25.01.2017
The law dated 23 December 2016 on market abuse waspublished in the Luxembourg official gazette (Mémorial A)on 27 December 2016 and entered into force 3 days after itspublication (the “MAL”).
The law dated 23 December 2016 on market abuse waspublished in the Luxembourg official gazette (Mémorial A)on 27 December 2016 and entered into force 3 days after itspublication (the “MAL”).
The MAL:
The MAL repeals the Luxembourg law dated 9 May 2006 on market abuse (the “Repealed Law”), which is no longer into force and is adapting Luxembourg national law to the new European legal framework on market abuse.
Even though the provisions of the MAR are directly applicable into member states national laws, it was necessary for each member states to take additional measures in order to ensure a proper application of the MAR.
Hence, according to the MAR, member states shall take the appropriate measures to comply with the provisions of the MAR relating to, amongst others, competent authorities and their powers, administrative sanctions and other administrative measures, exercise of supervisory and sanctioning powers,reporting violations and publication of the decisions.
The below items aim at giving a high level overview of how Luxembourg implemented such measures.
(a) Investigation and supervisory powers of the Supervision Commission of the Financial Sector
The Supervision Commission of the Financial Sector (the "CSSF"), the Luxembourg competent authority under the MAR, is granted with a comprehensive set of investigation and supervisory powers, such has a right to access any document or information, to conduct inspections and seize any document, whenever the persons under the investigation is under its supervision. When the person is neither supervised by the CSSF nor an issuer, such powers can be exercised after a judicial authorization of the investigating judge, who will verify that the required measure is justified and proportionate to the aim.
With regard to persons not supervised by the CSSF and issuers, the CSSF can carry on-site inspections on the ground of the judicial authorization or with the consent of the investigated person. Such inspection takes place with a member of the police department designated by the investigating judge and under certain conditions laid down by the MAL.
The MAL maintains in its Article 7 the same consultation mechanism which was already provided by the Repealed Law between the CSSF and the state prosecutor. This means that when the CSSF has enough proof to initiate an administrative proceeding, which may lead to the imposition of an administrative sanction, it will inform the state prosecutor before any criminal proceeding. If the state prosecutor decides to proceed, the CSSF will refrain from proceeding. If the state prosecutor does not proceed within two weeks, the CSSF can proceed. This principle aims at avoiding double prosecution for the same facts.
(b) Cooperation of the CSSF with the European Securities and Markets Authority (ESMA) and other competent authorities
According to Article 22 of the MAR, competent authorities, among which the CSSF, shall cooperate with ESMA and provide ESMA with all information necessary to carry out its duties, without delay .
The CSSF shall also, according to Article 10 of the MAL, cooperate with the other competent authorities referred to in article 25 of the MAR.
This includes the competent authorities of other member states and third countries competent authorities.
The CSSF can require other competent authorities to investigate or to carry on-site inspections on its territory in the same conditions as it was provided in the Repealed Law.
According to the MAL, the CSSF can exchange information with third countries competent authorities when this information is necessary to the other authority’s mission. The authority receiving the information has a duty to keep it confidential and can use the received information only for the aim for which it was transmitted.
Indeed such information cannot be transmitted by the CSSF to another competent authority if judicial proceedings are already engaged in Luxembourg for the same facts or if the person was already convicted for such facts in Luxembourg.
(c) Administrative sanctions and other administrative measures
In its implementation, the Luxembourg legislator meant to be more severe than the minimum level of protection provided in the European legislation.
The MAL provides for administrative and criminal sanctions that are of a higher level of those provided in the MAR. This was made possible by Article 30, paragraph 3 of the MAR.
Hence, it is provided in the MAL that the CSSF can impose a temporary ban of a person discharging managerial responsibilities within an entity supervised by the CSSF or another natural person who is held responsible for the infringement, from dealing on own account, and thus for a maximum of five years. In the same way, a maximum administrative fine of at least ten times the amounts of the profit gained or losses avoided because of the infringement, while the MAR provides for an amount of a maximum of three times such amounts.
