LUXEMBOURG Law and Practice Contributed by: Marcus Peter and Kate Yu Rao, GSK Stockmann SA
It is also common for a larger, private company to acquire a group of businesses where the old share - holders of the group roll over into the new structure, set up by the buyer. In this scenario, the old share - holders become minority shareholders in the newly formed entity, retaining a vested interest in the busi - ness while benefiting from financial support provided by the buyer. This approach enables old shareholders to maintain involvement in the business while operat - ing as co-investors alongside the buyer. 2.2 Primary Regulators For M&A transactions relating to the acquisition of regulated corporate vehicles in Luxembourg, the CSSF must approve changes to companies’ share - holding structures. Furthermore, the CSSF supervises takeover bids where the target company has its regis - tered office in Luxembourg and the company’s securi - ties are admitted to trading on a regulated market in Luxembourg. In addition, the Luxembourg government can interfere with contemplated acquisitions that involve Luxem - bourg companies doing business in highly sensitive governmental areas (see 2.3 Restrictions on Foreign Investments ). For antitrust-related regulators, see 2.4 Antitrust Reg- ulations . 2.3 Restrictions on Foreign Investments In order to implement Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019, the law of 14 July 2023 establishing a mechanism for the national screening of foreign direct investments (the “FDI Law”) was adopted. This law applies to direct investments not completed before 1 September 2023 made by foreign investors (ie, natural persons or legal entities residing outside the European Economic Area) seeking to acquire control over a Lux - embourg entity operating in critical sectors within the Grand Duchy of Luxembourg (such as energy, trans - portation, water, healthcare, communications, data processing and storage, aerospace, defence, finance, and media, as well as the trade of dual-use goods). Foreign investments potentially falling within the scope of the FDI Law must be notified to the Luxem -
bourg Ministry of the Economy before their comple - tion together with certain information related to the investment (such as product, services, business oper - ations and countries of business activity). A screening ministerial committee will then perform a preliminary analysis of whether a screening process is neces - sary. The Ministry of the Economy and the Ministry of Finance will then conduct a screening procedure to assess whether the contemplated FDI is likely to affect security or public order, and a decision will be taken to either prohibit or allow the investment. Following the screening procedure, the investment may be authorised subject to conditions pursuant to Article 8 (3) of the FDI Law. These may include restrictions on the level of shareholding acquired, the appointment of a government commissioner with par - ticipation and veto rights within the company’s cor - porate bodies, and protective measures to preserve strategic assets, such as requirements that intellectual property, know-how and production activities remain in Luxembourg and are not transferred or disclosed without prior approval. The scope of the regime is potentially broad, covering every investment made in Luxembourg by a non-Euro - pean investor taking control of a Luxembourg entity operating in one of the relevant sectors. However, the impact of the new FDI Law can be considered mini - mal. First, the FDI Law does not add any substantial requirements for financial firms, given that any merger or acquisition contemplated by such entities must be in any case approved in advance by the competent regulatory authority. Moreover, the FDI Law does not apply to “portfolio investments”, meaning that UCITS retail fund holdings are exempt from the screening regime. Lastly, although private equity fund invest - ments potentially fall under the FDI Law, it is not com - mon for private equity funds based outside the EU to The authority responsible for regulating competition in Luxembourg is the National Competition Authority (formerly known as the Competition Council), an inde - pendent public institution with legal personality and financial and administrative autonomy. Established by the Law of 30 November 2022, the National Competi - acquire targets in Luxembourg. 2.4 Antitrust Regulations
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