LUXEMBOURG Trends and Developments Contributed by: Anna Gassner, Philipp Mössner, Andrea Carraretto and Etienne Weryha, GSK Stockmann SA
GSK Stockmann SA 44, Avenue John F. Kennedy L-1855 Luxembourg Tel: +352 271 802 29 Fax: +352 271 802 11 Email: Luxembourg@gsk-lux.com Web: www.gsk-lux.com
Introduction The Grand Duchy of Luxembourg (“Luxembourg”) is widely considered as an attractive jurisdiction to establish a joint venture (JV) for several reasons. Firstly, from a political and economic perspective, Luxembourg is generally placed amongst the most stable countries in the world, as demonstrated by its long-standing AAA credit ratings. Secondly, from a cultural perspective, Luxembourg is characterised by a strongly international environment, which offers numerous advantages to those seeking to do business in the Grand Duchy. For example, the administrative languages of Luxembourg are Lux - embourgish, French and German, with English being widely used for transaction and corporate documents. Thirdly, from a legal perspective, Luxembourg law pro - vides flexibilities that have proved to be useful when parties seek to negotiate the allocation of rights and obligations in their joint venture. Once the potential parties of a JV have decided to establish the JV in Luxembourg, it is recommended to involve Luxembourg counsel during the early stages of negotiation, at which point the parties outline the main aspects of the JV vehicle, including the pur - pose, the target(s) and a tax-efficient exit strategy. The involvement of a Luxembourg lawyer is recommended in order to tackle the main topics of discussion at an early stage, resulting in smoother implementation of the JV venture. This article aims to provide a short roadmap highlight - ing the main points to consider during the negotiation of a JV:
• the shareholding of the JV vehicle; • the management of the JV vehicle; • the governing law of the JV agreement; • the relationship between the JV agreement and the articles of association of the JV vehicle; • the potential qualification of the JV vehicle as an alternative investment fund; and • the foreign investment control mechanism applica - ble in Luxembourg. It should be noted that any consideration of these aspects will differ depending on the type of company or partnership selected. This article focuses on the pri - vate limited liability company in Luxembourg ( société à responsabilité limitée SARL), which is one of the most commonly used types of entity for JV vehicles, due to the flexibility of its rules. However, there are several other suitable types of com - pany forms that could be used for a JV vehicle, such as a public limited liability company ( société anonyme – SA), a simplified joint stock company ( société par actions simplifi ée – SAS) or a common/special limited partnership ( société en commandite simple – SCS, or société en commandite spéciale – SCSp). The shareholding of the JV vehicle First and foremost, it is recommended that the parties agree on the characteristics of the investments they plan to make into the JV. This amounts to more than the simple sum of the investments and includes ques - tions such as the proportion of debt and equity to be invested, the number of shares each shareholder will hold, how these shares confer voting rights and influ - ence within the JV, and what each party will contribute to the venture (eg, cash or contribution in kind). These negotiations are crucial, as they define the balance
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