Conference on the Impact of Luxembourg Company Law Reform

Etienne De Crépy, Attorney at Law, Kaufhold & Réveillaud, Avocats presents on what the modernizations mean for corporate governance of Luxembourgish companies

On Friday, September 16, 2016, Meetincs SA held a conference at Hotel Royal in Luxembourg that focused on analyzing the country’s new company law reform introduced with the passing of bill 5730 into law on August 10th (the Law).

After nearly ten years of development, these modernizations are the result of joint effort from the community’s academics, lawyers, businesspeople and politicians. They update, change and add many provisions to the the original law of August 10, 1915 so as to align written rules with modern company practices, i.e. how they structure activities and partnerships.

Roughly 100 legal and business professionals – lawyers, notaries, domiciliation agents and company directors – attended the daylong meeting to discuss and learn more about the law and its potential impacts. The topics included:

• Updated shareholder guidelines
• Defined SAS company structure
• Modernization of the SARL
• Corporate governance
• Simplifying liquidation
• Tracking shares

Etienne De Crépy, Attorney at Law, Kaufhold & Réveillaud, Avocats, was asked to be a presenter and share his insight on how the law could impact the corporate governance of commercial companies in Luxembourg.

To introduce the subject, he began by looking at the historical context, definition and objectives of corporate governance in Europe and Luxembourg.

He highlighted the fact that corporate governance has become a hot topic in recent years with respect to companies with shares listed on a regulated market and supervised professionals of the financial sector, for which detailed binding rules are applicable.

Corporate governance for holding companies, the most common vehicles used in Luxembourg apart from funds, is much lighter. The reason for this, De Crépy explained, is that there is less of a financial systemic or national reputational risk for unregulated companies active in private equity.

Therefore, the Law only aims at improving existing practices and embedding them into a set of written rules to increase legal certainty and clarification while retaining the flexibility and pragmatism of Luxembourgish companies.

Next, the presentation examined all existing practices relating specifically to the SA and SARL that have been recognized and codified by the Law, aligning the management of the SARL to the SA regime, for instance:

• Use of written resolutions instead of board meetings by board of directors or “board of managers” (now recognized as a management body of the SARL)
• Possibility for a SARL to delegate its daily management to one manager or to any specific agent
• Recognition of the management committee in SA
• Framing of conflicts of interest

Etienne De Crépy then discussed the new powers and obligations of managers and directors, touching upon issues such as the suspension of shareholder voting rights and a SARL’s bond issuance to the public. He also insisted on the increased responsibility of SA directors because of (1) new obligations in certain circumstances, such as when the net assets of the company fall below a certain threshold, and (2) the rules in place to reinforce transparency and better protect minority shareholder rights.

In addition to the panel presentations, event programming incorporated opportunities for Q&A sessions, discussions, brainstorming and networking.