The Luxembourg Parliament has adopted on 22 September 2020 a bill of law containing measures governing how companies and other legal entities are permitted to hold meetings. This bill will enable companies and other legal entities (such as ASBLs) to hold general meetings and other meetings of the company’s corporate bodies without the need for physical attendance, even where this is not provided for in the company’s articles of association. This option will now be available until 31 December 2020. These measures were initially provided for by the Grand Ducal Regulation of 20 March 2020, and were extended by the law of 20 June 2020. 
 
The bill enters into force on 1 October 2020, and repeals the law of 20 June 2020.
 
See below for contextual information.
 

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On 18 March 2020, the Luxembourg government declared a state of emergency for a period of three months in order to contain and slow the spread of COVID-19. This measure impacts shareholder meetings. Faced with this situation, Luxembourg companies (whether private or listed) had the following options pursuant to a Grand Ducal Regulation issued on 20 March 2020:

  • Shareholders can be invited to participate in general meetings by way of proxies given to independent proxyholders. Independent proxyholders are chosen by the companies themselves and may be internal persons (e.g. a representative of the board) or external persons (e.g. a lawyer or auditor).
  • Shareholders may also be asked to exercise their rights by a distance vote in writing or in an electronic format.
  • Lastly, if the technical means at their disposal so allow, companies may also hold shareholder meetings by videoconference or any other means of telecommunication.

 

As a last resort and based on the general provisions of company law, companies may also decide to postpone a meeting – although as a rule, this can only be done by adjourning it while it is being held – or to cancel it. Even where a postponement or cancellation may directly or indirectly result in a theoretical violation of company law, we do not expect sanctions to be imposed with the same stringency as before the initial government ban on in-person meetings, to the extent that force majeure could be relied upon.

Finally, where a notarial deed is legally required for action in this context, companies should first ensure that civil notaries’ offices are operational. Arendt continues to advise several companies on ongoing issues related to shareholder meetings. Arendt is also closely monitoring the operational capacity of other relevant players including civil notaries, the Administration de l’Enregistrement (Registration Duties, Estates and VAT Authority), the Luxembourg Business Registers and the banks.

The Grand Ducal Regulation of 20 March 2020 adopted in the context of the state of emergency has ceased to apply as of the end of the state of emergency, being 24 June 2020. This means that a general meeting validly convened on the basis of this Grand Ducal Regulation for a date falling after the state of emergency ends will no longer be able to rely on its provisions.

A company holding its general meeting by videoconference or by means of written resolutions without a corresponding provision in its articles of association allowing this would risk exposing its directors or managers to liability for breach of its articles of association or the law.

Therefore, the law of 20 June 2020 - published in the Official Journal of 25 June 2020 - aims at extending the increased flexibility measures under the Grand Ducal Regulation of 20 March 2020 regarding the means used to hold general meetings and other meetings of companies' corporate bodies. The new law, which covers both the corporate entities but also other non-corporate entities such as the ASBL, will apply to all the general meetings (both annual and extraordinary general meetings) and other meetings of corporate bodies to be held within a period of 9 months as of the end of the financial year of the given entity.

Your contacts for more details: Bob Calmes (bob.calmes@arendt.com) and Philippe Harles (philippe.harles@arendt.com)

(22/09/20)

The Luxembourg Parliament has adopted on 22 September 2020 a bill of law containing measures governing how companies and other legal entities are permitted to hold meetings. This bill will enable companies and other legal entities (such as ASBLs) to hold general meetings and other meetings of the company’s corporate bodies without the need for physical attendance, even where this is not provided for in the company’s articles of association. This option will now be available until 31 December 2020. These measures were initially provided for by the Grand Ducal Regulation of 20 March 2020, and were extended by the law of 20 June 2020. 
 
The bill enters into force on 1 October 2020, and repeals the law of 20 June 2020.
 
See below for contextual information.

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Although governmental restrictions and travel bans are progressively being lifted, the holding of physical board meetings remains challenging. Furthermore, some Luxembourg companies could face additional difficulties if their articles of association provide that board meetings can only be held if, for instance, a majority of the board members are physically present in Luxembourg, or if they have to comply with tax or regulatory substance requirements.

On 20 March 2020, the Luxembourg authorities published a Grand Ducal regulation expressly permitting Luxembourgish companies to hold board meetings without holding a physical meeting. Thus, irrespective of contrary provisions, or absence of any provisions, in companies’ articles of association, board meetings may proceed (i) by way of unanimous written board resolutions or (ii) by videoconference or any other means of telecommunication enabling participating board members to be identified.

The Grand Ducal Regulation of 20 March 2020 adopted in the context of the state of emergency has ceased to apply as of the end of the state of emergency, being 24 June 2020.This means that a board meeting validly convened for a date falling after the state of emergency ends will no longer be able to rely on its provisions.

