In a pending procedure in front of the Luxembourg Commercial Court, one party (Company 1) disputed the mandate of the other party’s (Company 2) legal counsel.

According to its articles of association, Company 2 was managed by 5 managers. The articles of association provided the terms according to which the company was duly bound (joint signature of a class C and Class V manager). For several reasons, the company was not able to take the decision to appoint legal counsel by a joint decision of a Class C and Class V manager (among others due to a conflict of interest at the level of the Category V managers).

Company 2 referred to the provisions of the shareholder agreement of Company 2 which held a clause according to which category C managers were entitled, in certain circumstances (which Company 2 argued were given in this case) to take decisions without the consent of a category V manager. This provision only appeared in the shareholder agreement and not the articles of association of Company 2.

The Commercial Court (Commercial Court 1 July 2022) held that the articles of association of a company are to be considered as a legal provision that is hierarchically superior to extra-statutory agreements such as shareholder agreements.

The Court held that provisions of a shareholder agreement may complete the articles of association of a company, but cannot contradict them.

The mandate given only by a Category C manager was therefore declared invalid as being in breach of the articles of association, even if the decision was taken in compliance with the shareholder agreement.

Note(s):

This article is limited to the analysis of a specific Court decision and is not deemed to reflect the Luxembourg Case Law in its entirety.

It could not be determined if the analysed Court decision is final or subject to a (pending) appeal.