Directors’ Duties in Luxembourg

>> Powers and Duties in Luxembourg

The board of directors have extensive powers to act in the name of the Company in all circumstances and to authorise all transactions consistent with the Company’s objectives. In this regard the Company is bound in any circumstance by the (joint) signatures of a number of directors set forth in the AOA.This is apart from the actions which are expressly reserved for the General Shareholders Meeting by law and/or the AOA.

The board of directors must hold at least one meeting per year for the approval of the annual accounts. However it is highly recommended that the directors have more frequent meetings to ensure the effective management of the Company.

The board of directors will convene when the Chairman or Vice Chairman calls for a meeting. A board meeting may also be convened at the request of two directors. The chairman shall preside at all meetings of the board of directors, but in his absence, the board of directors may temporarily appoint another director as  Chairman by vote of the majority present at  any such meeting.

Please note that written notice of the meeting must be provided to all directors at least twenty four (24) hours in advance of the meeting date. However, this notice period may be ignored if all directors consent. The majority of the board of directors must be present to constitute a valid quorum. The AOA if the Company may provide for stricter rules.

Conflict of interest

A director must act in the best interest of the Company. Any director with an interest in a transaction, submitted for approval to the board of directors, that conflicts with that of the Company, shall be obliged to advise the board of directors and ensure a record of their statement is included in the minutes of the meeting. They may not take part in these deliberations. At the following general meeting, before any other resolution is voted upon, a special report should be issued on any transaction in which any of the directors may have had an interest conflicting with that of the Company.

Please note if the Company has only one director, the transactions that have a conflicting interest between the sole director and the Company will be registered in the decisions register.

Duties – General

The board of directors has the responsibility to define the Company’s plan of action and to improve the Company. The board of directors should do whatever is necessary or useful for the implementation of the corporate objectives of the Company, subject to certain decisions reserved by law or by the AOA to the general meeting of shareholders. In general the following list of duties should be observed by the directors;

  • Duty of Loyalty – The directors must make and implement their decisions in the ‘corporate interest’ of the Company
  • Duty of Care – The directors must act in the best interest of the Company as a whole and not just for its shareholders. Directors must ensure they conduct their activities with diligence, seriousness, competence and good faith
  • Duty of Confidentiality – The directors must ensure they do not divulge any information which could be regarded as Company secrets or compromising the Company’s interests
  • Duty of Information – The directors must ensure that they keep the shareholders up to date on all relevant information relating to the Company. They are responsible to the shareholders for the proper management of the Company
  • the AOA may specify additional duties of the directors
  • please note the standard of diligence to be applied be applied to a director is that of a “bon père de famille” i.e. of a “ good family father” which implies that the director has to act in good faith, with reasonable care, and in a competent, prudent and active manner

Duties – Other

There are several specific duties imposed on directors which they should always be aware of, a list of some of the most important have been listed below;

  • the duty to ensure the preparation of the annual accounts in accordance with Luxembourg legal requirements, a copy must be submitted to the general meeting of shareholder(s) within six months after the closure of the financial year followed by their filing within seven months of the closure of the financial year
  • the duty to call a shareholders meeting in the event of substantial losses to the share capital of the Company
  • the duty to ensure that the relevant filings and declarations are declared to the Commercial Court should the Company become insolvent (failite) within one month of the date in which the Company became unable to satisfy its debts

Further, the directors have a general duty to ensure that the Company is in full compliance with the applicable law. A director has an obligation to guarantee they are informed of the current legislation and has to ensure that the Company has the appropriate regulations and practices in place to maintain the Company’s’ compliance. This also includes all responsibilities relating to anti-bribery, anti-money laundering or anti-trust regulations.

Latest version updated 4th April 2018

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