CSRD Update - Luxembourg Draft Bill For The Transposition Of CSRD

On 5 January 2023, the Corporate Sustainability Reporting Directive (CSRD) entered into force.

The purpose of the CSRD is to extend the scope of application of non-financial reporting and aims to improve the quality, comparability and reliability of sustainability information disclosed by certain EU and non-EU companies who have significant activities in the EU.

EU member states are required to transpose the CSRD into national law by 6 July 2024. As at 31 March, only France, Finland, Romania, the Czech Republic and Hungary had implemented the CSRD into their national law.

The Luxembourg legislation in this respect – draft bill no. 8370 – was introduced by the Minister of Justice before the Luxembourg parliament on 29 March 2024 (the Draft CSR Bill).

Impacts of current Luxembourg legislation

The Draft CSR Bill proposes the amendment of several laws that regulate the accounting and reporting obligations of Luxembourg companies and partnerships, including, the Luxembourg law of 19 December 2002 on the register of commerce and companies and the accounting and annual accounts of companies (the 2002 Law), the Luxembourg law of 10 August 1915 on commercial companies, the Luxembourg law of 17 June 1992 on the accounts of credit institutions and the Luxembourg law of 8 December 1994 on the annual and consolidated accounts of insurance and reinsurance companies.

In addition, the Draft CSR Bill proposes to amend the Luxembourg law of 23 July 2016 on the audit profession and the Luxembourg law of 11 January 2008 on the transparency requirements for issuers.

It is worth noting that on 28 July 2023, draft bill 8286 was submitted to the Luxembourg parliament with the aim of overhauling Luxembourg accounting law and proposing, among other, to amend the 2002 Law (the Accounting Draft CSR Bill).

As the Draft CSR Bill has not taken into account the Accounting Draft CSR Bill and is based on current accounting law, the interaction between the Draft CSR Bill and the Accounting Draft CSR Bill should be closely followed.

Implementation and scope of the Draft CSR Bill

A considerable number of Luxembourg companies could potentially come under the scope of the draft CSR Bill. It is worth noting, for example, that Recital 26 of the CSRD expressly provides that an entity may, in certain circumstances, be exempted from consolidated financial reporting requirements but not from consolidated sustainability reporting requirements.

While the Draft CSR Bill provides for an exemption for certain financial products such as AIFs and UCITS, asset managers will need to consider its application at the level of the portfolio companies which they manage.

The Draft CSR Bill opted for a gradual implementation approach, as follows:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.