LUXEMBOURG Law and Practice Contributed by: Romain Tiffon and Marie Bentley, ATOZ Tax Advisers
SCS and SCSp Limited partnerships (both SCS and SCSp) follow a contractual and flexible governance model rather than a formal tiered system. They are generally managed by one or more managers, but in practice most often by their general partner. There is no formal one-tier versus two-tier distinction, and governance is largely determined by the partnership agreement, which can be tailored to the needs of the parties. This flexibility makes partnerships particularly suited for investment funds and joint ventures. SCA The SCA combines features of a company and a partnership and is typically managed by its general partner, who exercises control over the company’s management. Like partnerships, it does not follow the classic one-tier/two-tier distinction but instead relies on a controlled management structure centred on the general partner. SAS The SAS is characterised by a flexible and largely con - tractual governance structure. The law requires at least a chairman ( président ), but otherwise allows significant freedom to organise gov - ernance arrangements in the articles of association. This structure does not strictly follow a traditional one-tier or two-tier model and is designed for tailored governance, particularly in joint ventures or start-ups. Overview Overall, Luxembourg company law combines classi - cal corporate governance models (for SAs) with highly flexible, contractual approaches (for partnerships and SAS). 3.5 Directors’, Officers’ and Shareholders’ Liability The liability of directors and officers in Luxembourg is primarily governed by: • the Law of 10 August 1915 on commercial compa - nies; • the Civil Code (general tort liability); and • where relevant, the Criminal Code and Commercial Code.
Directors act as agents of the company and benefit from the principle of separate legal personality (the “corporate shield”), meaning they are not automati - cally personally liable for corporate obligations. How - ever, this protection is not absolute and liability may arise in several situations. The liability of directors in Luxembourg primarily arises under civil law, which constitutes the core regime and takes several forms. First, directors may incur liability towards the company itself for faults committed in the performance of their mandate, such as negligence or mismanagement. This is generally characterised as contractual liability (actio mandati) and may only be enforced by the company, or by a liquidator in the context of insolvency. Secondly, directors can be held jointly and severally liable towards both the company and third parties in cases where they breach the Com - panies Act or the company’s articles of association. In addition, directors may also incur liability under gen - eral tort law if they commit a fault that causes dam - age to third parties, provided that fault, damage and a causal link are established. In practice, Luxembourg courts apply an objective standard of care, assess - ing the director’s conduct against that of a reason - ably prudent and diligent manager acting in similar circumstances. Beyond civil liability, directors may also face criminal liability in cases involving serious misconduct. This includes, for example: • the falsification of accounts or corporate docu - ments; • misappropriation of company assets; • the distribution of fictitious dividends; or • fraudulent behaviour. Such offences may give rise to penalties ranging from fines to imprisonment. Directors are further exposed in situations of insol - vency or bankruptcy, where their responsibility is more closely scrutinised. They may be held liable if misman - agement contributed to the company’s financial dis - tress or if they failed to file for bankruptcy in a timely manner. In more severe cases, courts may impose
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