The Luxembourg law of 1 August 2019 (the “New Law”) amending the law of 24 May 2011 (the “2011 Law”) on the exercise of certain rights of shareholders in general meetings of listed companies was published on 20 August 2019 and entered into force on 24 August 2019.
The New Law adds new provisions rather than significantly amend the provisions of the 2011 Law. Whereas the 2011 Law principally established requirements in relation to the exercise of certain shareholder rights in general meetings, the New Law sets out specific requirements to encourage long-term engagement of shareholders, relating to shareholder identification, transmission of information, facilitation of exercise of rights transparency of institutional investors, assets managers and proxy advisors, executive compensation and transactions with related parties.
NEXT STEPS FOR LUXEMBOURG LISTED COMPANIES
The most immediate concern for Luxembourg listed companies subject to the New Law is to ensure compliance with the new requirements on transparency and approval of material transactions between such companies and related parties. Since the entry into force of the New Law, such transactions are subject to prior approval of the board of directors and public disclosure requirements.
An internal procedure should be established by the board of directors to assess whether approval and transparency requirements apply to transactions or whether such transactions are exempt due to being carried out in the ordinary course of the company’s business and under normal market conditions.
The next concern for Luxembourg listed companies subject to the New Law, in view of their next general meeting of shareholders, will be the establishment of a remuneration policy and the drawing up of a remuneration report. The vote of the general meeting on the remuneration policy and the remuneration report shall only be of an advisory nature. However in the subsequent remuneration report, an explanation must be included as to how the advisory vote was taken into consideration.
Directors of listed companies should not delay in taking action to comply with the New Law, and should be mindful of Article 11ter of the 2011 Law, as amended by the New Law, pursuant to which directors shall be held jointly and severally liable for any damages resulting from the violation of their obligations under that law.
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