The Court of Appeal recently ruled that shareholders have a right to seek an annulment of decisions made by their company's board of directors. This decision sets a precedent for challenging board decisions on the grounds of the Companies Law, thereby increasing legal certainty by filling the gaps left by the law. However, it also marginally limits the scope of such challenges by excluding former shareholders from initiating new proceedings.
The Luxembourg Administrative Court of Appeal and the European Court of Justice (on referral for a preliminary ruling) recently considered whether the Luxembourg law on the procedure applicable to the exchange of information on request in tax matters complied with EU Directive 2011/16/EU and the Charter of Fundamental Rights of the European Union. In particular, the courts examined whether the Luxembourg law complied with the right to an effective remedy set out in the EU directive and the charter.
The principal way in which managers can protect themselves from liability is by obtaining a grant of discharge from shareholders. The Court of Appeal recently stated that although discharge is voted on at a general shareholders' meeting after the adoption of the company's annual accounts, the mere approval of the accounts does not automatically entail discharge. Rather, the court made clear that a decision to discharge a management body must be subject to a separate deliberation.
Following a recent Luxembourg District Court decision concerning the conditions for the enforcement of a pledge, collaterals consisting in a pledge on the shares of a company can be enforced even outside of a default payment (ie, even if the secured debt is not due and payable). In the case at hand, the pledge agreement provided that the pledge was enforceable in case of non-compliance with a binding financial ratio.
The Luxembourg District Court has clarified the requirements and procedures regarding judicial management reports provided for in the law on commercial companies, as amended. The ruling provides valuable insight into shareholders' right to request information on management decisions. While the reduced threshold suggests a trend in Luxembourg law towards shareholder empowerment, as well as the accountability and transparency of managing bodies, the ruling appears to be pro-management.