Responsibilities and liabilities for managers: What are the new reporting obligations?

The revised article 100 of the Law (which only applies to S.A.s) has now clarified that the board of directors of an SA must convene a general meeting to pass a resolution to dissolve the company or on any other resolution announced in the agenda of the general meeting if the net assets of the company fall below half of the amount of the company’s share capital. The board of directors must convene the said general meeting within two months from the time it became aware or should have become aware of any losses. The said general meeting shall pass the resolution on the dissolution of the SA by the majority required for amendments to the articles of association (however, if the assets are reduced to less than one quarter of the share capital, the resolution can be approved by 1/4 of the votes cast at the meeting).

Article 100: special report for an S.A.

As an additional formality, the board of directors will in this event now be required, pursuant to the New Law, to draw up a special report setting out the reasons for the resolution and justifying the proposal. If a continuation of the company's activities is proposed, the report must set out the actions and measures that the board of directors intend taking to resolve the company's financial situation. In the absence of such special report, the decision of the general shareholders' meeting shall be void unless thel shareholders have unanimously waived the requirement for the special report.

The last paragraph of article 100 (which has not been modified) states that, in the event of the infringement of the foregoing provisions, the directors may be declared personally and jointly and severally liable vis-à-vis the company for all or part of the a subsequent increase in the losses.


Necessity to draft a report in case of conversion into an other form of commercial company

The New Law has introduced a new regime applicable for the conversion of Luxembourg companies into another type of company.

Under the new regime, certain formalities must be complied with, in particular, for the conversion of a company into an S.A. or an S.C.A., management must produce a special report on the draft terms of the conversion. This report must be included in the agenda for the meeting called to approve the conversion. The report must include the financial statements showing the assets and liabilities of within the company’s last 6 months. The shareholders can unanimously waive the requirement for this report.

Where the management report is omitted (unless the requirement for the report has been waived), the decision adopted by the general meeting can be declared void, and the managers can be held civilly liable. The New Law does not provide any specific criminal sanction in this regard.


Necessity to draft a report in case of an issuance of shares below their accounting par value

The Law authorises an S.A. to issue new shares below their accounting par value subject to certain conditions:

  • the notice convening the general meeting must expressly mention that the issue of the new shares will be made at a discount to their par value; 
  • management (the board of directors or the management board, as the case may be) must prepare a special report for the attention of the general meeting of the shareholders dealing with the issue price and the financial consequences of the issuance of the shares on the shareholders;
  • management must appoint an independent auditor (réviseur d’entreprises) who must certify that the financial and accounting information contained in the management report is reliable and sufficient to enable the general meeting to make a decision. The shareholders can unanimously agree to waive this report.
  • the management report and the independent auditor’s report must be filed with the Luxembourg Trade and Companies Register.

Failure to provide the report by the independent auditor (réviseur d’entreprises) invalidates the decision of the general meeting, unless the shareholders of the company unanimously waive the requirement for the report. It should be noted that the management report is required and it omission can invalidate the decision of the general meeting, unless the requirement for the report of the independent auditor (réviseur d’entreprises) has been unanimously waived.


Convening directors to general meetings of shareholders

The New Law confirmed that the members of the management body of an S.A. have the right to access the discussions and deliberations of the general meetings. This new article has been introduced in order to ensure good corporate governance of the company in particular by ensuring that all management bodies have equal access to information.

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