ARTICLE
28 January 2025

Luxembourg Enhances Cross-Border Corporate Mobility With New Legal Framework

AM
Arendt & Medernach

Contributor

About Arendt

Arendt combines the entire value chain of services dedicated to Asset Managers, Banks, Insurers, Public Institutions and Private Clients operating in Luxembourg.

-Legal & Tax
-Regulatory & Consulting
-Investor Services

Legal & Tax

We assist clients in structuring and running their business from a legal and tax standpoint across Luxembourg. Our teams directly serve international clients or work in close collaboration with foreign partner law firms.

Together with our regulatory consultants and investor services experts, we bridge the gap between legal/tax advice and its implementation. We deliver best-in-class services along our clients’ business life cycles.

The 450 legal experts of Arendt & Medernach have a wealth of experience in a wide variety of specialisations. Together, they are able to advise on a complete range of 15 complementary practice areas

Luxembourg has introduced a comprehensive legal framework to facilitate cross-border transactions. The new law increases legal certainty and strengthens protections for stakeholders...
Luxembourg Corporate/Commercial Law

Luxembourg has introduced a comprehensive legal framework to facilitate cross-border transactions. The new law increases legal certainty and strengthens protections for stakeholders in line with EU standards.

Overview

On 23 January 2025, the Luxembourg Parliament adopted a new law (Law) implementing Directive (EU) 2019/2121, which amends Directive (EU) 2017/1132 regarding cross-border conversions, mergers and divisions (Mobility Directive).

The Law modernises the Luxembourg framework relating to cross-border mobility transactions through the introduction of two distinct regimes: a general regime applicable to national and cross-border mergers, divisions and conversions not within the scope of the specific regime, and a specific regime applicable to intra-EU cross-border mergers, divisions and conversions explicitly included within the scope of the specific regime.

By introducing these two regimes, Luxembourg has expanded the scope of mobility transactions to include cross-border conversions and divisions, which were previously unregulated. This dual-regime approach ensures legal certainty for businesses while reinforcing Luxembourg's attractiveness as a jurisdiction for cross-border corporate transactions.

General regime

The general regime governs domestic mergers, divisions and conversions, as well as the following cross-border mergers, divisions and conversions:

  • Cross-border transactions involving a non-EU Member State.
  • Cross-border transactions involving a Luxembourg company existing in a form other than a société anonyme, a société à responsabilité limitée or a société en commandite par actions, regardless of whether the other country is within or outside the EU.
  • Cross-border transactions involving both the above criteria.

The existing rules will continue to apply under the general regime. This will maintain flexibility and allow Luxembourg companies to continue to engage in cross-border transactions with third parties while aligning with Luxembourg's established corporate practices.

Specific regime

The specific regime governs intra-EU cross-border mergers, divisions and conversions where the Luxembourg company exists in the form of a société anonyme, a société à responsabilité limitée or a société en commandite par actions and an EU Member State is involved.

Cross-border divisions by absorption are explicitly excluded from the specific regime.

Key features include:

  • Enhanced protections for stakeholders:
    • Shareholders: including a right of withdrawal for minority shareholders under certain conditions
    • Creditors: strengthened safeguards for claims
    • Employees: improved rights and involvement
  • Harmonised processes: every EU Member State will apply the same rules, including for cross-border conversions.
  • Notaries play a pivotal role in verifying compliance, ensuring the legal requirements are met and preventing fraudulent activities.

What's next?

The Law will come into force on the first day following the month of its publication in the Luxembourg Official Journal.

In cases where the draft terms of a transaction are published prior to that date, the existing rules will continue to apply. Where the draft terms of a transaction are published on or after that date, the new rules will apply.

Bill of law 82251, which implements the employment law aspects of the Mobility Directive, is likely to be adopted soon. This bill of law introduces new rules regarding informing, consultation and participation of employees of companies involved in cross-border restructurings. It extends existing obligations related to mergers and strengthens them to include cross-border divisions and conversions. These measures aim to ensure that employees' rights are maintained and protected during these transactions by ensuring adequate worker involvement in corporate decision-making processes.

Footnote

1. Bill of law 8225 amending the Labour Code to implement Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions.

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.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More