LUXEMBOURG Law and Practice Contributed by: Marcus Peter and Kate Yu Rao, GSK Stockmann SA
8.4 Independent Outside Advice Most commonly, each party to an M&A deal appoints its own financial and legal advisers to advise on the fairness and reasonableness of the transaction price and on the matters relating to conflicts of interest, etc. The involvement of an ESG adviser in the early stage of an M&A transaction has also become increasingly common. In addition to investment advisers and law - yers, management can engage other consultants in relation to specific questions arising in the course of a transaction. However, the board of directors/man - agement of the company remains responsible for its decisions even when following the advice of external advisers. 8.5 Conflicts of Interest The Company Law requires that a director who has, directly or indirectly, an interest of a patrimonial nature that conflicts with the interest of the company in rela - tion to an operation falling within the scope of the board of directors’ competence should inform the board of this and must not participate in the delibera - tion of or voting on the matter. Any conflict of interest must be recorded in the minutes of the board meeting and a report in this respect will need to be made to the shareholders of the company at the next general meeting of shareholders. The company auditor also needs to be informed. It is recommended that the board of managers/direc - tors of Luxembourg companies identify the circum - stances that constitute or may give rise to a conflict of interest and that may entail a material risk of dam- age to the interests of investors. For this purpose, the boards establish, implement and maintain an effective conflict of interest policy in order to, inter alia, identify such conflicts of interest and to provide for proce - dures to be followed and measures to be adopted in order to prevent them where possible and to manage such conflicts in an independent manner. The boards are also required to make all reasonable efforts to resolve conflicts of interest or, in cases where a con - flict of interest is unavoidable, to seek to address it on an arm’s length basis and to disclose it adequately to interested parties.
refrain from acting against the company’s corporate object. The Corporate Law also imposes certain gen - eral duties on directors and managers, such as the general management of the company, representation of the company towards third parties and upholding their duty to avoid any conflict of interests. The duty of the management is to act in the best inter - est of the company, not its shareholders. The cor - porate interest of the company is most commonly aligned with the interest of the shareholders but it can also include the interest of the company as a whole, including that of the shareholders, employees and creditors. 8.2 Special or Ad Hoc Committees The principles set out by the Luxembourg Stock Exchange require the board of directors of listed companies to establish special or ad hoc committees where necessary for the proper performance of the company’s tasks or to examine specific topics and advise the board. The special/ad hoc committees are also used in cas - es where conflicts of interest arise because of pro - posed business combinations. The company’s board is obliged to act in the best interest of the company, meaning that a conflict of interest may create the need to establish an independent committee to investigate a particular matter. Regardless of the establishment of a separate com - mittee, the liabilities and powers remain with the com - pany’s board. 8.3 Business Judgement Rule As described in 8.1 Principal Directors’ Duties , the board of directors (and individual directors) must act prudently and in the best interest of the company. Therefore, the board of directors must continue to act in accordance with the interest of the company in the context of a takeover (also in adopting defence measures). Where there is a breach of this fiduciary duty causing direct damage to the shareholders or to a third party in the context of a takeover, the members of the board of directors may be held liable jointly or severally in accordance with the Corporate Law.
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