(d) Exercise of supervisory and sanctioning powers
The MAL does not differ from the provisions of the MAR regarding the exercise of supervisory and sanctioning powers by the CSSF. Therefore the provisions of the MAR relating to the exercise of supervisory and sanctioning powers are directly applicable into national law as it stands.
In determining the type and level of the applicable sanctions, the CSSF shall take into account all relevant circumstances, including the following: the gravity and duration of the infringement, the degree of responsibility of the person responsible of it, the financial strength of the person responsible for the infringement (total turnover or annual income), the importance of the profits gained or losses avoided by committing the infringement, the level of cooperation of the person with the CSSF, previous infringements of that person, and the measures taken by that person to avoid repeating the infringement.
(e) Procedures for reporting violations
Rules relating to reporting violation are laid down in the Annex to the MAL.
Specific procedure is settled for the treatment of any reported violation, whereby the CSSF shall assign trained member of its staff. Any reported violations shall be published on the CSSF’s website.
Privacy of the information is guaranteed through the use of specific independent and autonomous communication channels differing from the normal communication channels of the CSSF.
The MAL also provides that the CSSF shall cooperate with the Labor and Mines Inspection in order to protect against reprisals, discrimination and unfair treatment any employee who would have reported a violation under the MAR.
(f) Publication of decisions
The MAL provides that any decision shall be published on the CSSF’s website and be available for at least five years after its publication, in accordance with the MAR.
Moreover, it is provided that any personal data shall be kept on the CSSF’s website only for a maximum period of twelve months. This was added by the MAL in order to increase the protection of privacy.
The MAL also provides for criminal sanctions applying to persons committing or recommending or inducing another person to commit insider dealing, unlawful disclosure of inside information and market manipulation.
Those infringements are punishable with imprisonment, fine or even both.
For natural persons the penalties for insider dealing and market manipulation are a term of imprisonment of between three months and four years or a fine of between EUR 251 and EUR 5,000,000. For insider dealing, this fine may be increased up to ten times the amount of the profit realised and shall under no circumstances be less than this profit.
For legal persons, the penalties for those infringements are a fine of between EUR 500 and EUR 15,000,000 . For insider dealing, this fine may be increased to ten times the amount of the profit realised and shall under no circumstances be less than the said profit.
For natural persons, the penalties for unlawful disclosure of inside information are a term of imprisonment of between eight days to two years or a fine of between EUR 251 and EUR 500,000. For legal persons, penalties for such infringement are a fine of between EUR 500 and EUR 15,000,000.
The MAL brings graver protection against market abuse than it is required under the European legal framework. Consequently to such strengthen of the sanctions, it is now time for persons concerned by this matter to update their internal policies.
For more information, please do not hesitate to contact us.
 | Laurent Massinon
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 | Charlotte Mortz-Kezic
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A few weeks after the adoption of the simplified private limited liability company (société à responsabilité limitée simplifiée), the Luxembourg legislator has decided to profoundly amend the legal regime applicable to the private limited liability company (société à responsabilité limitée) (“SARL”) pursuant to the law dated 10 August 2016 modernizing the law regarding the commercial companies dated 10 August 1915 (the “Law”). The key points to this reform are thus the following but remain subject to any contrary provision of the articles of association (“AoA”):
A few weeks after the adoption of the simplified private limited liability company (société à responsabilité limitée simplifiée), the Luxembourg legislator has decided to profoundly amend the legal regime applicable to the private limited liability company (société à responsabilité limitée) (“SARL”) pursuant to the law dated 10 August 2016 modernizing the law regarding the commercial companies dated 10 August 1915 (the “Law”). The key points to this reform are thus the following but remain subject to any contrary provision of the articles of association (“AoA”):
The maximum number of shareholders has been raised from 40 to 100.
The Law now recognizes:
The possibility to delegate to one or several managers the daily management (gestion journalière) of the SARL who may thus bind the company by his/her/their signature(s).
