Formalities

Date of reorganisation

Can a corporate reorganisation be backdated or deemed to have already taken place, for example from the start of the financial year?

From a Luxembourg accounting perspective, a corporate reorganisation may have a different effective date than its actual realisation date; however, this effective date cannot be prior to the opening date of the financial year of the relevant company.

Consequently, losses realised by the absorbed or demerged company since the opening of the financial year may be considered as realised by the absorbing or beneficiary company.

Documentation

What documentation is required in a corporate reorganisation?

The documentation required for a corporate reorganisation depends mostly on the type of reorganisation, but can be categorised as follows:

  • structuring and planning documentation, such as the structuring memo, tax analysis and legal step plan;
  • substantive documentation, including the general corporate approvals (board and, if applicable, shareholders' approvals), notarial deed to effect changes to the articles of association, share purchase agreements, contribution agreements, subscription agreements and common draft terms of merger or demerger; and
  • filing and post-completion actions and documentation, such as registration in the shares register, filing with the Luxembourg business register and filing with the Luxembourg register of beneficial owners.
Representations, warranties and indemnities

Should representations, warranties or indemnities be given by the parties in a corporate reorganisation?

It is relatively uncommon to provide for extensive representations and warranties in reorganisation documentation. While the parties remain free to determine the exact scope of representations, warranties, covenants or indemnities, intragroup documentation is generally focused on standard representations and warranties such as title to shares and assets, corporate approvals, valid licences, filings and registrations, and the arm's-length nature of the transactions.

Assets versus going concern

Does it make any difference whether assets or a business as a going concern are transferred?

From a corporate perspective, when transferring a business as a going concern it is important to determine whether any restrictions such as change-of-control provisions or third-party notices or consents may apply. It is equally important to verify whether transfer restrictions or liens may impede the transfer of those assets.

In relation to employees' rights, it does not make a difference. The transfer of undertakings for the protection of employment (TUPE) regulations apply to the transfer of a business or part of a business. Luxembourg courts apply the TUPE regulations in case of transfer of a business as well as in case of a transfer of assets, provided that there is a sufficiently strong link.

From a Luxembourg tax perspective, a transfer of assets or business as a going concern is in principle a taxable event. The taxable gain will correspond to the difference between the book value of the assets or businesses transferred and their estimated realisation value.

Regarding demergers, a tax-neutral regime is available under Articles 59(3) and (3a) and 59bis of the Luxembourg income tax law for domestic reorganisations or taking place in an EU context, under the condition that the partners or shareholders of the demerged company receive shares in the beneficiary companies on a basis proportional to their participation in the demerged company and a potential cash payment which may not exceed 10% of the nominal value of the shares allocated to the shareholders of the demerged company. This tax-neutral regime is also subject to the condition that the assets transferred must consist of at least an enterprise or a branch of activity which can operate independently.

Types of entity

Explain any differences between public, private, government or non-profit entities to consider when undertaking a corporate reorganisation.

When dealing with publicly held companies, it is important to ensure that investor notifications and applicable stock exchange requirements are duly assessed and met, because such entities are subject to ongoing disclosure obligations and market abuse rules. The timeline for the reorganisation will generally be affected, as the notification and publication requirements take much longer than for private entities.

Government entities and non-profit entities are rarely seen in cross-border reorganisations. Most government entities are subject to specific regulations that would require specific assessment and government approval.

Post-reorganisation steps

Do any filings or other post-reorganisation steps need to be taken after the corporate reorganisation takes place?

Corporate reorganisations will almost always require post-completion steps, but their nature depends on the type of transaction. In Luxembourg, the most common post-completion actions include:

  • registration of share transfers and, where applicable, pledges in share registers;
  • filings and registrations of applicable information with the Luxembourg business register;
  • filing of notarial deeds the Luxembourg business register; and
  • bookkeeping entries.

Further potential post-completion actions include:

  • filings with the land register or other public registers (eg, when transferring immovable properties);
  • notification requirements for specific regulated businesses (the most common being companies active in the financial services industry in Luxembourg); or
  • filing with the competent patent or trademark office.