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Articles

Renewed flexibility for Luxembourg companies to defer meetings in presence

Renewed flexibility for Luxembourg companies to defer meetings in pre

Renewed flexibility for Luxembourg companies to defer meetings in presence

30.09.2020 LU law

In the context of the COVID-19 pandemic and continuing applicable travel restrictions and the encouragement of the Luxembourg Government to observe social distancing including in a business environment, the Luxembourg Government has decided to extend the possibility to hold meetings without physical attendance until 31 December, 2020.

To this effect, the law of 23 September, 2020 supersedes and replaces the law of 20 June, 2020 which already regulated the extension of measures concerning the holding of meetings in companies and in other legal persons.

Notwithstanding any provisions to the contrary in a company’s articles of association, a company may, regardless of the number of participants, convene a general meeting without being physically present, and require its shareholders or partners and other participants at the meeting to participate and to exercise their rights exclusively:

  • by voting in writing from a remote location or in electronic form provided that the full text of the resolution(s) or decision(s) to be taken have been published or communicated to them;
  • through an agent appointed by the company; or
  • by video conference or other means of telecommunication allowing their identification.

Regarding listed companies, in relation to the exercise of certain shareholders' rights at general meetings where a shareholder or another person appoints another proxyholder than those concerned by article 8 of the amended Luxembourg law of 23 May, 2011, such proxyholder may only participate by voting in writing (or in electronic form) or by videoconference (or other means of telecommunication enabling identification).

Shareholders or partners who participate by such means will be deemed to be present for the computation of the quorum and the majority requirements at such meeting.

The above provisions apply mutatis mutandis to meetings of bondholders.

Notwithstanding any provision to the contrary in its articles of association, the other corporate bodies of any company, such as the board of directors of a public limited liability company or the board of managers of a private limited liability company may hold meetings, without being physically present:

  •  by written circular resolutions; or
  •  by video conference or other means of telecommunication allowing the identification of the members of the corporate body participating in the meeting.

The members of these corporate bodies who participate by such means are deemed to be present for the computation of the quorum and the majority requirements at such meeting.

The above flexible measures may have an impact on the substance of the Luxembourg companies, given that they offer the possibility to hold shareholders and board meetings without physical presence in Luxembourg. While these measures are meant to provide pragmatic solutions to the practical issues caused by the pandemic, there is per se no guarantee that the recourse to the possibility not to hold physical meetings in Luxembourg would not adversely affect the company’s substance in Luxembourg and trigger unwanted tax consequences.

Under normal circumstances, when management decisions are taken outside of Luxembourg, a foreign jurisdiction may attempt to attract a portion or the entire taxable base of a Luxembourg company either by claiming the presence of a permanent establishment on its territory or by considering the Luxembourg company as one of its residents for tax purposes in line with the effective place of management principle.

However, the Organization for Economic Cooperation and Development (“OECD”) issued helpful guidance on the subject on 3 April, 2020, stating that that the COVID-19 crisis is an “extraordinary and temporary situation” preventing managers and directors to travel in order to attend physical meetings and therefore, this fact alone should not by itself allow challenging the tax residency of a company.

This remains to be assessed on a case-by-case basis, to ensure that appropriate measures are taken at all times and that the sensitivity of foreign tax authorities as to the timing of the ending of this “temporary” situation is taken into consideration.

The law does not provide for further extension regarding the holding of annual general meetings and the approval and filing of annual accounts.

The law enters into force on 1 October, 2020 and will have effect up to and including 31 December, 2020.

Team

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