Authorized share capital (capital autorisé): the Board may now be authorized pursuant to the AoA for a maximum period of 5 years, renewable, to increase the share capital of the SARL in an amount and under the terms and conditions determined in the AoA subject to the fact that the shares are issued in favor of existing shareholders or to third parties preliminary approved by the shareholders. The Board may also decide to redeem the redeemable shares and to resolve upon the subsequent share capital reduction which shall be further recorded by a notarial deed.
The transfer of shares or of beneficiary shares requires the prior approval of the shareholders representing at least three quarter of the corporate units. The same rule applies to the dismemberment of the right of ownership.
The company must be notified by any shareholder who contemplates selling its shares or beneficiary shares. In case of refusal and unless the contemplated transfer is abandoned by the transferor, the shareholders may either acquire the shares or the company may decide to reduce its capital by the amount of the nominal value of the shares and to redeem them. Otherwise, the selling shareholder may proceed to the transfer.
Subject to the provisions of the AoA, the transfer of shares by reason of death to persons who are not shareholders also requires the prior approval of the shareholders unless if the shares are transferred to rightful heirs, to the surviving spouse or partner or to other legal heirs (if the AoA authorize such transfer).
The Law now also provides rules related to the determination of the price for the redemption of the shares and a specific procedure for any disagreement regarding this price.
The Law acknowledges the possibility for a SARL to proceed to the payment of interim dividends based on the rules already applicable to the public limited companies (sociétés anonymes) if provided by the AoA.
The Law introduced general rules related to the conversion of companies and other entities clarifying and simplifying the previous rules. However an enhanced regime has been implemented for any conversion of a SARL into a public limited company (société anonyme) or a corporate partnership limited by shares (société en commandite par actions) when (i) a SARL has benefited from a contribution in kind or a quasi-contribution within a period of two years prior to the members’ decision to proceed with the previous mentioned conversion, and when (ii) that contribution in kind or quasi-contribution has not been subject to a report by a statutory auditor (réviseur d’entreprises) and where such report would be required for a public limited company (société anonyme) or a corporate partnership limited by shares (société en commandite par actions).
 | Selim Souissi |
 | Julie Prunier |
 | Maxime Wagner |
The Luxembourg law of 10 August 2016 modernising the law on commercial companies of 10 August 1915 (the “Company Law”) and amending the Civil Code (the “New Law”) has amended article 100 of the Company Law concerning the impairment rules. The new text is in force since 23 August 2016.
The Luxembourg law of 10 August 2016 modernising the law on commercial companies of 10 August 1915 (the “Company Law”) and amending the Civil Code (the “New Law”) has amended article 100 of the Company Law concerning the impairment rules. The new text is in force since 23 August 2016.
If Luxembourg law accepts that companies which have losses continue to exist, there are nonetheless rules protecting the shareholders of such companies in a loss situation. These rules are of particular importance in case of a dispute or a disagreement between shareholders.
According to the former version of the Company Law, when it appeared that a société anonyme (SA) or a société en commandite par actions (S.C.A.) was confronted with a loss of half the share capital or more, the management body of the company shall convene a general meeting to resolve on the possible dissolution of the company to be held in a period not exceeding two months from the time at which the loss was or should have been ascertained by the management body.
The resolution on the dissolution of the company was to be adopted according to the rules applicable to the amendment of the company's articles of association unless the loss was equal or exceeded three-quarters of the share capital, in which case a resolution to wind up the company could be adopted with the approval of only a quarter of the votes cast at the general meeting.
In the event of any infringement of their obligations to convene a meeting in due time, all members of the management body of the company could be declared personally and jointly severally liable vis-à-vis the company for all or part of the increase of the loss. This risk is not theoretical and there are have been precedents of sentencing of directors and managers under this article. Luxembourg case law has also specified that a third party such as a creditor may also introduce a claim against the management body following a violation of the impairment rules by the management body.
The principle of the impairment rules of the Company Law, including the majority rules to vote the dissolution and the liability regime of the management body remains unchanged with the New Law.
However, the New Law has clarified the triggering conditions of the rule and strengthened the information of the shareholders by extending the mission of the management body.
The first contribution of the New Law is the clarification of the triggering conditions. The law now expressly states that the capital impairment rules will only apply if, as result of losses, the net asset (actif net) of the company falls below half or more of the share capital of the company.
