New Luxembourg law - introduction of corporate governance measures

A Luxembourg law of 25 August 2006 has introduced new measures amending the Luxembourg company law. Hereunder, we briefly outline the main amendments.

1.  Two-tier management and board structure

A Luxembourg S.A. (société anonyme) will have the possibility to opt for a two tier structure instead of a one-tier structure. In a two-tier structure there will be a management board (directoire) and a supervisory board (conseil de surveillance).
This measure could benefit foreign investors of Luxembourg companies wishing to appoint Luxembourg residents as directors while at the same time having the possibility to control and monitor the local management. In such case, Luxembourg residents would be appointed as directors on the management board and the foreign residents would be appointed as officers on the supervisory board. The articles of association may then provide that certain decisions of the management board require prior approval of the supervisory board.

2.   A Luxembourg S.A. with one shareholder

Prior to this amendment, a Luxembourg S.A. needed to have at least two shareholders. The Law now provides for the possibility of incorporating a Luxembourg S.A. with a sole shareholder.

3.   Minority shareholders’ rights

The Law provides that one or more shareholders who together hold at least 10% of the subscribed share capital (as opposed to 20% prior to this amendment) may request the convening of a general meeting or that one or more items be put on the agenda of the general meeting.

4.  General meeting of shareholders

The Law provides that a shareholders’ resolution amending the articles of association of the company requires at least two-thirds of the votes validly cast at the meeting (as opposed to two thirds of all shareholders present or represented at the meeting prior to this amendment).
Furthermore, the Law provides that the articles of incorporation may allow for the shareholders to participate in a meeting by video conference or any other means of telecommunication and that shareholders may vote through the use of voting forms (formularies) to be sent to the company prior to the meeting.

5.  Approval of the annual accounts

The Law provides that the annual general meeting approving the annual accounts shall be held within a period of 18 months starting from the date of incorporation of the company. The first financial year may therefore have duration of more than the standard 12 month period provided that the annual general meeting is held within this 18 month period.