Bertrand Géradin
Partner | Legal
Luxembourg Legal Services
Bertrand Géradin
Partner
Luxembourg Legal Services
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Restructuring and Insolvency Jurisdiction Guide: Luxembourg
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Domestic Procedures
| Question | Answer |
|---|---|
| What are the principal insolvency procedures for Companies in your jurisdiction? |
|
| Are any of the procedures available on a provisional basis? | Reprieve from payment procedure (sursis de paiement)
Composition to avoid insolvency (concordat préventif de faillite)
|
| What requirements must be satisfied for the procedures to be pursued? | Bankruptcy (faillite)
|
| What is the procedure and how long does it typically take? | Bankruptcy (faillite)
|
| Can any procedures be pursued without the involvement of the Court? | While out-of-court restructurings can be achieved on a contractual basis, all the above listed insolvency procedures are judicial procedures. |
| What is the effect upon control of the company and its assets during those procedures? | Bankruptcy (faillite)
|
| Is there an automatic moratorium and if so when does it come into effect and what is its effect? |
Bankruptcy (faillite)
|
| Can companies be forcibly wound up other than when insolvent? | Compulsory liquidation can be ordered by the court if a Luxembourg commercial company (i) either has pursued illegal activities, or has seriously infringed the provisions either of the Luxembourg commercial code or the provisions of the Luxembourg law on commercial companies or (ii) upon the request of a shareholder, or a group of shareholders, if it is established that such shareholder has a solid ground for this request. This is typically the case when a conflict between shareholders creates a permanent paralysis of the corporate bodies of the company. |
| To what extent are the procedures designed to facilitate a rescue of a company’s business? |
Bankruptcy (faillite)
|
| Can the procedures be used to facilitate the sale of all or part of the insolvent company’s business? | Yes, the receiver can, with the authorisation of the court, sell all or part of the company’s business, either by public auction or private contract. While “prepack” sale is not available in Luxembourg, in certain circumstances (depending on the facts and the structure), a similar result can be achieved through the enforcement (by way of private sale or out-of-court appropriation) of a Luxembourg law pledge. |
Cross Border
| Question | Answer |
|---|---|
| To what extent do the courts in your jurisdiction lend assistance to overseas appointees (through recognition) and in what circumstances? | Recognition of foreign insolvency proceedings
|
| Are there any limitations typically imposed in respect of the recognition of an overseas appointee? | As a general principle foreign insolvency proceedings regularly opened in another state, which is not in the EU, are recognised directly without any specific formalities except to the extent such recognition would require local enforcement measures, in which case formal recognition (exequatur) needs to be sought from the Luxembourg courts. |
| What kinds of overseas appointees have been recognised in your jurisdiction? | See above. |
| Do the courts in your jurisdiction assist in applications to subject a company incorporated in your jurisdiction becoming subject to an insolvency procedure in another jurisdiction? | Luxembourg courts would not assist in such applications. |
Creditors
| Question | Answer |
|---|---|
| What are the principle forms of security taken in your jurisdiction in respect of movable and immovable property? | Immovable property
|
| What is the effect on secured creditors of the commencement of an insolvency procedure? | Bankruptcy (faillite)
Controlled management (gestion contrôlée)
|
| Which creditors are preferred and to what extent? |
|
| What is the position regarding the recoverability and quantum of liquidator’s fees and expenses of the insolvency procedure? | Insolvency receivers are entitled to a fee for their service corresponding to a certain percentage of the assets realised and dividends paid to the creditors. If the assets of the company are not sufficient to cover these fees, the Luxembourg State will bear them and the receiver will receive a fixed fee. |
Avoidance Transactions
| Question | Answer |
|---|---|
| What if any categories of transaction can be avoided/set aside? |
Following contracts are automatically null and void if concluded during the suspect period” (période suspecte) (ie. less than 6 months and 10 days before the judgment opening the insolvency proceeding):
|
| Who is responsible for seeking orders to set aside such transactions? | The insolvency receiver. Additionally, notwithstanding the time when they were made (including prior to the suspect period), any contracts or payments can be annulled by the insolvency court if they were made in fraud of the creditors’ rights. |
Contributions to the liquidation estate and liability of officers
| Question | Answer |
|---|---|
| Can directors or shareholders be required to contribute to the liquidation estate? | Extension of a company’s bankruptcy to a manager
(i) While acting under the corporate veil, has entered into commercial transactions for their own account or benefit Debt contribution action
|
| What liability can directors or other officers attract in respect of an insolvent company? | Criminal liability: negligent bankruptcy (banqueroute simple)
Criminal liability: fraudulent bankruptcy (banqueroute frauduleuse)
|
| In what circumstances can directors be disqualified as a consequence of a company being wound up? | Directors who have committed serious offences or breaches of duty which have contributed to a company’s bankruptcy can be prohibited from carrying out any commercial activities or being appointed as a director, manager, statutory auditor, approved external auditor or any similar position which includes the power to represent a company, for a period ranging from 1 to 20 years. |
Key contacts
Hélène Arvis
Counsel | Legal
Luxembourg Legal Services
Hélène Arvis
Counsel
Luxembourg Legal Services
About Ogier
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Disclaimer
This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.
Regulatory information can be found under Legal Notice
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