Update
27.01.2025
On 23 January 2025, the Luxembourg Parliament voted in favour of the bill of law No. 8053 (the New Law), transposing the Directive (EU) 2019/2121 (the Mobility Directive) in Luxembourg law. This New Law amends the Luxembourg law dated 10 August 1915 on commercial companies, as amended, and the law of 19 December 2002 on the register of commerce and companies and the accounting and annual accounts of undertakings, as amended.

This New Law introduces a new set of rules for cross-border mergers, transformations, and demergers between Luxembourg and entities based within the European Union. It generally aims to improve the efficiency and legal clarity of the legal framework across member states while enhancing the protection of creditors, minority shareholders, and employees involved in cross-border transactions.

  • Scope

    The scope of the newly adopted provisions is strictly defined. The law specifically governs cross-border mergers, transformations (also known as migrations), and demergers within the EU. It applies exclusively to a limited number of limited liability companies, namely the S.A. (société anonyme), S.à r.l. (société à responsabilité limitée) and S.C.A. (société en commandite par actions). The final version of the New Law excluded special limited partnerships (SCSp) from its scope.

    The New Law applies to mergers by absorption, mergers by incorporation of a new company and two simplified forms of mergers: upstream and side-stream mergers.

    The New Law applies to partial or full demergers by incorporation of new company/ies and demergers by division. Other transactions, such as demergers by absorption, are explicitly excluded from the scope of the New Law.

    Domestic mergers, transformations, and demergers, and any cross-border transactions falling outside the scope of this new framework will continue to be governed by the existing provisions.

  • Anti-abuse control

    The New Law introduces an anti-abuse control by the Luxembourg civil law notary for operations falling within its scope. The notary will have to check whether there are serious suspicions that the EU cross-border operation is being carried out for abusive, fraudulent, or criminal purposes.

    Documents and information to be provided to the notary in order to obtain the issuance of the pre-merger certificate are listed in the New Law. During this control, the notary has the power to request additional information and documents as well as perform additional enquiries with relevant authorities. The exact requirements of the notary for the issuance of the certificate will be clarified by the practice.

  • Rights of minority shareholders

    The New Law introduces additional safeguards to minority shareholders and creditors.

    Minority shareholders are protected by a mechanism introduced by the Mobility Directive, the right of withdrawal, which allows them to sell their shares in exchange for cash compensation if they vote against the transaction.

    To limit the impact on the financial situation of the company resulting from the operation and to avoid excessive erosion of the creditors’ guarantees, Luxembourg has decided on a strict implementation of this mechanism.

    Shareholders also benefit from a right of information through a report from the management body intended to inform them in order to ensure an informed decision-making process, but also aimed at ensuring extensive information for workers, in a separate section of the report or in a separate report.

  • Rights of Creditors

    Provisions of the New Law also include enhanced protection for creditors that may be affected by the transaction.

    Provided that they can demonstrate that the operation threatens the recovery of their claims and that they have not obtained satisfactory guarantees from the company, creditors whose claims predate the date of publication of the draft terms of the operation may after notification to the company and within 3 months following the date of publication of such terms, request the court to obtain adequate safeguards.

    The creditors’ protection has therefore been advanced and extended in the transaction process.

  • Transitional provisions

    The provisions of the New Law will apply to any merger, transformation, and demerger operation within the scope of the New Law for which the draft terms are published on or after the first day of the month following the entry into force of the law.

    All ongoing transactions for which the project has been published prior to the entry into force of the new law, but which could not be completed beforehand, will remain subject to the current general rules.

    An additional bill of law (No. 8225) implementing the employment law aspects of the Mobility Directive is still pending approval. It is expected that this bill will be adopted shortly.

    While, in line with the Mobility Directive, this New Law provides for a harmonised regime for European cross-border mergers, demergers and transformations and strengthens the protection of stakeholders, the text adopted by the Luxembourg Parliament remains faithful to Luxembourg usual philosophy of implementing the whole directive, only the directive. Luxembourg therefore keeps its liberal approach for cross border transformations (aka migrations), mergers and demergers with non-EU member states.

    Following the adoption of the New Law by the Luxembourg Parliament, it is now expected that the Council of State will grant an exemption for the second vote by the Parliament and that the law should be promulgated shortly thereafter.

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