The legal framework containing the duties of directors and nominee directors in Luxembourg is the Company Law, also known as the law on commercial companies of August 10, 1915, with its subsequent amendments and additions. This legislative document contains the most important information regarding directors in Luxembourg for public and limited liability companies.
The law stipulates that companies in Luxembourg can have either a single tier structure or a two tier structure. In the first case, the company has only a Board of Directors composed of at least three members and at least one director. Two tier structures have, apart from the Board of Directors, a Management Board.
Directors in Luxembourg
A company director in Luxembourg is appointed during the general shareholder’s meeting and can also be removed by the shareholders. The maximum period of time during which an individual can occupy this position is six years, after which he can be re-elected. An individual acting as a company director can resign at any time provided that the resignation does not damage the company.
There are no specific legal requirements for appointing a director in Luxembourg. However, companies will make the most suitable choice based on the experience and qualifications of a particular individual. Foreigners can also become company directors in Luxembourg but it is advisable to have at least one Luxembourg resident director. The directors are responsible for the company, in accordance with the common law. They are jointly and severally liable to the corporation or to any third party, for any damages resulting from violations of the provisions of the Company Act or the company’s bylaws. A director who has an interest opposite to that of the company, in a transaction subject to the approval of the Board of Directors is obliged to advise the board and to include this statement in the minutes of the session of the general meeting. This meeting is made before any other meeting where the director where the directors may have opposite interests and may vote.
Large companies in Luxembourg that have more than 1,000 employees must have at least nine directors in the Board of Directors and one third of them must be appointed as representatives of the employees. Companies with a single shareholder can be managed by a single director.
Nominee directors in Luxembourg
The term of nominee director doesn’t have the same connotation as it has in an offshore jurisdiction. In these jurisdictions, the name of the nominee is rented during the incorporation process and after than it must give all the powers to the beneficial owner trough a power of attorney.
In Luxembourg, the company’s nominee director is responsible for delivering relevant information regarding him and the company to the competent authorities, records the company in the registers and at the authorities, sign and administrate all the company’s bank accounts, participate at annual audits, gather general meetings of the shareholders and provide any information required in the company’s liquidation or transformation process. Some of these responsibilities can be limited by the company’s articles of association provisions. This is the reason why the appointed person must be a trustworthy person but also the reason why it is not a common procedure here.
You can also watch the video below for more information on directors and nominee directors in Luxembourg:
A director’s duties and responsibilities
A Luxembourg company director must act in good faith and for the best interests of the company. They have the authority to act on behalf of the company and must, in their actions, express the goals of the legal entity. The Board of Directors has the duty to improve the action plan and manage the company’s activities.
A director can own shares in the company but this is not mandatory. They also do not have to be employed by the company and they have remuneration rights, as decided during the general shareholder’s meeting.
Company directors have civil liability and criminal liability towards the company, as such:
-civil liability: contractual liability, liability for violating the Articles of Association, tort liability, liability for the insolvency of the company;
-criminal liability: criminal offences like breaching the obligations towards the Luxembourg tax authorities or criminal offences in case of bankruptcy (under certain conditions) and other mismanagement acts.
Another legal entity can also be appointed as a member of the Board of Directors but in this case it must appoint a permanent representative in charge of the execution of this mission in the name and on behalf of the corporation. This representative is subject to the same conditions and the same responsibilities as if he were an individual without bringing prejudice to the legal entity that he/she represents. Executive Board members are appointed for a period determined by the statutes not exceeding six years. They may be reappointed. In case of vacancy of a member of the Board, the remaining members, unless otherwise provided in the bylaws, have the right to temporarily fill such vacancy.
Resources such as the one you mentioned right here will be incredibly useful to myself! I'll publish a hyperlink to this web page on my particular blog. I am certain my site visitors will discover that fairly useful.
*Click on the categories below for full list of articles