Summary
Draft Law n°8370 (the “Draft Law”) was introduced on 29 March 2024 before the Luxembourg Parliament to transpose the Corporate Sustainability Reporting Directive (CSRD) and the Commission Delegated Directive (EU) 2023/2775 into national legislation. This new framework will replace the existing regime established by the law of 23 July 2016, which implemented Directive 2014/95/EU (the “NFRD” regime).
The Draft Law proposes amendments to:
- the law of 10 August 1915 on commercial companies,
- the law of 19 December 2002 on the register of commerce and companies, and on the accounting and annual accounts of undertakings,
- the law of 5 April 1993 on the financial sector, along with sector-specific legislation related to financial and accounting reporting obligations for credit institutions and the insurance sector.
Under the new regime, companies will be required to disclose information on:
- the impact of their activities on sustainability issues (impact materiality),
- how sustainability issues affect their financial performance (financial materiality).
Reporting must adhere to the European Sustainability Reporting Standards (ESRS) developed by the European Financial Reporting Advisory Group (EFRAG), ensuring consistent and comprehensive disclosures across all sectors.
New adjusted size criterion / Scope
The new regime expands the scope of the NFRD, targeting large companies and/or parent companies of large groups. It introduces enhanced non-financial reporting obligations on sustainability matters on both a stand-alone and consolidated basis. The size criteria for determining applicable companies will be increased by 25% in terms of total balance sheet and net turnover, considering inflation and aiming to reduce administrative burdens. However, this adjustment may lead to certain large companies being reclassified as medium-sized, thus potentially excluding them from CSRD obligations.
Timing for implementation
The implementation of the Draft Law's requirements will be phased in as follows:
- from 1 January 2024 for large listed companies and their parent companies,
- from 1 January 2025 for large non-listed companies and their parent companies,
- from 1 January 2026 for listed medium and small-sized companies,
- from 1 January 2028 for non-EU companies with EU subsidiaries or branches, subject to certain turnover thresholds and criteria.
Opinion of the Luxembourg Chamber of Commerce on the draft Grand-Ducal Regulation transposing the Delegated Directive (“Draft GDR”)
The Luxembourg Chamber of Commerce has welcomed the Draft GDR and recommended its approval, with reservations regarding Article 4. The Chamber suggested revising this provision to allow companies the option to benefit from the increased thresholds from 1 January 2023. The categorization into one or the other group is determined by meeting two out of three relevant criteria (balance sheet total, net turnover, and number of employees) for at least two consecutive financial periods.
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