Thus, a company holding its board meetings by means of written resolutions without a corresponding provision in its articles of association allowing or forbidden this this would risk exposing its directors or managers to liability for breach of its articles of association or the law. Therefore, the law of 20 June 2020 aims at extending the increased flexibility measures under the Grand Ducal Regulation of 20 March 2020 regarding the means used to hold general meetings and other meetings of companies' corporate bodies. The law, which covers both corporate legal entities but also other non-corporate entities such as the ASBL, will apply to all the general meetings and other meetings of corporate bodies to be held within a period of 9 months as of the end of the financial year of the given entity.

Arendt is currently advising several companies on the most appropriate way to deal with their articles of association, or on how to rely on force majeure with a view to preventing business disruption while mitigating legal risks.

Your contacts for more details: Bob Calmes (bob.calmes@arendt.com) and Philippe Harles (philippe.harles@arendt.com)

(22/09/20)

If on a going concern basis directors must look at the long-term benefit of the company in every decision they make on its behalf, the dynamic is rather different in a situation of financial difficulties, where the scope of their fiduciary duties may drastically change:

  • First, directors will be expected to take a shorter-term perspective than outside financial difficulties, focusing e.g. on refinancing the due and payable obligations of the company, negotiating payment terms with the company’s creditors, disposing of certain assets to settle liabilities (including salaries), i.e. in a nutshell keeping the business afloat in the immediate future.
  • Second, the frequency of board meetings should be increased as the crisis intensifies, with the board taking preventive action as much as possible to avoid the bankruptcy.
  • Third, in a situation of financial difficulties, board members are subject to certain additional duties, such as convening a general meeting of shareholders when the company’s net equity becomes negative by more than half, then three quarters of the share capital (at least for certain corporate forms) or filing for bankruptcy within a month of the company having ceased its payments to creditors (as discussed above).

Your contacts for more details : RIDesk@arendt.com
(19/03/20)

Regarding the liability of board members, here again, the situation is different in a normal fashion or when financial difficulties have made the business bankrupt. In the former instance, directors may generally be held liable if they committed an error in discharging their management duties that a normally prudent and diligent director, placed under the same circumstances, would not have committed. In a situation of bankruptcy however, the Luxembourg court which opened the bankruptcy proceedings may board members liable under various circumstances:

  • First, a board member may be held liable for all or part of the liabilities of the bankrupt company in case there are insufficient assets to settle all such liabilities and the board member has contributed to the occurrence of the bankruptcy through his/her gross negligence.
  • Second, a director may be declared personally bankrupt, with the liabilities of the bankrupt company added to his/hers, in case he/she acted under the cover of the bankrupt company for his/her personal benefit, used the bankrupt company’s assets as if they were his/her own or misused his/her authority in order to pursue a loss-making activity for his/her personal benefit and without a reasonable chance of avoiding the bankruptcy.
  • Third, a director who has contributed through a serious and characterized offence to the bankruptcy may also be prohibited by courts to exercise any commercial activity or hold directorships or other similar mandates.

Your contacts for more details : RIDesk@arendt.com
(19/03/20)

Remuneration of board members in a Luxembourg corporate entity is usually subject to approval by and/or reporting to the general meeting of shareholder. Remuneration can take various forms, a bonus or option plan, share allocation or similar, and is often embedded in a larger framework of a policy of remuneration of board members based on different criteria. While the criteria are often set in a framework over several years, the decision to make actual payments is often taken at the occasion of any such payments. Notably, such rights to receive a payment of a bonus are often associated with a certain discretion of the company.

Payments to directors both as one off bonifications, and under bonus plans, can be problematic at a time where the economic outlook of many companies is already and/or risks to be heavily impacted by measures taken in relation to COVID-19, as, now more than usual, incentive payments that are in any way discretionary (as opposed to those arising out of contractual obligations), must be carefully balanced against the company’s corporate interest. A board must, before making or authorising such payments or proposing a payment to the general meeting of shareholders, ensure that it (i) is embedded in a global strategy of long term growth of the Company and (ii) complies with legal and contractual requirements, notably if they have any discretion in respect of amount and timing of payment. Particular caution must be applied in respect of such payments, which could in this context be considered a misappropriation of corporate assets, a criminal offense under Luxembourg law.

The sanctions for misappropriation of corporate assets go up to EUR 25,000 in fines and 5 years in prison. The offense consists in the malicious use of corporate assets or credit by a person entrusted with the management of a company for their own personal gain, be that direct or indirect. Any claim in this respect must be brought by the company itself.

In order to mitigate the risk, the deciding body should apply necessary caution, with respect to payout amounts and timing, motivation thereof, and in particular, the persons who may be implicated in the decision process. Board members should carefully assess whether they face a conflict of interest, and if so, should abstain from participating in the decision (or, as the case may be, submit the decision to the general meeting of shareholders in accordance with applicable legal provision).

