Domestic Procedures

In this article, partner Bertrand Géradin and managing associate David Al Mari from Ogier’s Restructuring and Insolvency team in Luxembourg provide a high level summary of the enforcement mechanisms related to share pledges in Luxembourg. This article first appeared in Chambers Expert Focus Guides.

The new law emphasises preventive restructuring, cross-border cooperation and equitable treatment of creditors

The European Union has recognised the need for harmonised insolvency laws across its member states and has taken a significant step forward with the introduction of the new EU Restructuring Directive ((EU) 2019/1023).

This directive aims to establish a common framework for insolvency proceedings, thereby enhancing cross-border cooperation and safeguarding the interests of all stakeholders involved.

Streamlined bankruptcy rules are due to come into force in June to shield healthy businesses hit by the pandemic

Belgium's Chamber of Representatives has approved (14 March 2021) a bill modifying the current insolvency laws with respect to – and alongside other minor changes – judicial reorganisation, pre-packaged insolvency and fiscal reform.

Usual Luxembourg security package

Luxembourg is one of the leading domiciles worldwide for international investment portfolio acquisition vehicles.

Acquisition financing are usually secured against the assets and cash flows of the target company as well as of the buyout vehicle.

In practice, given that a Luxembourg holding company generally does not have any operational activities, shares, receivables and cash on bank are the most important assets to cover.

Background

Luxembourg went into full Coronavirus lockdown on March 16. By the ministerial decree of 16 March 2020, the State narrowed down the movement of citizens to the essential activities (notably the procurement of food, medication and basic necessities and travel to health facilities) and has ordered to limit business activities and allow people to stay at home. For workers engaged in other (non) commercial activities, the state recommends using home office and reducing activities to tasks that are essential for the operation of the business.

In light of the COVID-19 crisis, a Grand Ducal Regulation was published on 25 March 2020 (the Regulation)[1] that suspends certain procedural deadlines applicable in civil and commercial matters during the Luxembourg state of crisis. The Ministry of Justice has clarified that this suspension also relates to insolvency matters.