The Luxembourg law of 6 August 2021 came into force on 16 August 2021 (the 6 August Law) and amends the Luxembourg law of 10 August 1915 on commercial companies (as amended) (the Companies Law), making it clear in law, that the prohibition, preventing Luxembourg public limited liability companies (SAs) and corporate partnerships limited by shares (SCAs), from providing, save in limited cases, financial assistance (i.e. advancing funds, providing security or extending loans) to third parties for the acquisition of their own shares, does not apply to Luxembourg private limited liability companies (SARLs).
The 6 August Law specifically amends article 1500-7 of the Companies Law, pertaining to criminal sanctions in the event of infringement of the financial assistance prohibition, so as to delete the references to “parts sociales” (i.e. the French term for shares issued in a SARL), which had caused doubts about the applicability of the financial assistance prohibition to SARLs. The reference to “parts sociales” was seen until recently by some practitioners, as an extension of the financial assistance prohibition (article 430-19 of the Companies Law) to SARLs. The deletion of “parts sociales” confirms that its inclusion was a clerical error made when the Companies Law was modernised in 2016 and makes it clear that the Luxembourg legislator never intended for the financial assistance prohibition to be applicable to SARLs.
As a result of the entry into force of the 6 August Law, SARLs, may (to the extent it falls within their corporate interest) now with certainty, directly or indirectly, advance funds/provide security/extend loans, with a view to the acquisition of their own shares by third parties.
This clarification enhances the flexibility and legal certainty for PE/RE transactions in Luxembourg and the financing thereof.