Clarity on the rules of financial assistance The Luxembourg legislator clarifies the non-application of the criminal liability of the managers of SARLs in a scenario of financial assistance
On March 16, 2021, a bill n ° 7791 was submitted to the Luxembourg Parliament (bill) to remove the reference to “corporate units” (shares) in article 1500-7, paragraph 2 °, of the Luxembourg law on commercial companies of 10 August 1915, as amended and reinstated (law on companies). This article deals with the criminal liability of directors of a anonimous society (SA) in the event of prohibited financial assistance.
In Luxembourg, an SA or partnership Limited by shares is deemed to have provided financial assistance to another person when it directly or indirectly advances funds or grants loans or constitutes a guarantee with a view to the acquisition of its shares by a third party. Administrators who have approved such assistance may commit a criminal offense.
Since the 2016 reform of the company law, some uncertainty has arisen as to whether this offense would apply to corporate executives. limited liability companies (SARL). It has been argued that article 1500-7 of the Companies Act – which currently refers to business units (shares) of a Luxembourg company, a term generally used for SARLs – would also cover SARLs.
The bill has been awaited by practitioners for a long time. It fixes (what we consider to be) a clerical error and makes it clear that the restrictions on financial assistance do not apply to LLCs. It puts an end to an unnecessary controversy and definitively strengthens Luxembourg’s legal toolbox and Luxembourg’s attractiveness for cross-border transactions, particularly in the LBO and restructuring markets.