Luxembourg adapts to temporary substance requirements

Luxembourg has enacted emergency legislation to protect investment funds and companies against the global pandemic.

On 20 March 2020, the jurisdiction put temporary measures in place for virtual shareholder meetings, board meetings and supervisory board meetings to be an acceptable form of attendance instead of face-to-face meetings. This is to enable business to continue as much as possible during the three-month emergency state period, while adhering to lockdown orders.

Board meetings

Law firm Goodwin advises that any management body of a Luxembourg legal entity can temporarily hold meetings in the following ways:

• Written circular resolutions
• Video conference or other telecommunication means which permits the identification of the attendee

Board members attending one of the above styles of meetings will be deemed present for determination of the quorum and to partake in a majority vote.

To continue company operations, Goodwin advised appointing a Luxembourg resident who is responsible for daily management functions, as this would also limit the amount of meetings held during this time.

LP and shareholder meetings

Improvement of meetings

Investors in a Luxembourg limited liability company (S.à r.l.) can only take resolutions in writing, provided there are 60 shareholders or less in the company. However, this option is not allowed for those in public limited liability companies.

Annual general meetings (AGM) and approval of accounts

Companies and funds are allowed to hold their AGM at the later of the following two dates:

• Date falling maximum six months after the end of its financial year
• Date within a period ending 30 June 2020

For the majority of legal entities in Luxembourg, the financial year runs from 1 January to 31 December and the AGM must be held within six months after the end of its financial year. Therefore Goodwin stresses this provision only provides an extension for legal entities with a financial year ending after 31 December.

Under normal business conditions, Luxembourg entities must file their annual accounts within one month of their approval by the general meeting. However, with the outbreak of Covid-19, the Register of Trade and Companies has adopted the following emergency measures:

• Filing annual accounts for the financial year ended in 2019: Luxembourg legal entities have an additional four month administrative period to file their data, at the standard rate
• Surcharge for late filing is suspended until 30 November 2020 and this includes filing delays of up to four months

However, the above does not apply to financial statements relating to previous years, which must be approved and filed as soon as reasonably possible.

Goodwin also said there is the possibility that these deadlines will be extended by the Luxembourg government depending on how the global situation evolves.

Tax substance

Under normal circumstances, for a company to be considered a tax residence of Luxembourg, shareholder and board meetings are expected to be held physically in the jurisdiction.

However, given the outbreak of Covid-19, foreign tax authorities should be more lenient when analysing the economic substance of a Luxembourg company. Digital general meetings of investors should not have an impact on the Luxembourg tax residence of a company or fund, even if this has to be dealt with on a case-by-case basis.

Extended deadline for AML survey for Luxembourg AIFMs

The deadline for the annual online survey, which collects standardised key information concerning money laundering and terrorist financing risks, for the year ended 31 December 2020 has been extended by the CSSF to 10 April 2020.

For the official circular letter regarding this extended deadline, click here.

Luxembourg’s alternative arrangements aimed at enabling professionals to adhere to government lockdown measures follows on from the adjustments made by Guernsey and Jersey in relation to substance requirements for both jurisdictions.