Rules restricting financial assistance do not apply to private limited liability companies (S.à r.l.)

August 13, 2021 | Blog

The Luxembourg law on commercial companies dated 10 August 1915, as amended (the “1915 Law”), provides that public limited liability companies (sociétés anonymes) and corporate partnership limited by shares (société en commandite par actions) may not, save in limited cases, directly or indirectly, advance funds or make loans or provide security with a view to the acquisition of their own shares by third parties.

The 1915 Law provides for criminal sanctions in the event of infringement of the prohibition against providing financial assistance. This provision refers not only to the shares (actions) of public limited liability companies (sociétés anonymes) and corporate partnerships limited by shares (société en commandite par actions) but also to corporate units (parts sociales) of private limited liability companies (S.à r.l.). As a result of this reference to corporate units (parts sociales), discussions arose as to whether the financial assistance rules might also apply to private limited liability companies (S.à r.l.).

Confirming that the reference to corporate units (parts sociales) in the context of financial assistance was in fact a clerical error, the law dated 6 August 2021 thus provides legal certainty as to the applicability of the financial assistance rules. As a result, and to the extent such operation falls within their corporate interest, private limited liability companies (S.à r.l.) may, directly or indirectly, advance funds or make loans or provide security with a view to the acquisition of their own shares by third parties. This welcome clarification brings certainty among participants of restructuring transactions and further enhances the attractiveness of the Luxembourg toolkit.

For more information, please contact Nicolas Marchand or Cédric Bless.

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