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09 April 2019
On 12 July 2017 the Commercial Section of the Luxembourg District Court clearly defined – for the first time – the concept of minority abuse at shareholders' meetings under Luxembourg law. Further, the court detailed the conditions which must be met for conduct to qualify as minority abuse.
According to the court, so-called 'positive minority abuse' occurs when minority shareholders – through a corporate decision taken at a meeting in which they find themselves in a majority position due to unforeseen circumstances – undermine the corporate interest and intentionally break with shareholder equality by using their vote to promote their personal interests to the detriment of all shareholders.
Further, the court clarified that 'negative minority abuse' occurs when minority shareholders block an amendment of their company's articles of association, either by repeated absenteeism or by refusing to vote for the proposed resolution (a so-called 'blocking minority'). Such abuse is possible only where decisions are taken in an extraordinary general meeting in which either a quorum or reinforced majority (or both) is necessary to pass a resolution. As such, ordinary general meetings and decisions for which neither a quorum nor a qualified majority are necessary are excluded.
The court held that in order to qualify abuse as negative minority abuse, the courts must analyse "the merits of the resolutions rejected by the minority" and weigh up the interests of the company and the minority shareholders. Thus, the company or its majority shareholders must prove whether:
This decision is of particular interest, as the alternative conditions for determining whether minority abuse has taken place are much broader than those initially set out in Luxembourg law.
For further information on this topic please contact Mathieu Laurent or Maurice Goetschy at Luther SA by telephone (+352 27484 1) or email (firstname.lastname@example.org or email@example.com). The Luther SA website can be accessed at www.luther-lawfirm.com.
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