From now on, the alarm mechanism shall be applied as soon as, pursuant to losses incurred, the company's net asset (actif net) falls below half of its share capital.
Further to the New Law, the management body shall prepare a special report explaining the reasons of the company's financial situation. Should the management body proposes to continue the company's activity despite the loss situation, it shall then proposes measures to remedy the company's financial situation.
This report has to be made available to the shareholders at least eight days before the holding of the general meeting called to vote on the continuation or dissolution of the company.
Failure of the management body to establish and provide this report shall render any resolutions passed at the general meeting invalid, unless all shareholders waive this requirement.
Since the capital impairment rules are still not legally applicable to certain types of companies and especially not to SARLs (limited liability companies), it will remain an important criterion to consider when choosing a corporate form for a joint-venture vehicle.
As of now, it is also recommended to management bodies to ensure in advance either that the shareholders waive the requirement of a special report or that the special report that they will submit will correspond to the requirements of the law.
It should finally be reminded that the holders of non-voting shares will in principle have the right to vote at shareholders’ meetings called to decide on the possible continuation of the company.
 | Mathieu Laurent |
 | Maurice Goetschy |
2017 has arrived and some legislative changes with it.
In order to assess if your HR department is compliant with the new laws, you will find a short summary of the major innovations: 1 Minimum salary increase and indexation of wages from January 1st 2017; 2 Reform of working time legislation; 3 Equal treatment expressly recognized in the Labor Code ...
2017 has arrived and some legislative changes with it.
In order to assess if your HR department is compliant with the new laws, you will find a short summary of the major innovations:
After long discussions and much expectation, the salary indexation has been implemented by a law dated December 15, 2016.
The new index used in the mobile salary grid is increased from 775.17 points to 794.54 points, which will lead to an automatic increase by 2.5% of all salaries and pensions and will thus adjust the remunerations to the evolution of the cost of living.
Besides this increase, the amount of the minimum wage has also be increased by 1.4%.
Therefore, from January 1st, 2017 the minimum wage:
As a result employees benefitting from minimum wage will see their remuneration increased by 3.9%.
The law dated December 23, 2016 (hereinafter the “New NAP Law”) will succeed to the law dated February 12, 1999 (the “NAP Law”) which has implemented a national action plan for employment.
The Labour Code fixes working hours at 40 hours per week which can be extended under certain conditions to 48 hours per week. Nevertheless, flexible options are granted to the employer, who is notably entitled to implement a working hours plan (Plan d'Organisation du Travail, hereinafter “POT”), fixing the working conditions during a reference period (the “Reference Period”) by taking into consideration both the normal and also exceptional and unexpected activity of the business. During the Reference Period, which was under the NAP Law fixed to one month or 4 weeks, the employees can work beyond the threshold of 8 hours per day and 40 hours per week, under the condition that the average weekly working hours are not exceeding 40 hours. Moreover, such POT must be approved by the staff representatives.
One of the major amendments introduced by the New NAP Law, is the extension of the Reference Period to 4 months. However such extension has only to be considered as an option for the employer. Thus, companies having already implemented a POT with a Reference Period of 1 month can continue under such regime or chose to adopt a longer Period of Reference.
To be noted that in case of amendment of the duration of the Reference Period, the staff delegation (or the employees if no delegation is set up) shall be informed and consulted.
Such extension of the Reference Period will under certain conditions have a beneficial effect for the employees concerned by the POT as they will be granted additional holidays (1.5 day off if the Reference Period is comprised between 1 and 2 months, 3 days off if the Reference Period is comprised between 2 and 3 months, etc.).
The New NAP Law also introduces some innovations with regard to working time, indeed, even under a POT, working hours cannot exceed certain thresholds. Therefore, if the Reference Period does not exceed one month, the standard thresholds mentioned above will apply (i.e.: maximum of 48 hours per week which corresponds to an increase of 20% of the normal working hours), nevertheless should the Reference Period be higher than one month, the monthly working hours cannot exceed:
Should the aforementioned limits be exceeded, any additional hour will be considered as overtime and shall be paid accordingly.
