Transposition of the Mobility Directive into Luxembourg Law: What will change?
On 23 January 2025, the Luxembourg Parliament adopted the law (the New Law) implementing the provisions of Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 as regards cross-border transformations, mergers and demergers (the Mobility Directive), having amended Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 on certain aspects of company law (the New Law).
The Mobility Directive aims to harmonize the rules applicable to the mobility of companies within the European Union.
The new provisions relating to EU cross-border mergers and demergers are provided for in Chapter II and Chapter III of Title X of the Luxembourg law of 10 August 1915 on commercial companies (as amended) (the Company Law). Those relating to EU cross-border transformations are incorporated into a new Chapter VI of Title X of the Company Law.
Scope of application
The New Law amends the Company Law, which provides for two regimes applicable to transformations (migrations), mergers, and demergers of Luxembourg companies: the general regime, mostly based on the existing provisions of the Company Law which applies to national and non-EU cross-border transformations, mergers and demergers (the General Regime) and the special regime, which only applies to EU cross-border operations (the Special Regime). The main changes introduced by the New Law are in relation to the Special Regime.The Special Regime applies to EU cross-border transformations, mergers and demergers of Luxembourg public limited liability companies (sociétés anonymes), private limited liability companies (sociétés à responsabilité limitée) and partnerships limited by shares (sociétés en commandite par actions). It applies if the cross-border operations are made in the EU and involve at least another form of EU company which is subject to the Mobility Directive.
The Special Regime doesn't apply to:
EU cross-border operations involving Luxembourg cooperative companies (sociétés coopératives), collective investment undertakings, companies in liquidation if the liquidation of its assets has begun, companies subject to resolution mechanisms as provided for by Title IV of the Directive (EU) 2014/59 or title V of the Regulation (EU) 2021/23, and companies under crisis prevention measures as provided for by article 2 paragraph 1, point 101 of the Directive (EU) 2014/59 or article 2, point 48) of the Regulation (EU) 2021/23;
European companies (sociétés européennes); and
cross-border operations involving third countries.
Timeline for an EU cross-border operation within the scope of the New Law
The diagram below shows the main steps to be followed as part of a EU cross-border operation.
Key changes for an EU cross-border operation within the scope of the New Law
Protections of minority shareholders: Withdrawal Right and Compensation
Shareholders of a company which is a party to an EU cross-border operation who voted against the cross-border common draft terms (the CDT) now benefit from a withdrawal and compensation right.
The withdrawal right has to be exercised in front of the Luxembourg notary at the general meeting of shareholders approving the CDT.
The New Law provides that the withdrawal right:
must relate to all the shares held by the outgoing shareholder unless otherwise provided by the CDT or if the shares are held by an account keeper within the meaning of the Luxembourg law of 1 August 2001 on the circulation of securities;
doesn't apply to shares sold between the date of publication of the CDT and the date of the general meeting of shareholders approving the CDT;
doesn't apply to non-voting shares and profit shares (parts bénéficiaires), even if they bear voting rights; and
when exercised, doesn't have a suspensive effect on the transaction.
The cash compensation (soulte) for the shares subject to the right of withdrawal is set forth in the CDT. The withdrawing shareholder(s) who think the compensation isn't properly determined can, within a month after the date of the general meeting of shareholders approving the CDT, challenge the share exchange ratio (in the case of a merger or demerger) or the cash compensation. They can submit a request for additional cash compensation to the presiding judge of the District Court of Luxembourg sitting in commercial matters and as in summary proceedings (magistrat présidant la chambre du tribunal d'arrondissement siègeant en matière commerciale et comme en référé).
The request has no suspensive effect on the cross-border operation.
Protection of creditors
Creditors whose claims predate the publication of the CDT and aren't yet due and payable can request adequate guarantees to the presiding judge of the District Court of Luxembourg sitting in commercial matters and as in summary proceedings (magistrat présidant la chambre du tribunal d'arrondissement siègeant en matière commerciale et comme en référé) if they're not satisfied with the ones offered in the CDT and manage to prove that the cross-border operation would jeopardize the recovery of their claims.
Non-Suspensive Effect: The introduction of a request for guarantees doesn't suspend the effects of the cross-border operation.
Notary certificate
A certificate will now have to be issued by a Luxembourg notary for any EU cross-border operation.
The confirmations to be given by the Luxembourg notary depend on the jurisdiction where the company resulting from the cross-border operation is based:
If the cross-border transformation, merger or demerger doesn't result in the continuation into, the incorporation or the survival of a Luxembourg company, the Luxembourg notary has to confirm that the Luxembourg conditions required by the Company Law are met and that the cross-border operation is not made for fraudulent or abusive purposes. The notary will issue the confirmation within three months after receiving the relevant documents. The period can be renewed by three months. Notaries can refuse to issue a confirmation if they think the EU cross-border operation is being carried out for abusive or fraudulent purposes. The company can appeal this decision.
If the cross-border transformation, merger or demerger results in the continuation into, the incorporation or the survival of a Luxembourg company, the Luxembourg notary has to confirm that all conditions required for the cross-border operation have been met. To do so, the Luxembourg notary can rely on the certificate issued by the relevant authority of the other jurisdiction involved.
Application and transitional period
The New Law will come into force on the fourth day following its publication in the Luxembourg Official Journal.
All operations that are subject to terms published on the Luxembourg Official Journal before the New Law enters into force will still be subject to the General Regime even if they haven't been completed before that date.
Conclusion
The Mobility Directive is aimed at harmonizing procedures applicable to cross-border operations. But the additional formalities and the increased involvement of notaries will likely encourage Luxembourg companies to carefully review and assess whether this will adversely affect the timing of their operations.
Our teams can help you plan your operations to ensure a smooth process.
