The law of April 6, 2013 on dematerialised securities was published in Luxembourg’s official gazette, the Mémorial on April 15, coming into force the following day. It creates a third category of securities alongside securities in bearer or registered form and introduces a general regime for them. The legislation also amends various existing Luxembourg laws such as the legislation of August 1, 2001 regarding the circulation of securities and other fungible instruments.
Scope of application
In Article 1, paragraph 11, the legislation defines the securities that may be dematerialised. These comprise equity securities issued by a Luxembourg public limited company or mutual fund, such as shares, profit shares, subscription rights and fund units (but not corporate units issued by a Luxembourg private limited liability company or limited corporate partnership), as well as debt securities from a Luxembourg or foreign issuer that are governed by Luxembourg law.
Clearing entities and account holders
The regulator, the Commission de Surveillance du Secteur Financier or CSSF, may lay down specific rules regarding dematerialised securities binding on clearing entities (organismes de liquidation), account holders (teneurs de comptes) and central account holders (teneurs de compte central).
Account holders shall keep dematerialised securities held on behalf of third parties or on their own account in securities accounts with a clearing entity, which must be located in Luxembourg, or central account holder, or with one or more institutions that act as intermediaries of the clearing entity or of central account holder.
The law allows issuers to issue dematerialised securities or convert existing securities into dematerialised ones.
Issuance of dematerialised securities
To issue equity securities in dematerialised form, a Luxembourg company or fund must meet the various prior requirements. It must amend its articles of incorporation or management regulations expressly to allow the issuance of securities in dematerialised form and to set out the applicable rules.
The company must take the necessary steps to register the complete issue of dematerialised securities of the same type with a single clearing entity or a central account holder, and publish in a Luxembourg national newspaper and on its website – if it has one – the name and the address of the clearing entity or central account holder.
Each issuer registered with Luxembourg’s Trade and Companies Register must file an extract containing the name and address of the clearing entity or central account holder for publication in the Mémorial.
The procedure for the issue of dematerialised debt securities by a Luxembourg company or fund, or of securities governed by Luxembourg law in the case of a foreign issuer, is more flexible in that they only have to register the securities issue with a clearing entity or central account holder.
Conversion of securities to dematerialised form
An issuer seeking to convert equity securities to dematerialised form must amend its articles of association to provide for the option of issuing dematerialised securities and specify the securities subject to the conversion, the mandatory or optional nature of the conversion, the conversion process, and in case of a mandatory conversion, the minimum conversion period (at least two years) and the sanctions applicable for non-submission of the securities for dematerialisation within the conversion period.
The issuer must also comply with the same conditions applicable to the issuance of equity securities in dematerialised form.
Transfer of dematerialized securities
Dematerialised securities may be transferred from account to account. The provisions of the August 2001 legislation on the circulation of securities apply to dematerialised securities except where the new law states otherwise.
Amendments to the law of August 1, 2001
The 2013 legislation amends the law of August 1, 2001 by redrafting substantially its sections 1 to 5, reflecting the Geneva Securities Convention of October 9 2009. These new provisions bring in particular greater protection of investors in the event of insolvency and of good faith acquirers, and clarify the prohibition of upper-tier attachment.
France has authorised and regulated dematerialised securities since 1981 and Belgium since 1995. Although the introduction of the concept is certainly beneficial, it hardly represents an innovation by international standards. However, the legislation is a further step in the modernisation of Luxembourg’s securities legislation, and the third option for securities issuance offers the greatest flexibility and speed for transfers.

A copy of the law can be found by clicking here