
Luxembourg implementation of CSRD
On 6 May 2025, the Luxembourg government amended the CSRD bill of law to implement the Directive, thus positioning Luxembourg to become one of the first Member States to incorporate the Directive into national law.
Among other amendments, the amended bill of law introduces a new article 1654 for the companies which were already caught in the scope of CSRD (listed large companies) for their financial year 2024, clearly stating that companies whose financial year began on or after 1 January 2024 and ended before the date of entry into force of this amended law are not required to prepare and publish sustainability information for that financial year. However, they may choose to do so on a voluntary basis.
This amendment has been introduced to clarify the situation of companies which, under the CSRD, would have been subject to the obligation to prepare and publish sustainability information in accordance with the bill of law as from the financial year beginning in 2024. The government highlighted that it was imperative to provide legal certainty to these companies to avoid any retroactive effect on financial years ending before the date of entry into force of the amended law.
What's next?
We can reasonably expect that text of CSRD will be implemented shortly with the suggested amendments, including the postponed application date for the companies which were supposed to start reporting on their 2025 financial year (with first reports due in 2026) by two years (i.e. reporting starting from their 2027 financial year with first reports due in 2028).
Footnotes
1. For more information on the key elements of the Omnibus Directive with respect to Luxembourg investment fund managers, please read our publication here.
2. Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability reporting.
3. Directive (EU) 2024/1760 of the European Parliament and of the Council of 13 June 2024 on corporate sustainability due diligence and amending Directive (EU) 2019/1937 and Regulation (EU) 2023/2859.
4. Government amendments to Bill No. 8370 available here: "Art. 165. Par dérogation aux articles 88, 112, 116, 161 et 162 de la présente loi, les entreprises dont l'exercice a commencé au 1er janvier 2024 ou après cette date et a été clôturé avant la date d'entrée en vigueur de la présente loi ne sont pas tenues d'établir et de publier l'information en matière de durabilité au titre de la présente loi pour ledit exercice. Elles peuvent cependant choisir de le faire sur une base volontaire."
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.
