Recent Luxembourg Case Law On The Minority Action Against Management

Clarification on the legal conditions to be met and consequences triggered by the vote on discharge

What is a minority action?

The Luxembourg District Court has recently rendered a judgment clarifying, amongst others, the conditions to be met to validly bring a minority action against the management of a Luxembourg company (Jugement du Tribunal d'Arrondissement (XV chambre) n° 2018TALCH15/543 dated April 25, 2018).

This minority action was introduced into Luxembourg company law by the law dated August 10, 2016 and applies only to public limited companies by shares (sociétés anonymes), European companies (sociétés européennes), corporate partnerships limited by shares (sociétés en commandite par actions), co-operative societies organized as public limited companies by shares (sociétés coopératives organisées comme sociétés anonymes), and simplified limited liability companies (sociétés par actions simplifiées). It does not apply to private limited liability companies (sociétés à responsabilité limitée). The minority action allows the minority shareholder(s)/holder(s) of profit units to sue the management and file a claim in the name and on behalf of the company for any harm caused to it by their mismanagement.

Article 444-2 of the law of August 10, 1915 on commercial companies, as amended (the "Law"), states: "An action may be brought against the directors or the members of the management board or the supervisory board, as the case may be, on behalf of the company by minority shareholders or holders of profit units. This minority action may be brought by one or more shareholders or holders of profit units who, at the general meeting which decided upon discharge of such directors or members, owned securities with the right to vote at such meeting representing at least ten per cent of the votes attaching to all such securities."

What are the conditions to validly introduce a minority action?

The Luxembourg District Court appears to have taken the measure of the fact that the provisions on the minority action are recent and that guidance on their application is necessary. Accordingly, the grounds of its judgement contain a very clear and instructive listing of the conditions which have to be met in order to validly introduce a minority action:

Being the owner(s) of shares/profit units (parts bénéficiaires) having the right to vote on the discharge at the general meeting which decided upon the discharge representing at least ten percent (10%) of...