Your contacts for more details : Alexander Olliges (alexander.olliges@arendt.com) and Maria Grosbusch (maria.grosbusch@arendt.com)
(19/03/20)

On 27 March 2020, the Commission de Surveillance du Secteur Financier (“CSSF”) issued a press release (the “Press Release”) essentially reiterating the position published earlier by the European Securities and Markets Authority in its public statement dated 27 March 2020.

The CSSF confirmed that it will not take any administrative measures or impose sanctions where issuers fail to comply with the upcoming deadlines for the publication of periodic financial information as required by Articles 3, 4 and 5 of the Law of 11 January 2008 on transparency requirements for issuers, as amended (the “Transparency Law”).

As needed, issuers may make take an additional two months to publish financial information for the relevant period. This temporary measure applies to financial information for reporting periods ending on or after 31 December 2019, but before 1 April 2020.

To ensure investor protection and preserve the integrity of the markets, the CSSF has also indicated the following:

  1. Issuers that can reasonably anticipate that their financial reports will be delayed should inform the market thereof.
  2. Issuers and holders of securities shall pay particular attention to compliance with ongoing disclosure requirements set by the Transparency Law and by Regulation (EU) No 596/2014 on market abuse (“MAR”). In particular, this concerns issuers’ requirement to disclose inside information, the requirement to notify and publish major holdings and the requirement to notify and publish managers’ transactions.

Issuers anticipating that their financial reports will be delayed should also notify the CSSF thereof (at transparency@cssf.lu) as soon as possible, and before the relevant legal deadline, giving the reasons for the delay and, where possible, the expected publication date.

The full text of the Press Release is available at the following link:

CSSF - Press release dated 27 March 2020

Your contact for more details: François Warken (françois.warken@arendt.com)

(01/04/20)

As part of its targeted efforts to mitigate the negative effects of the Covid-19 outbreak in Luxembourg, the law of 22 May 2020 introduces a set of temporary measures in relation to accounting and filing requirements in Luxembourg.

2020.05-Arendt-Visu-comptes-annuels-v8

The aim of the law is to extend the filing and publication deadlines for annual accounts, consolidated accounts and related reports as well as the holding of annual general meetings, in order to avoid exposing company managers and directors to liability and sanctions that are disproportionate given the exceptional circumstances.

The law expands on the warning published by the Luxembourg Business Registers (see below) introducing a degree of administrative lenience.

The law enters into force on 29 May 2020.

 
Extension of the deadline for holding general meetings, filing and publication for annual accounts

The law extends the filing and publication deadlines for annual accounts, consolidated accounts and related reports (such as consolidated management reports and audit reports) by 3 months.

As such, companies whose financial year is the calendar year (i.e. those which have the end of their financial year on 31 December 2019) would have 3 additional months to file their annual accounts with the Trade and Companies Register, resulting in an effective deadline of 31 October 2020 (instead of 31 July 2020 as per the usual rules).

All companies will also have an additional 3-month period to hold their annual general meeting. Companies would thus have 9 months (instead of 6 months) to have their annual accounts approved, and would be required to file them with the Trade and Companies Register within 10 months of the end of the relevant financial year (instead of 7 months).

A company whose financial year ends on 31 December 2019 may hold its annual general meeting until 30 September 2020 and file and publish its accounts and reports until 31 October 2020.

In a nutshell: Companies will have a period of 10 months to approve, file and publish their annual accounts.

Sanctions on hold

The law also specifies that during this additional 3-month period, the late submission of annual accounts and related reports to the general meeting of shareholders and the late filing of these documents shall not be subject to criminal proceedings. Directors or managers who are unable to submit the annual accounts, consolidated accounts and related reports to the general meeting of shareholders for approval within 6 months of the end of the financial year, and who cannot file and publish these documents within 7 months (i.e. within a month of approval), will not be subject to sanctions during the 3-month extension granted due to the state of emergency.


The extension does not apply where the deadline for filing or holding the general meeting had already passed as at 18 March 2020.

Finally, to prevent potential abuse of the measure, the law specifies that the extension only applies to annual or consolidated accounts, related reports and general meetings of shareholders regarding financial years ended no later than the date on which the state of emergency ends (currently planned for 24 June 2020). Furthermore, it only applies where the filing and publication deadlines or the deadline for holding the general meeting had not yet passed as of the date the state of emergency was declared (i.e. 18 March 2020).

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Luxembourg Business Registers warning (dated 18 March 2020)

In response to the disruption caused by COVID-19, the Luxembourg Business Registers has published a warning informing companies that an additional administrative period of 4 months has been granted in which annual accounts for the 2019 financial year may be filed. The standard rate will continue to apply during this period.

As such, for a financial year ending on 31/12/2019, annual accounts filed by 30/11/2020 will be subject to the standard administrative charge.

Please bear in mind that specific rules and deadlines may apply for regulated or listed companies.

Your contacts for more details:
Laurent Schummer (laurent.schummer@arendt.com)
Marc Elvinger (marc.elvinger@arendt.com)
Alexandra Cabannes (alexandra.cabannes@arendt.com)


(02/06/20)