According to the decision of the Court of Appeal (Cour d’Appel) of February 1st 2012, the interim relief judge (Juge des Référés) declared inadmissible the filing by a Luxembourg public limited company (the “Company”) requesting a court order (ordonnance) for the cancellation of notifications of bondholders’ meetings.
The above request was introduced by the Company in the context of notifications sent by the bondholders’ representative convening several bondholders’ meetings in order to create a fund to, inter alia, finance legal proceedings in connection with the bondholders’ objection to the approved safeguard proceedings (Procédure de Sauvegarde) opened by the Company.
The Company appealed the decision of the interim relief judge.
The Court of Appeal specified that in the absence of specific legal provisions relating to the invalidity of shareholders’ or bondholders’ meetings, the court may exercise its discretion to assess the validity of a meeting. Furthermore, the Court of Appeal pointed out that principles applying to shareholders’ meetings are applicable to bondholders’ meetings.
Moreover, the courts will consider a meeting as valid if the non-compliance with the legal and statutory provisions did not, as a result, cause the decision rendered at such meeting to be invalid and, conversely, they will consider such meeting as invalid if such non-compliance altered the meeting’s decision.
Finally, the Court of Appeal mentioned that legal doctrine recognises the invalidity of a procedure as a result of a formal defect (nullité pour vice de forme) to the extent that it caused damage to the person relying upon such.
In the case at hand, the Company raised the invalidity of a notice calling for a second bondholders’ meeting arguing that (i) the notification for the second meeting should have been communicated subsequently to the holding of the first meeting and (ii) the second meeting should have mentioned the resolutions of the first meeting.
According to case-law, the notification formalities for the holding of shareholders’ meetings, including those related to the agenda are expressed in the exclusive interest of shareholders. Thus, a company, not being a shareholder, is not entitled to invoke the non-compliance with the required formalities.
Furthermore, the defects on which the Company based its arguments of invalidity are formal defects (vice de forme). The rules regarding the form of notification are for the protection of the security holders. Thus, this invalidity may be argued only by the shareholders, respectively by the bondholders.
The Court of Appeal concluded that the Company was not entitled to invoke the non-compliance with notification formalities (i.e. the date of notification and the absence of information on the first meeting’s resolutions in the second meeting’s agenda) and only the bondholders may avail of such non-compliance in its claims (if any).