Long-awaited bill clarifying and confirming that the financial assistance prohibition of the Companies Act does not apply to SARL submitted to the Luxembourg Parliament
Pursuant to Bill No 7791, submitted to the Luxembourg Parliament on 16 March 2020, Article 1500-7 of the Companies Act will be amended in order to clarify that the financial assistance prohibition does not apply to Luxembourg private limited-liability companies (sociétés à responsabilité limitée).
Article 430-19 of the Companies Act provides that a Luxembourg public limited-liability company (société anonyme) may not, directly or indirectly, advance funds, extend loans or provide security with a view to the acquisition of its own shares by a third party (the financial assistance prohibition).
Article 1500-7 of the Companies Act currently provides that penalties, including a prison term and/or fine, may be imposed on any person who, in his or her capacity as a director, auditor (commissaire), manager (gérant) or member of the supervisory committee of a company, knowingly extends loans or advances using company funds or provides security with a view to the acquisition of the company’s own shares or units or a pledge of the company's shares or units.
The reference to manager (gérant) was inserted in Article 1500-7 further to the reform of Luxembourg company law in 2016. Since then, questions have arisen as to whether the financial assistance prohibition set out in Article 430-19 also applies to private limited-liability companies. Bill No 7791 will amend Article 1500-7 of the Companies Act in order to put an end to this uncertainty.
