The law of 10 July 2020 on professional payment guarantees, which aims to create greater freedom of contract while ensuring legal certainty in the provision of personal guarantees governed by Luxembourg law, recently entered into force. The new law is undoubtedly a welcome addition, especially in times of heightened uncertainty, and demonstrates once again Luxembourg's attractiveness as a forward-looking and business-friendly financial centre.
Due to the capital markets conditions caused by the COVID-19 crisis, liquid funds may need to activate their gating provisions in order to limit redemptions, in accordance with the terms of the fund's prospectus. Further, illiquid funds, such as private equity and loan-originating funds, should consider whether the COVID-19 crisis could constitute a material adverse effect under agreements or deals that have yet to close. This article examines the impact of COVID-19 on liquid and illiquid funds and their managers.
The Luxembourg Financial Supervisory Authority and the European Securities and Markets Authority are closely monitoring the COVID-19 situation and have issued a number of recommendations for fund managers concerning remote working, risk management and compliance, disclosure and reporting requirements.
In recent months, the Luxembourg Financial Supervisory Authority (CSSF) has been active and the industry is preparing for the open banking wave. The changes in response to the EU Payment Services Directive aim for a generally positive evolution of the payment scene in Luxembourg. The CSSF has published the fallback exemption request form and adopted several circulars that are applicable to payment service providers.
By way of the Law of 20 July 2018, Luxembourg has finally implemented the EU Payment Services Directive (PSD 2). As the PSD 2 is a full harmonisation directive, most of Luxembourg's PSD 2 provisions are identical to the legal framework implemented across the European Union. Nonetheless, EU member states were given scope to decide on certain topics and the Grand Duchy seized the opportunity to define its own rules.
After three shareholders representing 99.24% of the share capital of listed company Utopia SA announced their intention to exercise their right of squeeze-out, the remaining minority shareholders commenced judicial proceedings in a bid to block the squeeze-out. The case may open the way for minority shareholders in listed companies to oppose squeeze-outs more frequently.
The Law of 29 October 2020 recently entered into force, introducing a temporary exemption from Article L 211-12 of the Labour Code whereby maximum working hours can be increased to 12 hours per day and 60 hours per week. This exemption relates only to employees working in the health sector, employees working in the care sector and supervisory staff working in care homes for minors who are in custody. Employers must apply for authorisation from the minister of labour.
In a recent press release, the Ministry for Social Security clarified the rules regarding entitlement to leave for family reasons when a child must self-isolate or quarantine. Among other things, the child must have been made to quarantine or self-isolate by an order of the National Health Directorate. When the parents of the child in question must look after them, one parent can use leave for family reasons for the duration of the quarantine or self-isolation imposed by the National Health Directorate.
Bill 7661, which introduces a single bonus for promoting apprenticeships in the field of professional training, was recently submitted to the Chamber of Deputies. The bill aims to support training institutions to maintain apprenticeship contracts, persuade training institutions to offer more apprenticeships and encourage the resumption of apprenticeship contracts that were terminated due to the COVID-19 health crisis.
In a recent press release, the Ministry of Health announced a red alert (ie, warning of high temperatures) within the context of the Heat Wave Plan. This article highlights the Labour and Mines Inspectorate's recommendations for employers in the event of high temperatures and heat waves.
The Law of 20 June 2020 introduces a temporary exemption to certain employment law provisions relating to the state of crisis caused by COVID-19 and modifications to the Labour Code. The law takes over from the grand ducal regulations that implemented certain employment law exemptions based on Article 32(4) of the Constitution, which became obsolete at the end of the state of crisis.
The European Insurance and Occupational Pensions Authority recently issued new guidelines on outsourcing to cloud service providers which apply to insurers and reinsurers. The guidelines supplement the general regulatory framework based on the EU Solvency II Directive and EU Delegated Regulation 2015/35. The Insurance Commission has since confirmed that it will apply the guidelines in full. Therefore, Luxembourg insurers and reinsurers must abide by the guidelines.
As the insurability of administrative fines is not specifically provided for by the Insurance Contract Act, it may not be prohibited per se. Nonetheless, the industry is reluctant to offer insurance cover for administrative fines. Given the increasingly high penalties that can be imposed by administrative authorities following the entry into force of the EU General Data Protection Regulation, a legislative response would be appreciated at a supra-national level.
With more than 93% of premiums collected outside the Grand Duchy, Luxembourg life insurance has undeniably contributed to the dynamism of the European passport with regard to both freedom of services and freedom of establishment. Luxembourg life insurance is mainly a passported activity and thus marked by cross-border issues shaped by local developments that require constant monitoring, particularly when it comes to one of the sector's leading products: life insurance linked to investment funds.
The United Kingdom's planned exit from the European Union would result in it losing the fundamental freedoms guaranteed by the Treaty on the Functioning of the European Union and its qualification as an EEA third country. As such, it is timely to examine the regulatory framework governing the Luxembourg activities of (re)insurers registered outside the European Economic Area.
In a notable decision, the Luxembourg District Court cancelled a company's capital increase on the grounds of a breach of the preferential subscription right of one of its shareholders. The decision gives interesting insight into the convening process for shareholders' meetings, the legal qualification of a debt contribution and its consequences, the outcome of a breach of a preferential subscription right and the prescription period applicable to the cancellation of shareholder decisions.
The Luxembourg District Court recently ruled that a wrongful action committed by a company in the context of third-party attachment proceedings was justification to pierce the corporate veil. The decision confirms that the often-difficult task of proving that a company is fictitious is no longer the only possible way in which to thwart a debtor's fraudulent manoeuvres.
To counterbalance the negative economic impact that the COVID-19 lockdown measures have triggered, Luxembourg has introduced several regulatory and legislative measures to limit or at least mitigate the financial difficulties that many businesses may face in order to avoid bankruptcy. This article highlights the unforeseeability theory, which has not been used much in previous case law, but could be useful in the context of the unfolding COVID-19 pandemic.
Due to the unprecedented health crisis brought about by COVID-19, many economic actors are facing the impossibility of fulfilling their contractual obligations or do not wish to honour them because they are no longer commercially viable. In the absence of specific material adverse change clauses, one possibility offered by Luxembourg law is the legal concept of force majeure. This article looks at the lessons which can be learned from the available case law in this respect.
In a notable case, the Luxembourg District Court ruled on the requirements for bringing minority actions and whether a broad interpretation thereof is possible. The judgment exposes the common lack of legal recourse available to shareholders who hold equal parts in a company. Whereas majority shareholders can impose their will at general assemblies and minority shareholders can commence minority actions, the possibility for equal shareholders to take similar action would lead to a problematic stalemate.