NEWSFLASH | The Law on Commercial Companies dated August 10th 1915 as amended | End of Transitory Period

The law of August 10^th 1915 on commercial companies as amended ("LCC") had long since evolved at a glacial pace, following European directives over the years; thus the need for an ambitious reform to ensure its modernization and increase its attractiveness. This reform came into force on August 23^rd 2016.

Two guiding principles have driven this reform: "contractual freedom for shareholders and increased security for third parties"; ensuring that priority is given to balanced solutions between the need for increased security for the protection of third parties and the need not to disrupt the freedoms of economic operators present in Luxembourg.

In view of the importance of this reform, the legislator did not wish to impose it from the outset, and so provided a transition period of 24 months, which expired on August 23^rd 2018. Since August 23^rd 2016, all companies set up after that date have had to apply the new provisions of the LCC. On the other hand, companies established before August 23^rd 2016 and that have not updated their articles of association will be subject to a hybrid regime that may be complicated to interpret depending on the circumstances.

Indeed, the new LCC rules have automatically become applicable to all companies since August 23^rd 2018, so that in the event of a conflict with the provisions of the articles of association, it will be necessary to analyse the situation in detail. If, as it is often the case, the articles of a corporation faithfully transpose the text of a section of the LCC and that same section has been amended, there is now an obvious contradiction. Practitioners will have to determine on a case by case basis whether the new text of the LCC should prevail over those of the articles.

Less problematic, if there is a reference in a company's articles of incorporation to a specific section of the LCC, this reference will automatically be adapted to the new content of the rule. Finally, it is important not to forget shareholders' agreements and other agreements that could also be subject to contradictions in the interpretation of the rules if they have not been tidied up as required at the end of the transitional period.