The Act of 10 August 2016 modernising Luxembourg company law (the "Act") introduced new rules on share transfers. For the SARL (société à responsabilité limitée), the procedure to transfer shares to non-shareholders has been amended, while for the SA (société anonyme) there is now a statutory framework for share transfer restrictions.
1. Inter vivos share transfers in a SARL
While previously transfers of a SARL's shares to non-shareholders required the prior consent of shareholders representing 3/4 of the share capital, consent is now determined based on the total number of outstanding shares and can be lowered in the articles to half the share capital.
Under the new rules, in the absence of consent, the shares can be acquired, with the transferring shareholder's consent, by (i) the other shareholders, (ii) a third party approved by them or (iii) the company itself, within a period of 3 months, which may be extended to 6 months under certain conditions. The conditions to determine the transfer price should be set out in the articles of association. If the articles are silent on this point or if the parties cannot reach an agreement, the price will be determined by the competent Luxembourg court.
If the shares are not acquired in accordance with the aforementioned provisions, the shareholder may proceed with the initially proposed transfer. This represents a significant change to the previous rules. Indeed, previously, shareholders of a SARL that wished to transfer their shares were unable to do so if they failed to obtain the requisite consent.
As a result, majority shareholders in a SARL that wish to continue to have a final say in proposed share transfers by minority shareholders should ensure that the company's articles and, if applicable, a separate shareholders' agreement, contain the appropriate provisions.
2. Share transfers in an SA, SCA and SAS
Unlike with a SARL, shares of an SA are in principle freely transferable.
The Act introduces a formal legal basis for valid restrictions, such as a lock-up period and pre-emptive rights, on the transfer of an SA's shares.
The conditions to determine the transfer price should be set out in the articles. If the articles are silent on this point or if the parties cannot reach an agreement, the price will be determined by the competent Luxembourg court. The Act further enhances legal certainty and freedom of contract by specifying that SA share transfers that violate valid transfer restrictions in the articles will be deemed null and void.
As was previously the case, the SCA (société en commandite par actions) remains subject to the same statutory framework as the SA in terms of share transfers. The same holds true for the SAS (société par actions simplifiées), a simplified limited-liability company introduced by the Act in relation to which the Act clarifies that share transfers in violation of its articles are null and void.