LUXEMBOURG Law and Practice Contributed by: Anna Gassner, Philipp Mössner, Andrea Carraretto and Etienne Weryha, GSK Stockmann SA
Contractual JVs are recommended for short-term collaborations focused on a specific project. Under this structure, the participants remain liable for the JV liabilities, but do not have to bear the costs asso - ciated with the incorporation and day-to-day man - agement of a common JV vehicle. Although not all aspects of Luxembourg law applicable to agreements can be detailed here, it is worth mentioning that con - tractual JVs are not subject to compulsory formalities. The joint venture agreement is structured as a private contract executed by the parties thereto. There is no requirement to have it enacted by a notary, to adopt any specific form, and there are no stamp or registra - tion duties. The agreement may be written in English without requiring translation into any of Luxembourg’s national languages. As to the content of the agreement, the principle of freedom of contract largely applies, provided that the terms do not conflict with public policy rules. For any Luxembourg law-governed agreement, an overriding duty of good faith always applies not only to the per - formance of the provisions of the agreement itself, but also to pre-contractual discussions and any enforce - ment of the agreement that may be required. While a corporate JV involves some additional costs and complexity, for instance in compliance and gov - ernance, it offers limited liability to participants, an established governance structure, and capital-raising capabilities to support future business growth. A successful JV requires a high level of collaboration and co-operation, which may explain the dominance of corporate JVs in Luxembourg. The forms of JV vehicles most commonly adopted for corporate JVs in Luxembourg are: • private limited liability company ( société à respon- sabilité limitée – SARL); • public limited liability company ( société anonyme – SA); • simplified joint stock company ( société par actions simplifiée – SAS); • partnership limited by shares ( société en comman- dite par actions – SCA); and
• limited or special limited partnership ( société en commandite simple – SCS, or société en comman- dite spéciale – SCSp). For the SCA, SCS and SCSp, the JV participants are limited partners with limited liability and the general partner has unlimited liability. 2.2 Strategic Drivers for JV Structuring In Luxembourg, the choice of the most appropriate legal form for the JV vehicle depends on several fac - tors, notably the possibility of the structure to provide for tailored decision-making arrangements within the JV, management preferences, capital requirements, profit and loss sharing, transfers of shares, and accounting and tax considerations. If the JV is not established to conduct a regulated activity or to issue securities to the public, then the SARL is typically the preferred vehicle as it offers greater flexibility and is not subject to extensive statu - tory requirements. As per the law on commercial com - panies of 10 August 1915, as amended (LCC), the SARL has a share capital of at least EUR12,000, is managed by a single manager or a board of manag - ers, and cannot make public offers of shares or debt securities. Furthermore, the transfer of shares in an SARL to non-shareholders requires the approval of the existing shareholders holding at least 75% of the issued share capital by way of a formal shareholder resolution – though the articles of associations can provide for a lower threshold, provided it is not less than 50%. Given the importance attributed to the indi - vidual identity of the shareholders, it is not permissible to adopt such resolutions of approval at the inception of the joint venture without knowing the identity of the proposed future transferees. The JV agreement could, however, include a provision whereby all share - holders at the time of execution of the JV agreement commit to vote in favour of such a resolution. Voting arrangements are, subject to certain conditions, valid under Luxembourg laws. It should also be noted that the identities of the shareholders of an SARL must be mandatorily disclosed in the Trade and Companies Register ( Registre de Commerce et des Sociétés – RCS).
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