The Act of 10 August 2016 (the "Act") modernising Luxembourg company law has simplified the rules applicable to non-voting shares of a société anonyme (SA). 

1. New simplified rules for non-voting shares of an SA

Pursuant to the amended rules:

  1. the number of non-voting shares that can be issued by an SA is no longer limited to 50 percent of its share capital;
  2. non-voting shares need no longer entitle their holders to a preferred dividend; and
  3. the number of decisions for which non-voting shares exceptionally have voting rights has been reduced.

Under the new rules, the maximum number of non-voting shares an SA can issue is freely determined by the general meeting of shareholders. The general meeting can also approve the conversion of ordinary shares into non-voting shares, in which case it shall determine the maximum number of shares to be converted and the conditions for the conversion.

Another change introduced by the new rules is that non-voting shares need no longer entitle their holders to an annual preferred dividend. However, the SA's articles of association must include provisions on the rights of the holders of non-voting shares to (1) a dividend when profits are distributed, (2) repayment of their capital contributions, and (3) liquidation proceeds, if applicable.

Finally, it should be noted that the holders of non-voting shares can still vote on decisions of the general meeting affecting their rights or reducing the share capital and in the event of early winding-up of the company.

The new rules allow more flexibility to structure the share capital of an SA and provide greater legal certainty for both shareholders and third parties.

2. Non-voting shares of an S.à r.l.

The Act does not extend the rules on non-voting shares to private limited-liability companies (S.à r.l.) with multiple shareholders, even though this was initially proposed in the preparatory works.

As before, however, it may be possible for a single-shareholder S.à r.l. to issue non-voting shares, based on Article 200-1 read in conjunction with Article 195 of the Act, although this possibility is open to discussion.