The modernisation of Luxembourg company law: the confirmation of practice

Luxembourg’s Companies Act ‘reform bill’ adopted in July 2016 includes formal confirmation of measures which provide increased flexibility for companies.

On 13 July 2016, the Luxembourg Parliament formally adopted the so-called ’reform bill’ that aims to modernise the Luxembourg Companies Act of 10 August 1915. The Bill serves to both confirm unwritten practice in the current legal framework  and  introduce a number of new rules aimed at increasing the flexibility of doing business in Luxembourg; making the country even more attractive as an international business centre.

Formal confirmation of practice

Formal confirmation of practice measures put in place makes the following now possible in Luxembourg:

  • One-step dissolution. However, this implies additional conditions which will be outlined in the next update in this series
  • Tracking shares, ie. shares that are linked to a specific asset of the company, are allowed (art. 1853 Code Civil)
  • Warrants/convertible bonds and their conversion into shares now officially recognised and regulated (art. 32-4)
  • Redeemable shares now officially recognised for S.à r.l. (art. 182 (2))
  • Founder shares now officially recognised for S.à r.l. (art. 183 (1) 2°)
  • Interim dividends now officially recognised for S.à r.l. (art. 198bis)
  • Circular resolutions now officially recognised (art. 64 (1) S.A., art. 191bis (2) S.à r.l.). While the law states that such circular resolutions are deemed as having been taken at the registered office of the company, this view is unlikely to be shared by foreign tax authorities, so tax substance considerations do not change.
*All references to articles mentioned above are references to the law of 10 August 1915 unless expressly mentioned.

Next steps

For existing companies, a period of transition is granted. They have 24 months, in particular, to amend their Articles  in order to comply with the new formal confirmation of practice regulations. If their only changes required are related to an update of references as the article number in the law changed, the update of the articles may be done by Board resolution.

Need more information?

This is the first in a series of articles by TMF Luxembourg experts on changes in the Grand Duchy’s company law.

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