Finally, should a company be under the regime of a collective bargaining agreement setting forth the duration of the Reference Period, such duration will, despite the New NAP law, remain unchanged until a denunciation of the collective bargaining agreement occurs. However, if an applicable collective bargaining agreement remains silent about the duration of the Reference Period, the maximum duration of such period cannot exceed one month and this until the expiration of the collective bargaining agreement or renegotiation.
The New NAP Law is an opportunity for employers having a cyclical business activity; nevertheless before implementing such new regime, the company shall determine if efficient cost saving can be made.
The labor code (the “Code”) has been amended by a law dated December 15, 2016 and now includes a Chapter V entitled “Equal Treatment Between Men and Women”.
Article L. 225-1 of the Code provides that the employer has to grant equal pay for work of equal value.
Shall be considered as remuneration the salary as well as any advantages granted in cash or in kind, directly or indirectly to the employee.
Prior to the amendment of the Code, reference was made to a Grand Ducal Regulation dated July 10, 1974 and to articles L.241-1 and L-241-2 prohibiting gender discrimination.
Nevertheless, despite those provisions, unequal treatment between men and women is a reality which must be considered; the comments of the draft bill indeed refer to a remuneration inequality of 8% in disfavor of women in Luxembourg.
The recognition of the principle of equal treatment between men and women is therefore an essential step even if it is always difficult for employees to prove the inequality because evidence of an identical position, identical tasks and competences has to be produced.
 | Marie Sinniger
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On 16 November 2016 and 16 December 2016 respectively, the European Securities and Markets Authority (“ESMA”) updated its Questions and Answers with regard to the application of the Alternative Investment Fund Managers Directive (“AIFMD”) (Ref. ESMA/2016/1669) (“AIFMD Q&As”). The new points concern (i) notification of material changes relating to an alternative investment fund (“AIF”) in case of cross-border marketing, (ii) reporting obligations by non-EU AIFMs, and (iii) delegation of functions by an alternative investment fund manager (“AIFM”).
On 16 November 2016 and 16 December 2016 respectively, the European Securities and Markets Authority (“ESMA”) updated its Questions and Answers with regard to the application of the Alternative Investment Fund Managers Directive (“AIFMD”) (Ref. ESMA/2016/1669) (“AIFMD Q&As”). The new points concern (i) notification of material changes relating to an alternative investment fund (“AIF”) in case of cross-border marketing, (ii) reporting obligations by non-EU AIFMs, and (iii) delegation of functions by an alternative investment fund manager (“AIFM”).
The latest version of the AIFMD Q&As is available on ESMA’s website.
https://www.esma.europa.eu/sites/default/files/library/2016-1669_qa_on_aifmd.pdf
On 21 November 2016, ESMA updated its Questions and Answers with regard to the application of the UCITS Directive (Ref. ESMA/2016/1586) (“UCITS Q&As”). The UCITS Q&As now include some clarifications on how investment limits should be applied where a UCITS wants to invest in an umbrella fund:
The latest version of the UCITS Q&As is available on ESMA’s website.
https://www.esma.europa.eu/sites/default/files/library/2016-1586_qa_on_ucits_directive.pdf 1
On 14 October 2016, ESMA published (i) the “Guidelines on sound remuneration policies under the UCITS Directive” (Ref. ESMA/2016/575) (“UCITS Remuneration Guidelines”) and (ii) the “Guidelines on sound remuneration policies under the AIFMD” (Ref. ESMA/2016/579) (“AIFMD Remuneration Guidelines”) which are effective from 1 January 2017:
The UCITS Remuneration Guidelines and the AIFMD Remuneration Guidelines are available on ESMA’s website.
https://www.esma.europa.eu/sites/default/files/library/2016-575_ucits_remuneration_guidelines.pdf 1
https://www.esma.europa.eu/sites/default/files/library/2016-579_aifmd_remuneration_guidelines_0.pdf 1
 | Hervé Leclercq |
 | Julie Thai |
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