Exclusion of SARLs from the financial assistance prohibition

Since the reform of law 10 August 1915 on commercial companies (the Companies’ Law) in 2016, the revised article 1500-7 of the Companies’ Law seemed to imply that the prohibition of granting financial assistance, applicable to SAs, also applied to SARLs.

Article 430-19 of the Companies’ Law provides that a (société anonyme) public limited company shall 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.

Current Article 1500-7 of the Companies’ Law provides that criminal penalties 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.

Draft bill n°7791, filed on 16th March 2021, removes doubt as to the scope of the prohibition and confirms that such prohibition does not apply to SARLs by proposing to amend article 1500-7, point 2° of the Companies’ Law and remove any misleading reference to a Luxembourg SARL from the scope of provisions applicable to financial assistance.