With the deadline for national implementation set at 28 December 2024, listed companies have until 30 June 2026 to achieve the quotas set by the EU Women on Boards Directive.
Directive (EU) 2022/23811 (Directive), known as Women on Boards, has officially entered into force, given that the Member States had until 28 December 2024 to implement it into national law.
The Luxembourg legislator has not yet implemented the Directive. Nevertheless, listed companies will have to reach the quotas set by the Directive by 30 June 2026, which is an opportunity to reassess the various obligations stemming from this Directive.
Objective of the Directive
The Directive aims to increase the representation of women on the management boards of listed companies2 in the EU that have more than 250 employees, achieve an annual turnover of more than EUR 50 million or have a balance sheet exceeding EUR 43 million.
These companies must aim for a gender balance in their management board by achieving one of the following objectives by 30 June 2026:
- 40% female membership among non-executive directors; or
- 33% among all directors, both executive and non-executive.
Listed companies that have put in place the above 40% criterion must also set individual quantitative objectives in order to improve the gender balance among executive directors.
Impact for Luxembourg companies
Listed Luxembourg companies will have to comply with these new requirements. This will involve reviewing notably the nomination and recruitment processes to ensure a more balanced gender representation within management boards.
Selection criteria
The Directive imposes specific binding measures on the selection process for members of the management boards with these companies, coupled with selection criteria that are transparent and gender-neutral, as well as a rule for prioritising the candidate of the underrepresented sex if the candidates have the same qualifications. The candidate who was not chosen may request that the criteria related to qualifications be disclosed.
Companies must also publish information outlining the composition of their boards and potential obstacles to achieving the objective of the Directive.
Measures and penalties
Companies that fail to achieve these objectives will be required to justify their efforts and the measures taken to reach them. Effective, proportionate and dissuasive penalties, such as fines or declaring nominations null and void, may be imposed in the event of non-compliance.
Next steps
Even in the absence of the implementation law for the time being, we recommend that affected companies start thinking now about the current composition of their management boards and putting in place strategies to achieve the objectives set out in the Directive.
Footnotes
1 Directive (EU) 2022/2381 of the European Parliament and of the Council of 23 November 2022 on improving the gender balance among directors of listed companies and related measures.
2 Companies with their registered office in Luxembourg and whose shares are admitted to trading on a regulated market within the meaning of Article 4 (1), point 21) of Directive 2014/65/EU in one or several Member States.
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.
