Two weeks after the declaration of a state of emergency by the Luxembourg government, companies still face a number of challenges relating to the holding of shareholder and board meetings.
To a certain extent, the Grand Ducal Regulation of 20 March 2020 introducing measures concerning the holding of meetings of companies and any other moral persons (the Regulation) has eased the pressure on companies by creating a more flexible framework for holding meetings during the COVID-19 outbreak. However, as practice on the basis of the Regulation evolves, companies are also faced with a number of questions.
The Q&A below tackles some of the most frequently asked questions with respect to the organisation and holding of shareholder and board meetings in light of the Regulation, from a best-practices perspective. A draft bill of law in respect of the granting of an extended period to commercial companies for filing and publication of annual accounts, consolidated accounts and the related reports is pending and, if voted into law, will complement the flexibility already provided by the Regulation to commercial companies.
1. What changes for shareholder meetings in light of the Regulation?
Notwithstanding the provisions of the articles of association, companies may (i) hold a general meeting without a physical meeting and (ii) impose on request shareholders to exercise their rights exclusively through:
- a written voting form or electronic voting form,
- a proxy appointed by the company, or
- videoconference or any other telecommunication means that permits the identification of the participants to the meeting.
Attendance by way of the means above is tantamount to attendance in person for the purposes of quorum and majority.
This change is of particular relevance for SAs, SCAs and S.àr.l.s with more than 60 shareholders.
S.àr.l.s with less than 60 shareholders already had the possibility, by law, to organise their shareholder resolutions in writing.
2. What changes for board meetings in light of the Regulation?
Notwithstanding the provisions of the articles of association:
- board resolutions may be adopted by way of circular resolutions taken in writing, and
- meetings may be held, without the physical presence of members being required, via videoconference or any other telecommunication means that permits identification of the participants to the meeting.
Attendance by way of the means above is tantamount to attendance in person for the purposes of quorum and majority.
It is worth noting that the Regulation seems to introduce a new means to adopt resolutions by the board – being circular resolutions in writing (which do not require unanimous consent), but which are deemed adopted when the relevant majority of board members signs the resolutions.
3. To which entities does the Regulation apply?
The Regulation applies to all Luxembourg companies (including listed companies) and any other moral persons.
4. To which meetings does the Regulation apply?
The provisions of the Regulation with respect to the organisation and holding of non-physical shareholder and board meetings (as well as bondholder and any other corporate bodies such as a supervisory board in a SCA or in a SA with dual management board) apply to all shareholder and board meetings and other provisions of the Regulation apply to annual shareholders meeting only.
5. How long does this Regulation apply?
Companies should note that the application of the Regulation is temporary, meaning that as the Regulation was introduced under article 32(4) of the Constitution it remains in place until the end of the state of emergency.
6. Do convening rules still apply?
Yes – the Regulation does not introduce any changes to the usual convening formalities for shareholder and board meetings.
Depending on the form of company and the provisions of the articles of association, a convening notice will need to be sent in advance of any shareholder meeting, by registered mail or other means agreed by shareholders.
Convening formalities may be waived with the unanimous consent of the shareholders.
The board will need to be convened to board meetings (or notice of the circular resolutions in writing needs to be given) by respecting the periods and formalities related to the notice as set out in the articles of association or any internal rules applicable to board proceedings.
7. A shareholder meeting was convened before the entry into force of the Regulation. Can the company still change the attendance rules to benefit from the Regulation?
Yes – the Regulation stipulates that companies can notify shareholders and other participants to the meeting of a change to their attendance rules, in accordance with the Regulation, by publishing a notice in the form it had used for the convening of the meeting or on its website, up to three working days prior to the meeting. The original date for which the meeting was convened will not be postponed due to this change.
8. Can the company still organise a shareholder or board physical meeting in Luxembourg?
Yes – in principle the Regulation does not prohibit the holding of physical meetings. However, the Luxembourg Government’s confinement rules (applicable to the general population) are becoming stricter over time and need to be observed which may, in practice, prevent a physical meeting being held.
