CMS Expert Guide to cash pooling in Luxembourg

a) Intro

Although it has become a popular element of group financing, cash pooling is not governed by any specific dedicated legal framework in Luxembourg. 

The rules applicable to cash pooling are based on corporate provisions of the law of 10 August 1915 governing commercial companies, as amended (the “Company Law”) and the provisions of the Luxembourg civil code (the “Civil Code”) and the Luxembourg commercial code (the “Commercial Code”).

Under Luxembourg laws, the pool leader and the pool participants do not require a banking license from the Commission for the Supervision of the Financial Sector (Commission de Surveillance du Secteur Financier) as long as the cash pooling services are provided exclusively to one or more entities forming part of the same group.

b) Social interest and due diligence

Each manager or director must act bona fide in the best interests of the company.

The managers/directors of the companies participating to the pool shall verify in advance whether the transaction is in the best corporate interests of the company, i.e., if the benefits deriving from the cash pooling arrangement (higher interest rate, etc.) outweigh the potential risks. 

Special attention shall be given to the solvency of the pool leader and the other companies involved. 

In considering the entry into and the use of the cash pooling scheme by the company, the managers/directors shall assess the risks deriving from the cash pooling arrangement with due care and diligence and shall therefore:

• consider whether the company has excess cash which would be better remunerated by the group than a bank and whether any remuneration of the cash is on an arm’s length basis considering the benefit of the cash pool scheme;
• consider whether the loan(s) to be granted under the cash pooling scheme is assorted with sufficient guarantees;
• consider whether the company may need financing from the group with attractive conditions and avoiding cumbersome formalities;
• consider whether the company has sufficient capacity to honour the payment of any debt contracted under the cash pooling scheme;
• consider the financial situation and solvency of the participants to the cash pooling and request access to the balance sheets and information relating to the current and expected profitability of the group;
• make a reasonable assessment of the cash pool operator’s competence and capacities to manage the cash pool scheme and to repay the debts;
• consider whether the participation to the cash pooling arrangement may threaten the availability of necessary liquidity for the company;
• consider whether the company retains sufficient control on the day-to-day management of its cash; 
• pay particular attention to avoid any clause of the cash pooling agreement which are detrimental to the company’s interests; and
• take advice from experts where necessary.

The managers/directors of a company, when considering the benefits of participating in a cash pooling scheme, may also take into consideration the interest of the group to which the company belongs.

In the absence of specific provisions and case law regarding the interest of groups of companies, the following cumulative elements can be considered as decisive when assessing if a transaction, which is in the “group interest”, is also within the scope of the corporate interest of a company: 

• there is a common benefit to the parties involved in the light of the group policy, including a direct or indirect economic advantage for the company; 
• the risks of the transaction should be evenly apportioned among the concerned group’s companies; and
• the transaction should not exceed the supporting company’s financial capacity.

Considering the above, where a benefit to the group, or to a key member of the group, may indirectly benefit the company, this can be taken into consideration by the managers/directors to conduct their assessment as to whether the transaction is in the best corporate interests of the company. However, it will be not sufficient that the arrangement only benefits the group as a whole, without any interest for the company itself. 

The assessment of the corporate interests should be documented in detail. As a practical measure, it is recommended to include in the board meeting minutes the benefits expected from the cash pooling arrangement together with the assessment of the solvency of the company and the other pool members. 

c) Shareholder’s loan provisions

It is important to ensure that any intragroup loan granted as part of the cash pooling arrangement is granted on terms and conditions which are arm’s length in all respects. To ensure that such loans are issued on arm’s length terms, the borrowing company must pay an adequate interest rate and the lender should be entitled to prematurely terminate the loan if the financial situation of the borrower deteriorates. 

d) Liquidity protection

The directors/managers of a company are responsible for ensuring that the company has sufficient liquidity at all times to pay its debts as they fall due. 

The entry by a Luxembourg company into a cash pool transaction should not lead to its insolvency.

A company will be declared insolvent by a Luxembourg judge if the following cumulative conditions are met:

• the inability to pay the company’s debts as they fall due; and
• the inability to raise credit.

Prior to entering into a cash pooling agreement, the managers/directors should therefore consider the financial impact on the company, with particular concern to liquidity protection. There is no concern as long as the cash pool functions properly with companies having a sound financial position, and the pool operator allows payments to be made to and from the master account. There is however a risk that sufficient liquidity will not be available if funds paid to the master account are no longer recoverable or if a company becomes insolvent.

