Assessing and mitigating the impact on corporate governance and day-to-day management

Assessing and mitigating the impact on corporate governance and day-to-day management

Assessing and mitigating the impact on corporate governance and day-to-day management
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The law of 23 September 2020 regarding measures governing how companies and other legal entities are permitted to hold meetings enables 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.

These measures were initially provided by the Grand-Ducal regulation of 20 March 2020 and subsequently extended by the law of 20 June 2020 in the context of the COVID-19 pandemic. The law of 17 December 2021 has further extended these measures until 31 December 2022.

A company holding its general meeting by videoconference or by means of written resolutions without a corresponding provision in its articles of association to allow this would risk exposing its directors or managers to liability. It is therefore essential that legal certainty for such situations be provided by means of a law. 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.

Thus, the law of 23 September 2020 aims to maintain the possibility for companies and other legal entities to hold their meetings remotely. The law applies to all general meetings (both annual and extraordinary general meetings), and other meetings of corporate bodies such as board meetings.

In a nutshell, the following applies for shareholder meetings (even if there is no such provision in the company’s articles of association):

  • 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 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.

In a nutshell, the following applies for meetings of other corporate bodies (irrespective of contrary provisions, or the absence of any provisions, in the company’s articles of association):

  • Meetings may proceed by way of written circular resolutions or,
  • by videoconference or any other means of telecommunication enabling participating board members to be identified.

Note that the law of 30 June 2021 extended these measures until 31 December 2021, and that they have been further extended until 31 December 2022 by the law of 17 December 2021.

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

Your contacts for more details:

Bob Calmes (, Philippe Harles ( and Caroline Halembert (


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 ( and Maria Grosbusch (

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 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 (franç