SARL share transfer with pre-emption clause and pledged shares
Anna (45%), Ben (35%) and Clara (20%) own Nordic Design S.à r.l., a Luxembourg SARL. The articles contain a pre-emption clause: a shareholder who intends to transfer shares must first offer them to the others at a price fixed by an independent expert; any transfer in breach is void. Ben wants to sell 25% to Diana, his cousin, for EUR 500,000. Anna is willing to buy only 10%; Clara waives her right in writing. Ben argues that the clause does not apply because he is not selling control and because Diana is family. Ben previously pledged all his shares to Banque de Luxembourg to secure a EUR 200,000 loan; the pledge is recorded in the share register but the bank has not been asked for consent. The notary is asked to draft the cession and the shareholders' resolution approving Diana as shareholder.
1. Does the pre-emption clause apply, and what must the notary do before drafting?
Read the worked answer
The clause applies. It is triggered by an intention to transfer shares, not by loss of control, and a sale to a cousin is a transfer to a third party unless the articles expressly exempt family transfers. The notary must therefore verify that Ben made a written offer to Anna and Clara, that the expert valuation procedure was followed, and that the price offered to Anna matches the expert price. Anna's willingness to buy only 10% does not extinguish the right over the remaining 15%; the notary must check the clause's rules on partial exercise. Clara's written waiver is useful but must be authentic and unconditional. If the procedure is skipped, the transfer is exposed to nullity under the articles. The notary should not draft the cession until the pre-emption process is documented, and should include the waivers and the expert report as annexes.
2. What is the effect of the share pledge, and how should the notary deal with the bank?
Read the worked answer
The pledge is a serious obstacle. Ben pledged all his shares to Banque de Luxembourg; the pledge is recorded in the share register. A sale of pledged shares without the bank's consent does not extinguish the pledge. The bank may have a right to enforce against the shares in Diana's hands, and the transfer may be unopposable to the bank. The notary must obtain the pledge agreement, check whether it prohibits transfer or gives the bank voting rights, and require a written release or tripartite agreement among Ben, Diana and the bank. If the loan is not repaid, the bank must agree to transfer the pledge to the price or release it against payment into escrow. The notary should also ensure the share register is updated and that the company acknowledges the release.
3. Is a notarial deed required for the cession, and what formalities and filings follow?
Read the worked answer
A notarial deed is not mandatory for a SARL share transfer under Luxembourg law, but the cession must be in writing and the articles may require a notarial deed or approval. The notary should check the articles. If the notary authenticates, the deed gives a certain date and stronger evidence. Formalities: notify the company, update the share register, obtain the shareholders' approval if required, and file the deed for registration with the Administration de l'Enregistrement within the applicable deadline. The notary must verify the registration duty and any VAT. The shareholders' resolution approving Diana must be signed by the required majority; the notary should check whether Ben can vote. Finally, the notary should confirm that the RCS does not require filing of the transfer, but the company's records must be consistent.