LUXEMBOURG Law and Practice Contributed by: Anna Gassner, Philipp Mössner, Andrea Carraretto and Etienne Weryha, GSK Stockmann SA
• the transferability of shares and any restriction rights in relation thereto; • profit-sharing arrangements; • contemplated dispute resolution mechanisms;
Material adverse clauses are not specifically regu - lated and may be freely defined by the parties to the JV agreement. With respect to force majeure, Article 1148 of the Luxembourg Civil Code provides that “No damages shall be due when, as the result of supe - rior force [force majeure] or accident, the debtor has been prevented from delivering or doing what he has bound himself to deliver or to do, or has done what was prohibited”. The parties to a JV agreement remain free, however, to agree on alternative rules applying to force majeure events and to contractually determine how the force majeure clause shall apply (ie, the parties may narrow down the effect of force majeure effects to specific events or may even completely waive the application of force majeure events). In the absence of a specific definition of a force majeure event, both legal doctrine and case law establish that three cumulative conditions must be satisfied for an event to be considered as force majeure: • the event must be external to the debtor; • it must have been unforeseeable at the time the agreement was executed; and • it must be insurmountable ( irrésistible ), meaning that it makes the performance of the contractual obligation impossible, rather than merely more dif - ficult or burdensome. 5.4 Legal Formation and Capital Requirements Setting up a JV under Luxembourg law requires care - ful planning, and several steps must be complied with, as set out below. • Drafting the JV agreement: this crucial document will comprehensively outline the rights and obliga - tions of the parties to the JV. • Drafting the articles of association (or limited partnership agreement) of the JV vehicle: as these documents are publicly available (except for the limited partnership agreements which are only partially published), some parties prefer not to mirror all the provisions of the JV agreement in the articles of association. This is typically negotiated on a case-by-case basis.
• exit mechanisms; and • termination of the JV. 5.2 Disclosure Obligations
Information about the JV will be disclosed between the participants to the JV when the heads of terms are signed. For regulatory requirements regarding disclo - sure of the JV, please refer to 3.3 Sanctions, National Security and Foreign Investment Controls and 3.4 Competition Law and Antitrust . 5.3 Conditions Precedent, Material Adverse Change and Force Majeure Conditions precedent provided for in JV agreements are often linked to: • regulatory approvals (eg, FDI approval); • achievement of specific milestones or KPIs by a party to the JV agreement; or • securing funding and achievement of prior transac - tions (eg, carve-out of certain assets or activities). Article 1181 of the Luxembourg Civil Code defines a condition precedent as “a future and uncertain event on which the creation of a right depends”. Atten - tion needs to be paid to the drafting of any condition precedent. If the fulfilment of a condition precedent depends solely on the will of one of the parties to the JV agreement, then the underlying obligation is deemed void by law (c ondition potestative ). Failure to fulfil the condition precedent renders the agreement ineffective, while fulfilment of the condition precedent triggers its effectiveness. Under Luxem - bourg Civil Law this effectiveness is retroactive to the date on which the commitment was made, although this retroactive effect may be waived by the parties. Depending on the type of JV (investment focused or operational JV) material adverse change and force majeure events may also be included as conditions precedent to the entry into force of JV agreements, although they are less common in the negotiation JV agreements.
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