LUXEMBOURG Law and Practice Contributed by: Anna Gassner, Philipp Mössner, Andrea Carraretto and Etienne Weryha, GSK Stockmann SA
• Incorporation of the JV vehicle under the chosen form: generally, the incorporation of a company must be enacted before a Luxembourg notary, except for SCS and SCSp structures, which can also be incorporated under private seal. • Registration of the newly incorporated JV vehicle: the RCS articles, or an extract of the limited part - nership agreement in the case of SCS and SCSp, will be publicly accessible. • Complying with any regulatory requirements: depending on the nature of the JV’s activities, it may be necessary to comply with specific regula - tory requirements. These could include merger control regulations, FDI rules, or obtaining relevant business permits, as applicable. 6. Core Terms of a JV Agreement 6.1 Drafting and Structure of the Agreement Regardless of the form of the JV vehicle, the terms the parties agreed upon for the JV will be set out in detail in the JV agreement. In Luxembourg, JV participants can agree that the JV agreement will not be subject to Luxembourg law if the provisions of the chosen foreign law do not contravene public order provisions under Luxembourg law. As is often the case, parties to a JV may be based in different jurisdictions and will prefer to apply a law that is more familiar to them. The main terms that a JV agreement would be expect - ed to address include: • scope of the JV, roles and responsibilities of each party; • share capital modification and related anti-dilution aspects; • funding obligations of the participants; • management structure; • reserved matters; • deadlocks and dispute resolution mechanism(s); • restrictions on share transfers, restriction to ensure the maintenance of the share capital and the with - drawal of certain of its shareholders under certain circumstances (drag-along/ tag-along clauses); • term of the JV;
• exit provisions; • put and/or call options; • allocation of profits; • distribution of assets; • intellectual property rights; and
• confidentiality and non-disclosure obligations. 6.2 Governance and Decision-Making Structuring the decision-making process within a JV is undeniably one of the most critical aspects to be discussed and carefully considered during its estab - lishment. While the LCC provides a default framework, certain contractual mechanisms can play a vital role in shaping and refining the decision-making process within the JV, ensuring it aligns with the specific needs and objectives of the parties involved. The following clauses can be inserted in the JV agree - ment or in its articles (where necessary): • clauses relating to the allocation of the directors’ mandates – such clauses will enable the JV part - ners to have a certain degree of representation at the management level by ensuring that the former have one or more of their representatives on the board of directors or managers of the JV vehicle; • clauses allowing different categories of board members to be created – eg, class A and B, with different powers to act on behalf of the JV vehicle; • a clause allowing the adjustment of the quorum and majority rules in decision-making bodies, enabling stricter rules in this respect than the ones provided for by the LCC (except for public order provisions); • observer appointment clauses – in some cases, the JV partners will prefer to have an observer appoint - ed instead of a director with voting prerogatives (an observer may receive all the documentation related to a particular meeting of the board and will be able to attend any board meetings); and • specific consent clauses – in a classic JV vehicle, decisions by the board on strategic matters can require the approval of all, a majority, or a super- majority of the partners of the JV (the so-called reserved matters).
• termination possibilities; • plans for future change;
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