The long-awaited implementation of EU Directive 2019/2121 regarding cross-border conversions, mergers and demergers into Luxembourg law has finally taken place. The law of 17 February 2025, amending both the law of 10 August 1915 on commercial companies and the law of 19 December 2002 on the Trade and Companies Register, the accounting and annual accounts of undertakings, was published in the Luxembourg Official Gazette (Mémorial) on 26 February 2025.
The new law became effective on 2 March 2025 and it applies to all EU-cross-border transactions whose terms are published as from 1 April 2025.
With this legislative update, Luxembourg can now fully participate in the harmonised legal framework for corporate mobility within the EU, catching up with other member states in implementing these rules. Migrations of companies, as well as cross-border mergers and demergers, now benefit from a more secure and predictable legal environment.
This new enhanced legal framework on corporate mobility applies only to cross-border corporate restructuring within the EU involving a Luxembourg SA, SCA or SARL, while the old Luxembourg legal framework continues to exist with some simplifications and express provisions for certain best practices relating to (i) EU restructuring of other legal forms of companies, (ii) international restructuring implicating a non-EU entity, and (iii) domestic mergers and demergers. Key changes introduced by the law include:
Rights of Minority Shareholders
Those who oppose a particular EU cross-border transaction are now entitled to exit the company in exchange for a monetary payout. Furthermore, shareholders who opt to stay in the company retain a legal right to dispute the share exchange ratio and can claim additional financial compensation.
Rights of Creditors
Creditors, whose claims exist prior to the publication of the draft terms and have not fallen due at that time, may ask the court for adequate securities if they deem their claims are at stake despite the securities offered in the draft terms. Such court action is open to them for 3 months following the publication of the draft terms, but it has no suspensive effect on the relevant transaction. The debtor company may dismiss court action by paying the creditor, even in the case of a term debt.
Shareholder Communication
The company’s management is required to prepare a detailed report for shareholders, which must outline key aspects of the transaction, including the share exchange ratio and any cash-out compensation, as well as the valuation methods used to determine them. The report must also clarify the broader impact of the transaction on shareholders. The shareholders may, however, unanimously waive this requirement, and this requirement does not exist for companies with a sole shareholder.
Employee Communication
The management must also provide employees with a report detailing the anticipated restructure. This report should explain how the transaction will affect employment relationships and what measures will be implemented to protect them, and whether there will be significant changes in employment conditions, workplace locations, or company operations. Additionally, the report should outline any potential consequences for the company’s subsidiaries. This report is, however, not required if neither the company nor its possible subsidiaries have no employees other than those forming part of a relevant management body.
Independent Expert Evaluation
An independent auditor (réviseur d’entreprises) must conduct an assessment to ensure the equitability of both the proposed exchange ratio and the cash compensation offered. However, the shareholders may unanimously waive this requirement, and this requirement does not exist for companies with a sole shareholder.
Anti-abuse Oversight
Notaries will have a crucial supervisory role in ensuring compliance with all legal requirements. Their role includes verifying that every procedural step has been properly executed by Luxembourg-based companies involved in such transactions, and in the case of a positive result, notaries are responsible for issuing a relevant certificate prior to completion of the transaction.
Migration under such regime
An EU migration is called an EU cross-border conversion and entails basically all of the above (except that there is of course no share exchange ratio), and it becomes also subject to a one month waiting period between the publication of the terms of the conversion into a foreign company type and the actual delocalisation.
Meanwhile, the framework for national transactions and for cross-border transactions outside the EU has been streamlined, rendering certain processes more efficient. Notable improvements include:
The above summarises the main innovations and does not list any exceptions or nuances. But it can be said that as a result of the new law, Luxembourg companies now have a robust legal infrastructure at their disposal that enables them to adapt dynamically to market conditions while ensuring compliance with EU-wide harmonisation efforts. This legislative evolution marks a significant step forward in facilitating seamless cross-border corporate transformations within the European single market.