Fiduciary duties of Luxembourg company directors during an acquisition process

In a recent publication of the Revue Pratique de Droit des Affaires (#10, March 2021), Torsten Sauer and Mathis Bredimus have analysed the fiduciary duties applicable to the directors and managers of unlisted and unregulated Luxembourg public limited liability companies (sociétés anonymes, or SAs) and private limited liability companies (sociétés à responsabilité limitée, or SARLs), in particular in the context of an acquisition regarding the company’s shares or assets.

Although not spelled out in the Luxembourg Company Law, Luxembourg company directors are subject to a broad range of fact-specific fiduciary duties. Far from being a rubber-stamping corporate body under the (perhaps undue) influence of a company’s majority shareholders, the board members should approach each and every corporate decision—especially where requested to do so by outside parties, including the company’s owners—with a critical mind and think through the ramifications of their decisions on equity and non-equity stakeholders. These considerations are of particular importance in the context of a proposed acquisition of the company, whether in the form of a share deal or an asset deal. A target company—represented by its board—will only in rare cases be a neutral player in such a transaction. Whenever the board becomes actively involved in the change of ownership, it should holistically evaluate its potential consequences on the enterprise as a whole.

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