Entry into force of the law dated 17 February 2025 implementing the EU "Mobility Directive" (Directive 2019/2121)

In our previous post on 23 January 2025, we informed you that the Bill of Law 8053, implementing the EU “Mobility Directive” (Directive 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 regarding cross-border conversions, mergers, and divisions), had been voted on the same date.

The Grand Duke has since signed the new law, dated 17 February 2025 (the “Law”), which was published and came into effect in Luxembourg on 2 March 2025. This marks a significant milestone in the EU’s legal landscape for cross-border operations, covering mergers, divisions, and conversions.

Key Achievements of the Mobility Directive and the Law:

1. Reinforced Framework for Mergers: Strengthening the existing harmonized legal framework for cross-border mergers.
2. New Framework for Divisions: Establishing clear procedures for cross-border divisions.
3. Harmonized Rules for Conversions: Addressing previous conflicts between the real seat theory and the incorporation theory to facilitate company conversions (also often called migrations) within the EU.
4. Enhanced Creditor Protection: Implementing measures to safeguard creditors in cross-border operations.
5. Stronger Shareholder Protections: Introducing a withdrawal right for minority shareholders, ensuring their interests are safeguarded.
6. Workers Protection: Enhancing workers' rights in the context of cross-border restructuring.
7. Legality Control Procedure: Requiring a pre-operation certificate issued by the competent authority (i.e., notaries in Luxembourg). This certificate is subject to scrutiny, particularly if there are serious doubts regarding potential abuses, fraud, or circumvention of EU or national laws.

Luxembourg’s Approach:

The Luxembourg legislator has opted for a transposition of the Mobility Directive a minima - “the whole directive, nothing but the directive.” Consequently, the Law does not apply to:

• Domestic operations;
• Operations involving entities outside the EU; and
• EU operations not involving an SA, SARL, or SCA.

While Luxembourg has adopted a specific transitional approach (i.e. applying it to only three types of companies), other EU member states have opted to apply the Mobility Directive to a wider range of corporate entities, if not all, within their jurisdiction. Our firm remains committed to assisting clients in navigating these diverse legal frameworks. Leveraging our extensive network of legal professionals across the EU, we ensure that cross-border operations are executed with the utmost efficiency and precision.

Impact and Future Outlook

This Law represents a major development in cross-border corporate mobility, though implementation times are expected to be longer (particularly for conversions), notably due to extended waiting periods, reinforced legal framework and the new legality control procedure. However, by reinforcing legal certainty and harmonizing procedures, this framework is set to create fresh opportunities for companies with a long-term EU presence.

While challenges may arise, we are excited to guide our clients through this evolving landscape and provide tailored solutions for their strategic plans.