Directors and nominee directors in Luxembourg
Directors and Nominee Directors in LuxembourgUpdated on Tuesday 30th November 2021
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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.
With a vast experience in corporate matters, our lawyers in Luxembourg can offer information on the duties and responsibilities of company directors in the Grand Duchy. We also offer nominee director services in Luxembourg.
Appointing directors for private and public companies in Luxembourg
According to the Company Law in Luxembourg, both private and public companies are required to have directors or managers. The law also provides for the directors for other types of business forms in Luxembourg. The following requirements must be met for companies in Luxembourg:
- in the case of a private company, at least one director who can be a natural person or a corporate entity is required;
- in the case of a public company, at least three directors must be appointed; they can be natural persons or corporate entities;
- in the case of a simplified private limited liability company, the director or directors must be natural persons;
- in the case of a general partnership, both members in the business entity can act as managers or directors;
- in the case of a limited partnership, the general partner will have director or manager rights in the business;
- there are no director requirements when it comes to setting up a sole proprietorship in Luxembourg.
Special attention must be paid to the management of public companies in Luxembourg when appointing other companies as directors. These must nominate or delegate a person to represent the corporate director. The representative can be a Luxembourg resident or citizen. The public company can also appoint a board of directors and a supervisory board as management.
Directors of public companies in Luxembourg can be appointed for a maximum period of 6 years.
Our attorneys in Luxembourg can offer more information on how company directors are appointed in the Grand Duchy.
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 that, it must give all the powers to the beneficial owner through 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:
Shareholders acting as company directors in Luxembourg
Under the Commercial Law, shareholders can also act as directors in the companies they own. The following conditions must be respected when the shareholders take on the role of Luxembourg company directors:
- the shareholders can act as company directors in private companies without any special requirements;
- in a simplified private limited liability company only natural persons who own shares in the business can also be directors;
- there are no restrictions for the shareholders or a public company to also be the managers of the business;
- in the case of a simplified joint stock company, the president can also be a shareholder in the company.
Other important aspects which need to be considered when it comes to directors of public companies in Luxembourg is that at least 3 of the members of the supervisory board must represent the interests of the company’s employees. This requirement applies in the case of public companies with more than 1,000 workers which are listed on the Stock Exchange and which benefit from state concessions.
Our Luxembourg lawyers can advise on the shareholders’ rights and duties towards a company.
How are company directors appointed/removed in Luxembourg?
The appointment of company directors in Luxembourg will be done before the business registration procedure begins. The names of the directors must be found in the company’s Articles of Association and in the Luxembourg Trade Register’s database. The director must also submit declarations of acceptance of their position in the companies upon the registration with the Companies Register.
When it comes to the removal of company directors in Luxembourg, the legal provisions are different and depend on the type of company. Special conditions for the removal or dismissal of company directors are usually stipulated in the company’s Articles of Association.
No matter the case, a Luxembourg company director can be removed for legitimate reasons and in accordance with the bylaws of the company.
In the case of public companies, the directors can be removed during the general meeting of the shareholders. Also, the decision of the shareholders in relation to the removal of a director must be unanimous.
Our lawyers in Luxembourg can explain how the dismissal and removal of company directors occur.
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 offenses like breaching the obligations towards the Luxembourg tax authorities or criminal offenses 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.
Nominee director services in Luxembourg
As mentioned earlier, Luxembourg public companies must appoint a natural person to act as a company director when the management is ensured by a legal entity. You can appoint one of the lawyers in our firm in Luxembourg who can offer nominee director services and who will act in complete confidence and confidentiality.
We offer various fiduciary services in Luxembourg, including those of domiciliation agents.
For more information about corporate governance and issues related to company incorporation and management please contact our law firm in Luxembourg. If you want to open a holding company in Luxembourg, we can offer legal advice.