On 17 December 2025, the Luxembourg Parliament adopted the law of 19 December 2025 establishing a quantitative target for gender balance among directors of listed companies with a view to transposing Directive (EU) 2022/2381 (the "Gender Balance Law"). For those who have been following this legislative journey since the draft law stage, the enacted text remains largely faithful to the draft law, while introducing some notable refinements, particularly around enforcement mechanisms.
For listed companies, adoption of the Gender Balance Law marks the point at which gender balance becomes a governance and enforcement issue, rather than a policy aspiration.
Scope and core requirements
We first covered the draft law in our April 2025 newsletter, available here. As a refresher on the scope and core requirements:
- The Gender Balance Law applies to all companies whose registered office is in Luxembourg and whose shares are admitted to trading on a regulated market in one or more EU Member States. However, in alignment with the EU Directive, listed companies that qualify as micro, small, and medium-sized enterprises ("SMEs") are excluded from its scope.
- The central requirement: at least 33% of board positions, both executive and non-executive, must be held by the under-represented gender by 30 June 2026.
- The CSSF has been designated as the competent authority, tasked with overseeing compliance, collecting data, and publishing an annual list of companies that meet the target. The CSSF will work alongside the gender equality observatory (established under the Law of 7 November 2024) to monitor progress and promote best practices.
The Gender Balance Law entered into force on 23 December 2025 and will remain in force until 31 December 2038.
How enforcement changed in the final text: CSSF can now intervene before imposing fines
One of the most meaningful differences between the draft law and the enacted version lies in the architecture of enforcement.
Under the draft law, injunctions appeared alongside fines and reprimands within the sanctions provision. The Gender Balance Law deliberately restructures this. Injunctions are now anchored exclusively in the CSSF’s supervisory powers, while Article 7 is reserved for punitive measures (warnings, public statements and administrative fines).
This distinction is not merely cosmetic; it clarifies that injunctions will be used as corrective tools by the CSSF to steer the behaviour prospectively rather than as a sanction.
For boards and nomination committees, this increases the likelihood of early supervisory intervention well before any fine is imposed, particularly where selection processes or disclosures are deemed deficient.
The "Comply-or-Explain" reality
Apart from this enforcement-related refinement, the enacted Gender Balance Law remains largely aligned with the draft law as previously discussed. Rather than revisiting unchanged provisions, this follow-up article focuses on certain aspects that take on particular practical importance now that the Gender Balance Law is in force, beginning with the “comply-or-explain” mechanism transposed from Directive (EU) 2022/2381.
The Gender Balance Law creates a two-tier compliance framework:
Tier 1: the target itself (no direct sanctions)
- Companies must aim for 33% representation by 30 June 2026.
- Failure to meet the target triggers additional obligations but not penalties.
Tier 2: process and transparency obligations (sanctions apply)
- Companies that do not meet the target must adapt their selection process, applying clear, neutral and unambiguous criteria in a non-discriminatory manner throughout the selection process.
- Where the objective is not achieved, companies must explain the reasons and provide a full description of measures taken or intended to achieve the objective.
- Companies must report annually to the CSSF and publish information on their website.
The critical distinction is as follows: Companies won't be fined simply for having a board composition of, say, 25% women. They will face sanctions if they fail to implement proper selection procedures, fail to report transparently, or fail to explain their shortfall adequately.
Board appointments are now contestable: what this means for your process
Another important practical implication of the Gender Balance Law to note, is the proceduralising of appointment decisions.
When choosing between candidates who are equally qualified in terms of their aptitude, competence and professional performance, priority shall be given to the candidate of the under-represented gender, unless, there are legally exceptional cases, such as the pursuit of other diversity policies, invoked in the context of an objective assessment that takes into account the particular situation of a candidate of the other sex and is based on non-discriminatory criteria, tip the balance in favour of the candidate of the other sex.
Candidates who are not selected now have an explicit statutory right to request information on:
- the selection criteria,
- the comparative assessment, and
- the reasons why priority was not granted to a candidate from the under-represented sex.
Combined with the shift of the burden of proof onto the company before the courts, this creates a framework in which individual board appointments may become contestable events, especially in closely matched candidate scenarios.
From a risk perspective, this elevates record-keeping, internal deliberation minutes and nomination committee documentation from best practice to legal necessity.
How this may work in practice
A listed company with board positions requiring 3 members of the under-represented sex for 33% compliance currently has 2 women directors. When a vacancy arises, the company receives applications from both a male and a female candidate with similar qualifications. Under the Gender Balance Law, the company must give priority to the female candidate unless it can demonstrate exceptional reasons based on other diversity policies. If it selects the male candidate, the female candidate can request the selection criteria, comparative assessment, and justification. Moreover, if the matter goes to court, the company bears the burden of proving it did not breach the priority rule.
Why process documentation matters more than board composition
With the Gender Balance Law now in force, the question for listed companies is no longer whether they will be subject to a gender-balance regime, but how well their governance processes will withstand supervisory and, potentially, judicial scrutiny.
The most exposed organisations may not be those with the least balanced boards, but those whose appointment decisions cannot be convincingly explained.
In that sense, the message to the listed companies is clear: demonstrate that you're taking gender balance seriously through transparent, merit-based processes and honest reporting. The outcome matters, but how you get there and how you explain any shortfall matters more.
What listed companies should do now
- Conduct a board composition gap analysis against the 33% target
- Document your director selection criteria before your next appointment
- Review and formalise nomination committee procedures
- Prepare templates for candidate comparative assessments
- Establish a system for annual CSSF reporting and website publication
- Train nomination committees on the priority rule and burden of proof implications
Share on
