Adoption of Bill of law 8053

Today the Luxembourg Parliament approved significant legislative changes in regard cross to border conversions, mergers and divisions affecting the Law of August 10, 1915, regarding commercial companies the (“Law of 1915”), as well as the Law of December 19, 2002, on the register of commerce and companies and the accounting and annual accounts of companies. This reform aims to transpose directive (EU) 2019/2121 of the European Parliament and of the Council (the “Mobility Directive”), regarding cross-border conversions, mergers, and divisions of companies. The Mobility Directive is seeking a harmonisation of legal regimes in regard to cross-border transactions throughout the European Union in order to counteract the current divergent, uncertain and sometimes unprotective legal system in place regarding such cross-border transactions.

1. TRANSPOSITION OF THE MOBILITY DIRECTIVE

The Luxembourg legislator has, with the adoption of the Bill of Law 8053, implemented the Mobility Directive's provisions while ensuring at the same time that Luxembourg corporate law remains both attractive and competitive. To this extent, the Luxembourg legislator has methodically isolated the new rules by introducing under separate sections the new concepts of European cross-border mergers and European cross border divisions. These separate sections will, aside from the general regime, form special and derogatory regimes to domestic and cross-border mergers and divisions (other than European cross-border mergers and divisions) and must therefore be subject to strict interpretation. As a result, for transactions involving a company located in a third country, the traditional legal framework currently in place – regarded as more flexible – remains in effect.

In addition, the Luxembourg legislator made use of certain novelties introduced by the Mobility Directive (such as sister-companies mergers being now considered as simplified mergers) to integrate these into the general regime in a way to further simplify the rules applicable to the transactions under the general regime.

Its worth noting that for cross-border conversions, the notion of European cross-border conversions has been introduced as well. Furthermore, cross border divisions by absorption are specifically excluded from the special and derogatory regime.

2. MAIN CHANGES

The main changes introduced by the Mobility Directive in the Law of 1915 include:

• Introduction of an anti-abuse test: The new regime implements an anti-abuse control that notaries will be required to carry out during a first legality control to ensure the legality of the transaction.
• Effectiveness of a transaction: The cross-border or domestic transactions can be made subject to specific conditions or be made subject to the occurrence of a term.
• Simplified mergers: mergers between sister-companies shall, under certain circumstances, be considered as simplified mergers, entailing that no share exchange will need to be implemented.
• Protection of stakeholders’ rights in case of cross-border mergers and divisions:
  • Exit right for shareholders who voted against the proposed operation by selling their shares to the company in exchange for financial compensation.
  • Possibility for shareholders to challenge de adequacy of the exchange ratio and to claim an additional cash payment under certain circumstances.
  • Accrued information rights which include the detailed management report(s) for the shareholders, creditors and employees as well as a notice informing shareholders, creditors, and employees that they may submit to the company their observations on the draft terms of the transaction.

3. ENTRY INTO EFFECT

The law will come into force on the first day following the month of its publication in the Luxembourg Official Journal. This development marks an important step in Luxembourg's ongoing efforts to modernize its legal framework for businesses, reinforcing the country's position as a leading financial center in Europe.

4. WE ARE HERE TO HELP

This summary is intended to provide a general outline and should not be considered comprehensive. For more in-depth analysis or specific inquiries, our team is on hand and eager to provide the necessary support and guidance due to their profound expertise on this subject.