Pursuant to Bill No 7791, submitted to the Luxembourg Parliament on 16 March 2020, Article 1500-7 of the Companies Act will be amended in order to clarify that the financial assistance prohibition does not apply to Luxembourg private limited-liability companies (sociétés à responsabilité limitée).
Article 430-19 of the Companies Act provides that a Luxembourg public limited-liability company (société anonyme) may not, directly or indirectly, advance funds, extend loans or provide security with a view to the acquisition of its own shares by a third party (the financial assistance prohibition).
Article 1500-7 of the Companies Act currently provides that penalties, including a prison term and/or fine, may be imposed on any person who, in his or her capacity as a director, auditor (commissaire), manager (gérant) or member of the supervisory committee of a company, knowingly extends loans or advances using company funds or provides security with a view to the acquisition of the company's own shares or units or a pledge of the company's shares or units.
The reference to manager (gérant) was inserted in Article 1500-7 further to the reform of Luxembourg company law in 2016. Since then, questions have arisen as to whether the financial assistance prohibition set out in Article 430-19 also applies to private limited-liability companies. Bill No 7791 will amend Article 1500-7 of the Companies Act in order to put an end to this uncertainty.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.