The Act of 10 August 2016 (the "Act") modernising the Luxembourg Companies Act of 10 August 1915, as amended, provides a statutory framework for the well-established practice of voting arrangements by shareholders of an S.A. (société anonyme), S.C.A. (société en commandite par actions) and S.à R.L. (société à responsabilité limitée) and thus further enhances the attractiveness of these types of entities as joint venture or co-investment vehicles.
Pursuant to Articles 67bis and 195bis of the Act, shareholders may conclude arrangements concerning the exercise of their voting rights. The Luxembourg legislature has also taken this opportunity to clarify the circumstances under which such arrangements shall be deemed null and void. Indeed, voting arrangements that violate the provisions of the Act or are contrary to the corporate interest are invalid. In addition, in order to safeguard shareholder voting independence, the following arrangements are considered null and void: (i) an undertaking by a shareholder to vote in accordance with instructions given by the company itself, a subsidiary or any corporate organ of such entities and (ii) an undertaking by a shareholder to those same companies or corporate organs to approve proposals made by the company's corporate bodies. It is important to note that the Act does not state that voting agreements need be limited in time.
The legislative history to the Act specifies that if a voting arrangement in an agreement (such as a shareholders' agreement) is found to be void, this will not result in the entire agreement being considered null and void, only the provisions in question.
If votes are cast at a general meeting of shareholders pursuant to an invalid voting arrangement, the votes shall be considered null and void along with any resolutions taken, unless the votes did not affect the final outcome. The statute of limitations for legal action in this regard expires six months after the vote.
New Article 67(8) and amended Article 195 of the Act (for the S.A./S.C.A. and the S.à R.L., respectively) introduce the possibility for the articles of association to authorise the board (of an S.A. or S.à R.L.) or the general partner (of an S.C.A.) to suspend the voting rights of a shareholder that is in default of its obligations under the articles of association, subscription agreement or any type of binding document or commitment. Furthermore, the Act now allows a shareholder to waive, temporarily or permanently, all or some of its voting rights.
The formal recognition of these safeguards and mechanisms provides greater legal certainty and enhances the attractiveness of Luxembourg corporate entities as joint venture and co-investment vehicles.