In case of bankruptcy of a Luxembourg participant, if the proceedings reveals that there are insufficient assets to satisfy the creditors’ claims, the Luxembourg Commercial Court can decide that any shortfall in the company’s assets will be made up from the personal assets of the managers/directors if they have committed a gross and manifest fault (“caractérisée”) leading to the bankruptcy. It is a sufficient condition that the managers/directors’ actions or omissions have contributed to the insolvency. It is, therefore, not required that their fault be the exclusive or direct cause of the company’s going bankrupt.

In addition, if as a result of losses, the net assets of a Luxembourg public limited liability company (S.A.) fall below half of its share capital, the board of directors shall convene a shareholders’ meeting to be held within a period not exceeding two months from the time at which the loss was or should have been ascertained by the directors. The shareholders’ meeting shall resolve, with a two third majority, upon the dissolution of the company and on any proposal of the board of directors as set out in a report prepared by the latter. The same rule applies in case the net assets fall below one quarter of the share capital, provided that in such case, the dissolution shall take place if approved by one fourth of the votes cast. In case of infringement of this rule, the directors may be declared personally and jointly and severally liable vis-à-vis the company for all or part of the loss.

e) Hidden distribution of profits

Profits may only be distributed to shareholders in compliance with legal requirements. 

Article 461-2 of the Company Law provides that the amount of a distribution to shareholders may not exceed the amount of the profits at the end of the last financial year plus any profits carried forward and any amounts drawn from reserves which are available for that purpose, less any losses carried forward and sums to be placed to reserve in accordance with the law or the articles. The same article of the Company Law also provides that the term “distribution” includes in particular the payment of dividends and of interest relating to the shares. 

Hidden distribution of profits is deemed to exist whenever the company makes payments to the shareholders in the absence of an equivalent consideration.

Avoiding unlawful distributions is important as, under certain circumstances, the directors may be subject to criminal sanctions. 

f) Insolvency proceedings – contestation of transactions

Transactions entered into by a Luxembourg company before it has been declared bankrupt are particularly hazardous for third parties.

Certain transactions performed during the hardening period, i.e., the period starting as at the date of the suspension of payments (as determined by the court with retroactive effect up to six months prior to the date of the judgment declaring the bankruptcy), are void automatically while others may be annulled by the court.

The following transactions entered during the hardening period (and up to ten days before) are automatically null and void:

• Any payment of debts which were not due at the time of their payment, made by cash, transfer, sale, set-off or any other means;
• Any payment of due debt made other than by cash or with commercial instruments (“effet de commerce”);
• Any judicial or contractual mortgage as well as any securities over the company’s assets to secure debts that came to existence at an earlier date; and
• Any transfers of property without consideration or without appropriate consideration.

The following transactions, if entered during the hardening period, may be declared null and void: 

• Any payment by the company, including for debts that were due, as well as any transactions, other than free of charge transactions, if the contracting party was aware that the company had suspended its payments;
• Mortgage or securities when the mortgage or securities was/were filed in the relevant register at least 15 days after the deed documenting the mortgage or securities agreement, to the extent that the filing was done within 10 days preceding the hardening period or subsequently.

In addition, any contract or payment carried out to defraud creditors is null and void, regardless of the date on which they were made.

a) Intro

Given the group nature of cash pooling arrangements and the related transfers, loans and drawdowns of funds, the participation of Luxembourg companies to such transactions may entail various risks for the directors/managers and, to a lesser extent, the shareholders.

b) Liability of directors

In respect of managers/directors’ liability, reference must be made to the general principles as set out by the Company Law and the insolvency provisions of the Commercial Code.

Contractual liability

Managers/directors are agents of the company. They are liable towards the company for the performance of their mandate and for their faults in the management of the company. Their liability may arise from any misconduct in the management of the affairs of the company.
Three cumulative conditions must be fulfilled in order for the managers/directors to be held liable on this basis: 

• a fault;
• a damage; and 
• a direct causal relation between the fault and the damage.

A management misconduct consists in a mismanagement act that a careful and diligent manager/director would not have committed in the same specific circumstances. Mismanagement acts may consist in positive acts or a lack of action. They are assessed in abstracto by Luxembourg courts by reference to the concept of a “good family father” (bon père de famille).

