On 21 December 2022, the Luxembourg Court of Appeal defined – for the first time – the concept of equality abuse at shareholders' meetings under Luxembourg law. Further, the Court detailed the conditions that must be met for conduct to qualify as equality abuse.
Equality abuse
The abuse of equality consists of the holder of half of the voting rights preventing a decision from being made. The holder thus:
- acts contrary to the interests of the company;
- prevents an essential operation for the company; and
- acts in their own interest, to the detriment of the other shareholders of the company.
The abuse of minority and the abuse of equality presuppose an abusive or wrongful decision that is made during a vote of refusal, contrary to the company's interests. Such a decision is made to favour the interests of the shareholder to the detriment of those at the shareholders' meeting. The abuse presupposes that it has been committed through the exercise of a voting right in a general meeting or in a statutory body.
The following are insufficient to characterise an abuse of minority or equality:
- a difference of opinion;
- a critical or even negative attitude; and
- the announcement of opposition to measures envisaged by majority or equal shareholders, expressed outside any statutory body.
Thus, abuse of equality committed by shareholders presupposes the regular convening of a general meeting and an expressed vote, notably at a general meeting.
Comment
The concepts of abuse of majority and minority have been the subject of numerous recent decisions by Luxembourg courts. These decisions have clarified the basis and conditions of these actions.
The Luxembourg Court of Appeal's recent decision confirmed the application of the concept of equality abuse under Luxembourg corporate law. This abuse can be qualified in shareholders' meeting or in any statutory body of a company as long as it is committed through the exercise of a voting right.
Originally Published by International Law Office
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