9. Is it required that all board members attend the shareholder meeting?
No – this is not mandatory. However, if questions are asked by shareholders attending the meeting, the board must answer those questions (within the parameters of the law and the articles of association). It is therefore recommended that the board or one of its representatives attend the meeting.
10. Can the shareholders, board members or any other relevant participants join a meeting by phone from outside Luxembourg?
Yes – people outside of Luxembourg can attend by any telecommunication means as provided for in the Regulation and notwithstanding any provisions to the contrary in the articles of association. However the impact of this approach should be checked from a tax perspective on a case by case basis for each such meeting.
11. Should the company foresee a possibility for shareholders to pose questions and/or make specific requests for information?
Yes. In normal circumstances, shareholders have the right to pose questions on the items of the agenda, so as to cast an informed vote. In the circumstances, this might be difficult to do. To facilitate the engagement with shareholders, a company could consider organising a Q&A (for instance through electronic means) whereby questions would be received and answered by the board a few days prior to the meeting and before the shareholders exercise their vote.
12. Are the company’s articles of association or shareholders’ agreement still relevant?
Yes. The Regulation facilitates the holding of virtual meetings by superseding the applicable provisions of the articles of association as regards the means for attending a meeting. However, the articles of association should still be checked and complied with regarding all other aspects of the corporate meetings e.g. information rights of shareholders, convening formalities, obligations of management to attend the meetings.
Companies are also advised to always check whether a shareholders’ agreement is in place and whether the application of any measures provided by the Regulation is consistent with the shareholders’ agreement. The Regulation supersedes the provisions of the articles of association but has no impact on the private contractual arrangements between shareholders.
13. Do I still need a bureau for the shareholder meeting?
The Regulation is not specific in this respect. Therefore, meetings that required a bureau (e.g. shareholder meetings of public limited liability companies with more than one shareholder) before the entry into force of the Regulation should continue to apply the rules regarding the bureau.
However, members of the bureau may take advantage of the flexibility ensured by the Regulation and attend the meeting via telecommunication means or verify and confirm in writing that the conditions necessary for the meeting have been met.
14. What rules apply with respect to the signing of the minutes of a meeting or the relevant circular resolutions in writing?
The provisions of the articles of association relating to the signing of the minutes of the board and shareholder meeting will need to be considered. In the absence of provisions allowing a dedicated member of the board e.g. the chairman of the meeting, to sign the minutes alone, such minutes should normally be signed by all of the members of board who attended the meeting. The minutes of a shareholders’ meeting are normally signed by the bureau of the meeting or, in the absence of a bureau, by the members attending the meeting.
Written or circular resolutions are normally signed by all members casting a vote on the relevant resolutions.
Electronic signatures may be considered in such circumstances, subject to conditions. Click here to find out more on the conditions under which electronic signatures have equivalent effect to handwritten signatures.
15. Does the company need to consider other aspects when applying the Regulation?
Before implementing any changes to the company’s routine of holding meetings, such changes should also be discussed with tax advisors.
Not least, listed companies may be subject to particular rules which may vary depending on the listing venue.
You can also read more on further analysis of the measures proposed under the Regulation here.
16. Does the company need to amend its articles of association in light of the Regulation?
No. The Regulation facilitates the holding of virtual meetings by superseding the applicable provisions of the articles of association as regards the means for attending a meeting. Therefore, a company does not need to change its articles of association to apply the Regulation - such decision can be taken by the relevant corporate body.
Companies may, of course, review their articles of association and assess whether any changes are required to their articles of association in order to benefit from additional flexibility after the expiry of the Regulation. If not already included, the company could consider amending its articles of association by, for example, introducing the use of specific telecommunication means during corporate meetings, the use of written resolutions, and/or reconsider the phrasing with respect to the signing of the minutes of meetings.