Legal proceedings based on contractual liability can only be brought before the court by the company based on a decision of the general shareholders’ meeting adopted at a simple majority of votes or, in public limited liability companies (S.A.), by shareholder(s) holding at least 10 % of the voting rights at the general meeting having granted the discharge to the directors. Compensation is sought for damages which the company has incurred itself.

No actio mandati can be brought by a company if a discharge was validly granted to the managers/directors by the annual general shareholders’ meeting held to approve the company’s annual accounts. In accordance with the Company Law, following the approval of the annual accounts, the general meeting of shareholders shall resolve upon the discharge to, inter alia, the managers/directors. Such discharge is valid only if the approved annual accounts contain no omission or false information concealing the true situation of the company. In respect of a fault committed by managers/directors of a company, a discharge will only have effect if it has been granted in full knowledge of the facts (en pleine connaissance de cause).

In order to reduce their liability risks, the managers/directors of the participating companies must satisfy themselves in advance that the benefits of the cash pooling arrangement outweigh the possible risks.

Liability for breach of the law and/or the articles of association

Managers/directors can be held jointly and severally liable towards the company and third parties for all damages resulting from a breach of the Company Law or the articles of association. Again, a fault, a damage and a causal link between the fault and the damage must be established for legal proceedings to be successful.

Legal proceedings can be initiated against the managers/directors by the company according to the same rules as those applying to contractual liability. Third parties, such as public authorities, creditors, employees, can also initiate legal proceedings. The discharge granted to the managers/directors by the annual meeting of the shareholders has no effect towards third parties. 

If the fault is proven, a presumption of joint and several liability will apply to all the managers/directors in function at the time the fault was committed. Any individual manager/director can be held liable for the payment of the entire damage caused by a breach of the Company Law or the articles of association, with no need for the claimant to prove who specifically committed the breach.

A manager/director can only escape joint and several liability if he can establish that:

• He did not participate in committing the breach;
• He was not otherwise negligent; and
• He was not aware of the breach, or has informed the shareholders of the breach at the first shareholders’ meeting following the date on which he became aware of the breach.

The managers/directors shall make sure that the activity of cash pooling is not in breach of the articles of association of the company. If this is not the case, they shall convene a shareholders’ meeting to amend the articles of association in order to include the cash pooling activity in the corporate object.

They shall also make sure that, in the event they have a direct or indirect financial interest conflicting with that of the company in a transaction which has to be considered by the board, they will inform the board thereof. Such manager/director should abstain from taking part in the related decision making. 

Tort liability

The rules relating to tort liability, provided for in articles 1382 and 1383 of the Civil Code, are applicable to managers/directors of a Luxembourg company.

The managers/directors of a company can be held liable for a damage caused by them to third parties by their illegal acts on the grounds of article 1382 and seq. of the Civil Code. 

Third parties include any shareholder acting on an individual basis, as well as any creditor of the company who has suffered a damage as a result of the fault of the managers/directors. In this respect, it should be noted, however, that the Luxembourg case-law has been traditionally reluctant to admit tort liability claims from third parties against managers/directors. The reasoning behind has usually been that the managers/directors are acting on behalf of the company and, hence, the legal personality of the company should serve as a screen protecting them from third persons’ claims.

Certain Luxembourg case-law has been making reference to the French law concept of “faute détachable” according to which the tort liability of managers/directors of a company towards third parties may only be engaged if such managers/directors have committed a rather serious “personal” fault independent from their role as manager/director meeting all of the following criteria:

• It must be intentional, i.e., committed with the awareness of causing damage to a third party;
• It must exhibit characteristics of certain “seriousness” (gravité) – like gross negligence;
• It must be incompatible with the normal exercise of the role of manager/director of the company.

It should, however, be noted that there is some criticism as to the “indulgency” of such approach and changes are regularly proposed in favour of less strict conditions triggering managers/directors’ liability towards third persons. 

Criminal liability 

Certain faults committed by a manager/director may trigger not only their civil liability but may also constitute a criminal offence for which they can incur criminal liability (e.g. forgery, breach of trust, fraud etc.).

In addition, the Company Law provides for criminal sanctions if managers/directors infringe upon certain obligations such as:

• the distribution of fictional dividends (i.e., dividends that are not paid out of real profits made by the company);
• forgery of the annual accounts or other company’s documents with fraudulent intent or with the purpose to cause harm; 
• prohibited financial assistance (S.A.); and
• misappropriation of the company’s assets.

