Part of Luxembourg’s Companies Act reform bill of July 2016 details changes to the board of directors in respect to managers. Changes are as follows:
- The Board of a S.à r.l. may transfer its registered office to another municipality if authorised in the articles
- The corporate GP of an SCA does not need to appoint a permanent representative (art. 107)
- The Board of a S.à r.l. may delegate day-to-day management to non-members (art. 191bis (3)); Board of an S.A. may delegate to committees (art. 60-1), without touching the responsibility of the directors
- Conflicts of interest only in case of divergent patrimonial interest; if the Board does not reach quorum due to abstention of members with conflict of interest, it may submit the decision to the shareholders (art. 57)
- Going concern – revised art. 100 clarifies that shareholders need to be convened if net assets fall below 50% resp. 25% of the share capital as a consequence of losses. The Board needs to submit a report on the reasons for the loss and a proposal to correct the situation if it proposes to continue the activities. The shareholders may waive this report, but only unanimously. In case of infraction, the members of the Board are personally liable for an increase in losses (art. 100)
*All references to articles mentioned above are references to the law of 10 August 1915 unless expressly mentioned.
The above changes clarify a number of questions which have a direct or indirect impact on the liability of the legal representatives of a Luxembourg company. The legislator has made it clear that there is no need to expose an individual to the unlimited and personal responsibility of a GP in an SCA, and that the Board of Directors remains responsible even if the actual management is delegated to committees which may include staff from middle management. The additional requirement of a special report to the shareholders in case of significant losses, and the direct responsibility of the directors for any additional losses if this report is not prepared or validly waived, should be one of the more relevant changes introduced by the new law.
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This is part 4 of a series of articles by TMF Luxembourg experts on changes in the Grand Duchy’s company law.
Read part 1: The confirmation of practice
Click to part 3: Changes to shareholder meetings