LUXEMBOURG Law and Practice Contributed by: Marcus Peter and Kate Yu Rao, GSK Stockmann SA
sequently be a shareholder vote if certain matters (eg, if the transfer of the shares in the target company is more than a certain percentage) are stipulated in the articles of association of the target company and reserved for shareholders, which triggers the approval from the general meeting of shareholders to be adopt - ed by, for example, a majority or a supermajority of the votes cast. 6.6 Requirement to Obtain Financing In accordance with the Takeover Law, committed funding is required prior to announcing an offer. The bidder can only make a bid once it has ensured it has the capacity to supply the full cash consideration. The bidder must also take all reasonable steps to make sure that there is availability for any other type of con - sideration. The description of the financing of the bid must be included in the offer documentation. 6.7 Types of Deal Security Measures Break fees are not prohibited in Luxembourg under the applicable laws. Break fees are regularly nego - tiated between the parties at the beginning of the transaction as commonly the breakdown of negotia - tions results in payment of damages by the responsi - ble party. Moreover, the judge may adjust the agreed break fees if they are manifestly excessive or derisory. Break fees gained heightened relevance in the wake of the COVID-19 pandemic, and they were still common in 2024 and 2025 amid ongoing geopolitical uncertain - ties, macroeconomic volatility, and increased regula - tory scrutiny, as deal makers seek enhanced contrac - tual protections. In the years to come, it is expected that break fees will continue to play a crucial role in private M&A transactions. In tender offers, the break fee can be agreed to be paid either to the shareholders of the target company or to the target company itself. Non-solicitation provisions are also quite commonly seen in practice. 6.8 Additional Governance Rights Bidders have a formal obligation, when filing a tender offer, to apply for 100% of the share capital, apart from specific simplified offers where they can seek only
10% of the capital. As long as a bidder does not cross the 33.3% mandatory offer threshold, it can choose to enter into different agreements to obtain additional governance rights. The most common agreement for this purpose is a shareholders’ agreement, which may cover a variety of subjects – eg, providing a bidder with specific rights with regards to the management of the target company. For example, a holding of 10% allows shareholders to request the convening of gen - eral meetings of shareholders or to add points to the agenda of such general meetings. 6.9 Voting by Proxy Shareholders are allowed to vote by proxy in Luxem - bourg. 6.10 Squeeze-Out Mechanisms The governing law in Luxembourg for the mandatory squeeze-out and sell-out of securities of companies admitted or previously admitted to trading on a regu - lated market or having been offered to the public is the Law of 21 July 2012 (the “Luxembourg Squeeze-Out and Sell-Out Law”). The Luxembourg Squeeze-Out and Sell-Out Law applies: • if all or part of a company’s securities are admitted to trading on a regulated market in one or more EU member states; • if all or part of a company’s securities are no longer traded, but were admitted to trading on a regulated market and the delisting became effective less than five years ago; • if all or part of a company’s securities were the subject of a public offer which triggered the obliga - tion to publish a prospectus in accordance with Directive 2003/71/EC (the “Prospectus Directive”); or • if there is no obligation to publish according to the Prospectus Directive, where the offer started in the previous five years. In accordance with the Takeover Law, when an offer is made to all the holders of securities carrying voting rights in a company that has listed its securities on a regulated market and if, following such offer, the bid - der becomes a majority shareholder by holding secu -
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