Bankruptcy

In case of bankruptcy of the company, managers/directors may face various sanctions:

• Ban of trading: they may be prevented from engaging in any commercial activity or from acting as director or auditor of a company if they have committed a gross and manifest fault contributing to the bankruptcy of the company;
• Liability for company debts (see section 1d);
• Extension of the bankruptcy: a director/manager can also be held personally liable if he (i) has undertaken a commercial transaction for its own personal interest under the guise of the company, or (ii) has used the property of the company as their own property, or (iii) has abusively pursued, in his personal interest, a loss-making operation which could only result in the company suspending all of its payments; and
• Criminal sanctions against managers/directors of an insolvent company who (i) failed to declare the insolvency within one month after the company suspended its payments and lost its creditworthiness, (ii) fraudulently embezzled or diverted part of the assets, (iii) assumed considerable obligations without adequate compensation, (iv) paid a creditor to the detriment of the insolvency estate in order to postpone the insolvency.

b) Liability of shareholders

Shareholders of limited liability companies (such as S.A. and S.à r.l.) have no other engagement or liability than the amount of the share capital they subscribed for, provided they do not interfere in the management of the company.

a) Intro 

Several mechanisms can be put in place to mitigate the risks generated by a cash pooling structure.

b) Corporate power

As a general rule, the entry into a cash pooling transaction falls within the competence of the directors/managers of the company, unless otherwise provided for in the articles of association. 

The managers/directors must refrain from entering into any transaction which does not fall within the scope of the company’s corporate object. The articles of association may explicitly refer to cash pooling activities or should at least allow the company to lend and borrow monies to and from other companies, and (if applicable) grant guarantees. 

In case of doubt in that respect, the board may consider convening a shareholders’ meeting to amend the articles of the company by inserting a specific reference to participation in group cash pooling schemes in the corporate object of the company.

Despite the above, it is usual practice and recommended to obtain a shareholders’ resolution to approve the cash pooling transaction to mitigate the managers/directors’ contractual liability. The approval by the shareholders should be made on a well-informed basis. It is therefore recommended that the managers/directors provide a full set of information and documents in respect of the envisaged transaction to the shareholders ahead of the meeting and be prepared to answer any questions raised by the latter.

c) Cash pooling agreement

It is advisable to have a cash pool agreement between the participants that clearly states the terms and conditions of the arrangement (i.e., duration, rate of interest payable on any sums borrowed …). 

In order to reduce the risks of liability arising from a cash pooling arrangement, it is recommended that the cash pooling agreement contain the following provisions:

• Right to information: the agreement shall include information rights to ensure that the management of a participating company can monitor the solvency and liquidity of the other participants and determine whether the company will be able to recover the loan(s) granted to the pool operator through the receipt of updated financial information about the pool leader and the other participants on a regular basis (e.g., monthly consolidated financial statements). It is also recommended to include an obligation on each company to immediately notify all the other participants if the company’s solvency is threatened so that the management of the other companies may take appropriate measures and make a timely decision as to whether to terminate the company’s participation in the arrangement.
• Right to terminate: the agreement shall grant pool participants the right to terminate it at any time without giving reasons so as to allow the participants to exit the arrangement if there is any doubt as to the pool leader’s financial situation or if it is exposed to the insolvency of any other participant getting into financial difficulties. The agreement should also contain the right for a company terminating the cash pooling arrangement to have repaid (within a couple of days) any funds it has contributed to the cash pool. In addition, it is recommended to include a provision that a company experiencing solvency problems is required to terminate its participation in the cash pool by repaying all of the intra-group loans and reclaiming deposited funds (subject to any limitations on payments during the hardening period). 
• It may make sense to include provisions in the cash pooling agreement prohibiting funds from being withdrawn from the pool participants if this would encroach on the company's share capital or deplete its assets so greatly that this would jeopardise its survival.

d) Facility agreement

The facility agreement entered into with the bank should reflect the terms and conditions of the cash pooling agreement (i.e., termination rights of each company …) in order to reduce the risk of liability. 

e) Guarantee

Agreements entered into with the bank often require the pool participants to provide the bank with adequate securities and guarantees for their obligations under the facility agreement. 

