Context
As you may know from our a previous newsflash on the subject dated July 2016, company law matters are regulated by the Luxembourg law of August 10th 1915 on commercial companies, as amended from time to time (the Law 1915), as well as some provisions of the Luxembourg civil code relating to certain Luxembourg legal entities.
Amendments
On August 10th 2016, has been implemented the long awaited bill of law 5730 aimed at modernizing and amending the Law 1915 and amending some provisions of the Luxembourg civil code as well as of the law of December 19th 2002 on the register of commerce and companies and accountancy and annual accounts of companies (the Amendment Law).
"The Amendment Law became effective as of August 23rd 2016 leading to the amendment of the Law 1915 (the Amended Law 1915)."
Transition period
The Amendment Law specifically provides for a transitional period of twenty-four months, starting as of its entry into force. Therefore, further to a first set of queries raised over the last weeks in relation to this transitional period, we thought useful to give you a more detailed explanation for a valid assessment of the situation.
Hence, despite many hesitations and interpretations, the transitional period shall be as follows:
- the Amendment Law came into force on August 23rd 2016;
- a transitional period of twenty-four months has been provided, which will run until August 23rd 2018;
- Luxembourg companies incorporated after August 23rd 2016 will directly be subject to the application of the Amended Law 1915;
- Luxembourg companies incorporated and in existence before August 23rd 2016 will remain subject to the existing regime of the Law 1915 for a transitional period of twenty-four months:
- in case statutory provisions are in contradiction with the Amended Law 1915: the Law 1915 will remain applicable until August 23rd 2018;
- if a new rule introduced by the Amended Law 1915 is not provided in the articles of association of a company: the Amended Law 1915 shall apply as of August 23rd 2016;
- if the articles of association of a company faithfully transpose the text of an article of the Law 1915: the Law 1915 remains applicable (for that specific reference) until August 23rd 2018; finally
- if within the articles of association of a company, reference is made to a precise article of the Law 1915 (for instance article [x]) or to the Law 1915: the Amended Law 1915 will apply directly as of August 23rd 2016.
These rules are only valid unless prior amendment of the company’s articles of association to comply with the Amended Law 1915 and consequently benefit as of such amendments from the new enacted rules offering flexibility and security.
Conclusion
All Luxembourg based and incorporated companies will face a questioning phase in the course of which an assessment will need to be performed as to whether or not any articles of association, shareholder agreements, joint ventures agreements, incentive plans or any other constitutive documents, will require amendment during the transitory period following the entry into force of the Amended Law 1915.
We strongly recommend performing such analysis as soon as possible in order to avoid any possible detrimental situation to the company and to determine whether the shareholders want to benefit directly or only at the end of the transitional period fixed at August 23rd 2018, of the new rules provided under the Amended Law 1915.
Over the coming period we shall continue to offer you a tailored discussion and introduction into the amendments.
