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Luxembourg: Directors’ increased duties during Coronavirus Pandemic

08 April 2020
Aldric Grosjean

 

The coronavirus pandemic creates liquidity shortage and economic instability, which are likely to impact in diverse magnitude numerous Luxembourg holding companies (LuxCos) in the short to medium term. Directors (administrateurs/gérants) accordingly have an increased duty to closely monitor the position of the LuxCos on the boards of which they sit. They may eventually face serious liabilities, if the LuxCos, and potentially their underlying group, would bear damage or go bankrupt, resulting from their inaction or passivity.

Therefore, promptly convening a board meeting is essential for diligent directors. This is the first step for them to take, which will contribute to reducing their exposure to potential liabilities further down the road. The purpose of such ad hoc board meetings shall, in particular, be:

  • to consider the financial robustness of the LuxCos and their underlying group to face the current period of instability
  • to assess the liquidity resources to continue as a going concern for the mid-term
  • to take all the measures at hand to overcome or mitigate any identified issues
  • to schedule subsequent meetings to enable monitoring and plan further actions
 
With the practical aim of helping directors to expedite the convening and the holding of their board meetings, a format agenda is produced below.
 
FORMAT COVID-19 BOARD AGENDA
Important note. This agenda is for general guidance only. It does not purport to cover all matters which the pandemic may have triggered for each LuxCo. It needs to be considered in light of the specificities relevant to each LuxCo and tailored accordingly.
 
1) Acknowledgment of the coronavirus pandemic, related Luxembourg government announcements to date, entry into a period of instability and liquidity concerns, as well as potential impact on the worldwide economy (the Pandemic Context)
 
2) In light of the Pandemic Context, assessment of the position of the Company, and its underlying group (the Group) to continue as a going concern in the foreseeable mid-term (the Assessment), including without limitation by considering the impact on:
  • the current liquidity status and needs for the upcoming mid-term
  • the terms and conditions of the key agreements to which the Company is party
  • the main recurrent costs, expenses and payments
  • the status of the (recent/on-going) projects to which the Company is involved
  • the tax payments/advances
  • the employees as well as the office rental and expenses (if applicable)
  • any other relevant matters
 
3) Decision to diligently and closely monitor the position of the Company and the Group, as well as to schedule a series of board meetings, as frequently as the business requires during the Pandemic Context
 
4) Decision to instruct accountants to prepare updated management accounts of the Company in order to enable an efficient and on-going monitoring
 
5) Based on the Assessment and the management accounts, decision to take and implement appropriate protective, safeguarding and financial measures, including, as required and applicable:
  • collect all payments (when) due to the Company in a timely manner and chase overdue receivables
  • draw-down under existing financial instruments
  • inform bank/creditors about liquidity concerns and propose/negotiate new payment plans
  • extend existing debt facilities and/or seek additional equity finance to bridge cash flow constraints
  • obtain financial support letters from shareholders
  • fund underlying Group with working capital needs
  • request postponement of tax/VAT payment/advances
  • use of support measures issued by applicable governments
  • any other measures
 
6) Assessment on the impact of the travel restrictions on the (tax) substance and effective management of the Company in Luxembourg from the perspective of the applicable foreign jurisdictions, as well as decision on any required measures deriving therefrom
 
7) Decision to draw-up a (high-level) business continuity plan, summarising and tracking the measures (to be) taken and planning the next board meetings

8) Any other matters

 

For further information, please contact:

Adric Grosjean, Partner

e: agrosjean@lexfield.com 

or

Adrian Dobbyn, Counsel

e: adobbyn@lexfield.com

 

LexField, Luxembourg

t: +352 26 00 82 50 37

 

 

 

 


#Directorsdutiesliabilities  #Luxembourg  #Covid19  #Luxembourgholdingcompanies  #WLNadvocate

 

 

Source: https://www.linkedin.com/pulse/directors-increased-duties-during-pandemic-convene-board-grosjean/

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