In general, banks also require that all participating group companies are liable jointly and severally for the balance on the master account.

As for any transactions, the provision of guarantees must fall within the company's corporate object as set forth in its articles of association and must be in the corporate interests of the company.

It is generally accepted that downstream guarantees may be provided by Luxembourg companies without any limitation. 

The question of up-stream and cross-stream guarantees is subject to discussions amongst legal practitioners in Luxembourg. In order for the board to be able to conclude that providing the guarantee to secure the indebtedness of third parties is in the corporate interests of the company, it is recommended that:

• the company should derive a demonstrable benefit from the operation for which the guarantee is being provided (e.g., where a company provides a guarantee in exchange for an arm's length consideration), being noted that the interest of the group is not sufficient to support the granting of upstream or cross-stream guarantees; and
• such company’s existence is not threatened by the provision of such guarantee. 

It is recommended, to the extent possible, that the company avoids providing securities and assuming joint and several liability. 

If this cannot be achieved in negotiations with the banks, limitation language should be inserted to limit the guarantee to the amount of funds drawn from the cash pool by the company and the liability of a company should be fully excluded to the extent that a claim jeopardises the existence of such company. It is also market practice to limit the guarantee to a certain percentage (80 to 95%) of the guarantor's own funds, subordinated debt or net assets.

a) Intro

From a tax perspective, cash pooling arrangements are not governed by any specific tax framework in Luxembourg. As such, general rules and principles as provided by Luxembourg laws, case laws, administrative tax circulars and unpublished administrative practice apply to cash pooling arrangements.

b) Thin capitalization rules

Luxembourg tax law does not contain any specific thin capitalization rules. Currently, an appropriate equity level should be respected by Luxembourg taxpayers. This analysis should be made on a case-by-case basis. In this regard, the Luxembourg Tax Authorities (“LTA”) may request proper documentation which supports the debt-to-equity ratio of the taxpayer. When the taxpayer cannot demonstrate its debt capacity, the excess of interest can be requalified as a distribution of profits which is nontax deductible and is subject to a 15% withholding tax unless an exemption (or reduced rate) applies under domestic law or as per a tax treaty.

c) Interest deductibility

In principle, all interest payments are tax deductible provided that the expenses are not profit sharing nor economically related to exempt income and subject to the following limitations: 

(i) Interest deduction limitation rules (IDLR)

Luxembourg has introduced the IDLR in the context of the transposition of Council Directive (EU) 2016/1164 of 12 July 2016 (“ATAD I”) into domestic law (article 168 bis of the Luxembourg Income Tax Law (“LITL”)). The law provides that, in a given fiscal year, the deduction of so called “exceeding borrowing costs” is limited to the highest of (i) 30 % of its tax earnings before interest, tax, depreciation and amortization (“EBITDA”) or (ii) EUR 3 million. 

• “Exceeding borrowing costs” are defined as the amount by which tax deductible “borrowing costs” of a taxpayer exceed its taxable interest income and other economically equivalent taxable income.
• “Borrowing costs” are defined as (i) interest expenses on all forms of debt, (ii) other costs economically equivalent to interest, and (iii) expenses incurred in relation to financing.

Tax unities are allowed to determine exceeding borrowing costs and tax EBITDA at the level of the tax unity itself.

The IDLR do not apply to debt instruments concluded before 17 June 2016 (“Grandfathering Rule”) provided the relevant agreements have not been subsequently modified. In case of a subsequent modification, the Grandfathering Rule only applies to the original terms of the debt instrument. The law also contains a carve-out for standalone companies, loans used to fund long-term infrastructure projects and financial undertakings. 

(ii) Anti-hybrid mismatch rules (“AHMR”)

Luxembourg has introduced the AHMR in the context of the transposition of Council Directive 2017/952 of 29 May 2017 (“ATAD II”) amending ATAD I into domestic law (article 168 ter of the LITL). The law provides that interest expenses are not tax deductible if there is (i) a double deduction (“DD”), a deduction without inclusion (“D/NI”), or (ii) an imported mismatch involving “associated enterprises” and / or arising under “structured arrangements”. A structure arrangement is an arrangement involving a hybrid mismatch where the mismatch outcome is priced into the terms of the arrangement or an arrangement that has been designed to produce a hybrid mismatch outcome, unless the taxpayer or an associated enterprise could not reasonably have been expected to be aware of the hybrid mismatch and did not share in the value of the tax benefit resulting from the hybrid mismatch).

