The recent changes in the law have a significant impact on private limited liability companies, specifically the SARLs, and also have some relevance for public limited liability companies (the SAs) and special limited partnerships (the SCSp). Here's a summary of the key modifications brought about by the New Law:
Transfer of SARL Shares to Third Parties:
According to Article 710-12 of the Corporate Law, SARL shares could only be transferred to third parties with the approval of shareholders representing at least three-quarters (or half, if specified in the articles of association) of the share capital. The New Law clarifies that only shareholders are involved in the approval process, removing any ambiguity about the company's role. If the transfer is not approved and the transferring shareholder does not abandon the transfer, the shares can be acquired by non-transferring shareholders or bought back by the company within three months. Previously, the company needed the transferring shareholder's consent for repurchasing shares, but this requirement is eliminated by the New Law. The transferring shareholder still has the option to abandon the transfer. Additionally, the New Law allows the company to retain repurchased shares in its treasury instead of canceling them to reduce its share capital.
Liquidation of SARLs: The New Law eliminates the statutory double majority requirement for initiating the liquidation of a SARL, making it sufficient for shareholders holding three-quarters of the share capital to consent to the liquidation, unless stricter requirements are outlined in the articles of association.
Single-Shareholder SARLs: Previously, certain provisions of the Corporate Law did not apply to single-shareholder SARLs, but the New Law corrects this error. It grants single-shareholder SARLs the flexibility to:
Allow management to issue shares within authorized capital limits.
Transfer the company's registered office without the sole shareholder's intervention.
Make decisions through telecommunication means.
Additionally, specific rules related to statutory pre-approval procedures for share transfers and decision-making rules for different share categories no longer apply to single-shareholder SARLs.
Shareholder Meetings for SARLs: The New Law introduces several improvements for SARL shareholder meetings, aligning them with the rules applicable to SAs. It is no longer necessary for a shareholder or proxy to be physically present in Luxembourg when participating in remote shareholder meetings. Repurchased shares are not considered for quorum and majority calculations, similar to SAs. Shares with suspended or waived voting rights are not included in determining quorum for shareholder meetings, applicable to both SARLs and SAs.
SCSp Leonine Clauses: The New Law specifies that leonine clauses, which allocate all profits to one shareholder or exempt a shareholder from contributing to losses, are null and void. However, these clauses do not invalidate the entire constitutive document of the SCSp.
SA Bonds Under Luxembourg Law: Companies, including SAs, can now disapply the statutory bond issuance regime provided in articles 470-1 to 470-19 of the Corporate Law when issuing bonds governed by Luxembourg law.
Other Corrections: The New Law rectifies clerical errors, omissions, and inconsistencies from the 2016 reform of the Corporate Law. It updates definitions and references to other laws that have changed or been repealed since then.
Exciting developments lie ahead, as substantial changes to the Corporate Law are expected in the near future, subject to the progress of various draft bills. These changes aim to enhance the transparency and efficiency of corporate governance in Luxembourg.
The bill number 8053 transposing the EU mobility directive (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) into Luxembourg law and amending the Corporate Law’s regime of mergers, divisions, and conversions. Even though the deadline for the implementation of this directive into national law has already lapsed on 31 January 2023, the bill is still pending its final vote in the Luxembourg Parliament. Updates by Loyens & Loeff to follow.
The bill number 8286 aiming at modernising the Luxembourg accounting law by making it more comprehensible and readable, submitted to the legislative procedure in the Parliament recently on 28 July 2023 – which is not expected to be voted prior to next year.
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