The Luxembourg Company Law Is Finally Modernised

On 13 July 2016, the Luxembourg Parliament voted the long-awaited law to modernise the law of 10 August 1915 on commercial companies, commonly referred to as the Company Law1. The Law enacted a reform of the private limited liability company (S.à r.l.) in order to align it with the regime applicable to public limited liability companies (S.A.) and introduced a new legal form of commercial company, the simplified public limited liability company (S.A.S.). The Law also introduced measures aimed at simplifying intra-group funding flows. Corporate governance and the conduct of business in general have also been improved. Finally, certain measures dedicated to the private equity sector were enacted. Although not detailed here, other measures worth mentioning include: the improvement of the regime of usufruct/bare-ownership of shares, the rights of minority shareholders and the introduction of a regime relating to the conversion from one type of company into another.

How has the S.à r.l. changed?

The reform aims to make the S.à r.l. a more flexible and easier to use vehicle, in particular in the context of its widespread use as a SOPARFI (financial holding company) in Luxembourg. S.à r.l. managers will likely welcome the changes, having been granted increased power to run their business and to make financial decisions regarding the increase (authorised capital) or decrease (cancellation of redeemed shares) of capital or the distribution of interim dividends.

The S.à r.l. has become a more flexible type of company for its shareholders as well. Shareholders are now entitled to make contributions in industry, to create beneficiary shares or redeemable shares and to transfer their shares to non-shareholders under more flexible rules. When it comes to figures, EUR 12.000 is the new amount of minimum share capital, 100 is the maximum number of shareholders and 60 is the number of shareholders triggering the obligation to hold shareholders' meetings or to appoint a statutory auditor. When meetings are held, an individual representing one or more shareholders must always be present in Luxembourg, an obligation which will require a certain level of organisation from companies.

What does the new S.A.S. look like?

The newly introduced simplified joint stock company is built on some of the existing S.A. rules, but it is also meant to offer greater flexibility and simplicity in its organisation and management. Shareholders are free to determine the economic...

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