![European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources](https://eaccny.com/wp-content/uploads/2020/06/eaccny-logo.png){kind=logo}
|
Article 32-3 (5bis) of the Act of 10 August 2016 (the “Act“) modernising the Luxembourg Companies Act of 10 August 1915, as amended, introduces the possibility for an SA to grant shares free of charge to, amongst others, employees and certain executives. The new rules will facilitate the set-up and implementation of management incentive plans. |
|
The articles of association of an SA may now authorize the board of directors to award shares to employees and certain executives, amongst others. Such an authorization may be given either by the general meeting of shareholders upon the incorporation of the company or at a later stage by means of an amendment to the articles of association and is without prejudice to the possibility for the general meeting to award shares free of charge from time to time. It should further be noted that this type of authorization constitutes a waiver by the existing shareholders of their preemptive right in favour of the beneficiaries of the share award. The shares to be awarded may be either outstanding or newly issued. In the latter case, the issuance must be within the limits of the authorized capital, as determined in the company’s articles. In practice, the increase in the company’s share capital resulting from the issuance of shares free of charge is effected by converting retained earnings or other available reserves into capital. The general meeting of shareholders may determine the terms and conditions for the award of shares or authorize the board of directors to do so. The terms and conditions may stipulate a period after which the award shall be deemed final as well as a minimum holding period for the shares. Beneficiaries of share awards can be employees or certain executives of the issuing company or one of its affiliates, as defined in the Act. The award can be limited to certain categories of employees or executives. With respect to the provision of information to the company’s shareholders, it should be noted that the award of shares free of charge by the board must be mentioned in its annual management report (or in the notes to the financial statements, as the case may be). Shares granted free of charge carry voting rights, unless determined otherwise in accordance with Article 45 of the Act. Article 32-3 (5bis) also applies to the S.C.A., in which case the general partner is authorised to award shares free of charge. Like the new provisions on the redemption of shares for the purpose of distribution to employees or executives, the new rules on share awards are designed to facilitate the set-up and implementation of certain management incentive plans. Compliments of Nautra Dutilh – a member of the EACCNY |