Only D/NI or DD mismatch outcomes resulting from a different tax qualification of the instrument or of the allocation of payment (i.e., hybrid entities), are in the scope of the AHMR. However, if the exemption is prima facie due to the tax-exempt status of the lender and beneficiary, then the payment should be out of the scope of the rule. 

(iii) EU Blacklist rule

As from 1 March 2021, interest and royalties due by Luxembourg collective undertakings (broadly, tax opaque entities) to “associated enterprises” that are the beneficial owners of the interest and royalties received and that are established in a jurisdiction or territory listed in the EU Blacklist will not be tax deductible (article 168 (5) of the LIR).

For the purpose of this rule, two undertakings are “associated enterprises” where one of them participates directly or indirectly in the management, control, or capital of the other, or where the same persons participate directly or indirectly in the management, control, or capital of both undertakings.

Interest and royalties remain tax deductible if the taxpayer provides proof that the transaction, in the context of which the interest or royalties are due, is carried out for valid commercial reasons which reflect economic reality.

The latest version of the EU Blacklist (published on 24 February 2022) includes American Samoa, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, Us Virgin Islands and Vanuatu.

(iv) Transfer pricing rules

See paragraph d) below.

(v) Other relevant Luxembourg provision

Cash pooling arrangements may still be subject to scrutiny from the LTA under the Luxembourg General anti-abuse rules (“GAAR”), if the use of such arrangement is artificial and is not backed by valid commercial reasons reflecting economic reality. In case the GAAR would be successfully invoked by the LTA, the tax deductibility of interest expense could be challenged for instance.

d) Transfer pricing

Luxembourg is a member of the OECD; however, Luxembourg tax law does not provide with cohesive transfer pricing (TP) legislation. In its place, the LTA provide for legislation to perform upward and downward adjustments in accordance with the arm’s length principle.  Luxembourg tax law explicitly recognizes the arm’s length principle in Article 56 LITL. 

Luxembourg being a financial hub in Europe, the LTA have focused on providing specific regulation regarding the transfer pricing aspects of financial transactions. The corresponding provisions have been included in the Circulaire du Directeur des contributions L.I.R. n° 56/1 – 56bis/1 (the Circular). Under the Circular, Luxembourg companies should fulfil substance requirements, assume sound economic risks and earn an arm’s length remuneration for their financing activities. These regulations should also be taken into consideration in the context of cash pooling arrangements. 

(vi) Withholding tax (WHT)

No WHT applies on at-arm’s-length interest which are not profit sharing paid by a Luxembourg resident company to a non-resident entity as beneficial owner.

(vii) Corporation tax

Interest income are subject to Luxembourg Corporate Income Tax (CIT) and Municipal Business Tax (MBT). For fiscal year 2022, the CIT rate is 18.19% (including a 1.19% employment fund’s contribution) and the MBT rate is 6.75%, resulting in an aggregate rate of 24.94% (for companies established in Luxembourg City).

(viii) VAT rules

A Luxembourg company engaged in financing activities should, in principle, qualify as a VAT taxable person.

Provision of financial services (such as lending) to EU and Non-EU debtors is VAT exempt in Luxembourg (article 44 (1) c) of the Luxembourg Law dated 12 February 1979 (“Luxembourg VAT Law”). Financing granted to EU-established debtors do not entitle to recover VAT on costs while financing granted to non-EU-established debtors entitles to recover VAT on costs. 

If a Luxembourg company only carries out a VAT exempt activity which do not entitle to recover VAT (lending to an EU debtor for instance), it should be liable to register for VAT in Luxembourg only if it receives services from abroad, which are subject to the reverse charge mechanism (or acquire goods from other EU Member States for an amount exceeding EUR 10,000 per year). 

Article 430-19 of the Company Law provides that a Luxembourg public limited liability company (société anonyme) may not, directly or indirectly, advance funds, extend loans or provide security with a view to the acquisition of its own shares by a third party, except under strict conditions under the responsibility of the directors. 

Under certain circumstances, unlawful finance assistance is subject to criminal sanctions. 

The cash pooling agreement should specify that any amount transferred by a Luxembourg company (S.A.) to the group cash pooling may not be used for unlawful financial assistance.