A further step towards the use of digital tools in Luxembourg corporate law

Luxembourg

On 15 February 2022, bill of law n°7968 was filed in Luxembourg (the Bill), the purpose of which is to transpose Directive (EU) 2019/1151 of the European Parliament and of the Council of 20 June 2019 amending Directive (EU) 2017/1132 on the use of digital tools and processes in company law (the Directive) and modifying:

  1. the Civil Code;
  2. the law of 9 December 1976 on the organization of the notarial profession, as amended (the Notarial Law);
  3. the law of 10 August 1915 on commercial companies, as amended (the Company Law);
  4. the law of 19 December 2002 on the Trade and Companies Register as well as the accounting and annual accounts of companies;

       and to implement the digitization of the notarial profession.

The main objective of the Bill is to facilitate the use of digital technologies throughout the life cycle of a company.

It should be noted that the Bill does not transpose Article 13i of the Directive relating to the disqualification of directors as a longer transposition period is granted by the Directive until August 1, 2023.

  • Authentic instruments

The Bill contemplates significant legal changes, in particular an amendment of the Company Law, a modernisation of the provisions of the Civil Code relating to the authentic instruments (including notarial deeds), as well as an adaptation of the Notarial Law.

These modifications will allow to create a legal basis for authentic instruments in electronic format and to establish the rules and conditions that authentic instruments in electronic format must comply with.

The amendments of the Civil Code introduce the authentic instrument in electronic form by setting out the principle and the minimum requirements that the authentic instrument in electronic form must meet in order to be valid. It is to be noted that the Bill goes beyond the provisions of the Directive, as it establishes a general principle that all authentic instruments can be drawn up in electronic format under certain conditions.

  • Online incorporations

Currently, Luxembourg public limited liability companies (S.A.), private limited liability companies (S.à r.l.) and corporate partnerships limited by shares (S.C.A.) must necessarily be incorporated in front of a notary in the presence of the parties (attending in person or being represented through a power of attorney).

In order to facilitate the formation of companies, the Bill intends to enable the incorporation of these type of companies through an authentic deed in electronic form, whether in the physical presence or not of the founder(s) in front of the notary.

The Luxembourg notary may refuse to draw up an incorporation deed in electronic format remotely only in limited specific cases:

  • when the payment of the company's share capital includes a contribution in kind; or
  • in the presence of a suspicion of falsification of identity or in the presence of grounds for suspecting non-compliance with the rules aimed at ensuring that the parties to the deed have the necessary legal capacity and power to represent the company.

The notary may in that case require the physical presence of the party in order to remove any suspicion.

For documents drawn up in electronic format and signed remotely, the notary may further require the parties to use a qualified electronic signature within the meaning of Article 3, point 12, of Regulation (EU) n°910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC.

In addition, the Bill provides that the share capital may be paid up in cash online in an account opened in the name of the company to be incorporated with a credit institution established in a Member State by means of a widely available online payment service that can be used for cross-border payments which allows the identification of the person who made the payment and is provided by a financial institution or payment service provider established in a Member State. A proof of payment may also be provided online.

  • Branches

The Bill provides that branches established in the territory of a Member State of the European Union by Luxembourg public limited liability companies (S.A.), private limited liability companies (S.à r.l.) and corporate partnerships limited by shares (S.C.A.) should now be registered with the Luxembourg Trade and Companies Register.

  • Interconnection of registers

Currently, Member States' trade registers already exchange information with each other (e.g. as part of the cross-border mergers process). The Directive aims to strengthen the exchange of information flow between Member States' business registers.

The idea behind this is to apply the once-only principle, according to which companies should not be asked to submit the same information to public authorities more than once. For example, where a company is formed in one Member State but has a branch in another Member State, it should be possible for the company to submit certain changes to their company information only to the register where the company is registered, without the need to submit the same information to the register where the branch is registered.

For additional information in this respect, please contact our specialists.