SPECIAL ISSUE PREVENTIVE RESTRUCTURING 18. Navigating uncharted waters: The implementation of the EU Directive on Preventive Restructuring Frameworks in Luxembourg

1. Introduction^[1]

The internal market of the European Union (EU) has been created as an area of prosperity and freedom. Established over 30 years ago and widely considered as one of the EU’s greatest achievements, the internal market opened to countless possibilities for EU citizens and businesses, such as new opportunities for trade, the provision services, investments, mergers and acquisitions of a cross-border nature, facilitated by the approximation of laws and the adoption of EU-wide regulations. As businesses internationalised their activities, also the disruptions of those activities became international. However, the EU legal framework has proven to be unprepared to deal with the failure of companies having creditors in different EU Member States (MS), leading to legal issues not restricted to contract law. Since insolvencies are often managed by a court,^[2] there are important aspects that touch other fields of law, such as procedural law or private international law.

As a response to repeated calls to improve the current status of the internal market and to complete the Capital Markets Union (CMU),^[3] over the last 10 years^[4] the European Commission engaged in a strong regulatory wave targeting ongoing deficiencies in the EU insolvency framework while harmonising several aspects of insolvency law. This is the case of preventive restructuring frameworks. By virtue of their flexibility, those procedures ensure that a debtor and his creditors can find an agreement (amicably or court-led), thus giving the possibility for a fresh start. The relevance of those proceedings led to their improvement and harmonisation by the publication, in 2019, of the Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks (PRD 2019),^[5] which was transposed in Luxembourg in August 2023. This article studies such implementation to understand how it has been integrated within the wide Luxembourg insolvency regime and including a preliminary assessment on its use and impact.

The adoption of the Law of 7 August 2023 (Loi du 7 août 2023 relative à la préservation des entreprises et portant modernisation du droit de la faillite)^[6] known also as the “Business Preservation Law” (BPL) or the “New Insolvency Law”,^[7] marks a significant milestone in the modernisation of the insolvency and restructuring framework of the Grand Duchy.^[8] Aligning with the PRD 2019, this reform introduces comprehensive changes aimed at enhancing the efficiency and effectiveness of business rescue operations. The impetus behind this legislative overhaul is twofold: to comply with EU-law novelties and to modernise the broader Luxembourg insolvency regime by addressing some of its longstanding deficiencies.

Until the reform under analysis in this contribution, Luxembourg’s historical approach to insolvency was primarily liquidation-focused, with limited provisions for preventive restructuring. The pre-reform regime was characterised by rigid procedures, stigmatisation of insolvency, and inadequate protection for debtors. This backdrop necessitated a robust legislative response to foster a more supportive environment for business restructuring and continuity.

The BPL introduces several key features designed to transform the insolvency landscape. Central to this reform is the establishment of early warning mechanisms and preventive restructuring frameworks.^[9] For example, Chapter 2 of the BPL contains provisions aimed at detecting financial distress at an early stage, enabling businesses to restructure their debts before insolvency becomes imminent. The law also incorporates mechanisms such as the stay of individual enforcement actions, the facilitation of restructuring plans, and the cross-class cram-down, ensuring that viable businesses can navigate financial difficulties more effectively than with the pre-reform regime.

The implementation of this reform has garnered initial positive responses from legal practitioners and businesses alike. Although not perfect, the new framework has so far been praised by the legal community for the enhanced flexibility and the increase of proactive measures available to practitioners and, especially, distressed companies.^[10] Moreover, early cases, analysed in this text, illustrate some of the practical benefits of the new procedures, highlighting their potential to facilitate business restructurings. Despite the positive reception, the new framework presents challenges and areas requiring further attention. Issues in the formulation of certain criteria of the stay will necessitate judicial interpretation or legislative refinement. Furthermore, the framework’s compliance with the principles of the PRD 2019, such as early intervention, business rescue, and balanced stakeholder interests, demonstrates Luxembourg’s commitment to aligning its insolvency laws with EU standards.

This paper is structured as follows. Section 2 contains an introduction and an excursus on the insolvency and restructuring regime applicable in Luxembourg; Section 3 will be dedicated to the scope and structure of the BPL; and Section 4 will deal with the core elements of the law stemming from the implementation of the PRD 2019. This work will allow the reader to understand to what extent the PRD 2019 has been transposed in Luxembourg and the impact of the reform. The result of the current analysis will favour to gather preliminary feedback on the BPL, shedding the light over uncertain aspects of the new regime.

2. Overview of domestic pre-reform restructuring and insolvency law regime

2.1 State of play before the BPL

The genesis of Luxembourg insolvency law reflects a historical evolution shaped by various legislative reforms and characterised by strong influences from its neighbourhood. Initially, Luxembourg insolvency framework was largely influenced by Belgian law, given Luxembourg’s historical connections and the adoption of similar legal principles.^[11] Over time and with the critical contribution of the jurisprudence, Luxembourg developed its unique insolvency provisions, adapting its regime to the developing economic and commercial landscape that has made Luxembourg one of the major financial hubs in Europe.

Ahead of the implementation of the PRD 2019, Luxembourg’s restructuring and insolvency law regime was primarily governed by the Commercial Code (Code de Commerce)^[12] and specific laws on restructuring and pre-insolvency proceedings, such as the Law of 14 April 1886 on composition with creditors (Loi du 14 avril 1886 concernant le concordat préventif de la faillite)^[13] and the Grand Ducal Regulation of 24 May 1935 on controlled management (gestion contrôlée).^[14]

The early structure of Luxembourg’s insolvency law can be traced back to the mid-19^th century. A key example of a regime different than that of insolvency (faillite)^[15] belonging to this period can be traced in the abovementioned law on the composition with creditors. This law introduced a preventive settlement procedure in which a debtor in financial difficulties could negotiate an arrangement with creditors to avoid bankruptcy. This tool was rarely used in practice due to its complexity and the stigma associated with such type of proceeding. A similar fate occurred to the controlled management.

Further refinements and updates to insolvency law occurred throughout the 20^th century, with notable amendments and new legislation introduced to address the evolving needs of the business environment. For instance, the controlled management was introduced with the objective, for a debtor in good faith (commerçant de bonne foi),^[16] to avoid bankruptcy while not having to deal with disadvantages stemming from the above-mentioned composition with creditors or those of another alternative to bankruptcy, the suspension of payment (sursis de paiement).^[17] The debtor had the possibility of reorganising the business under the control of the tribunal while enjoying the consent of the majority of the creditors^[18]. This procedure, also inspired by Belgian law,^[19] has similar characteristics with the restructuring procedure under the control of the judiciary introduced by the BPL that will be analysed in the following sections. On a preliminary consideration, the poor success of the controlled management and other procedures aimed at the restructuring of businesses other than bankruptcy proceedings could be explained by the rigidity of their structure and the scarcity of their use, therefore causing stigma over time. As a result, the reforms introduced by the BPL will have the burden of proof to having overcome such rigidity.

In Luxembourg, in the late 20th and early 21st centuries, insolvency law underwent a significant modernisation to align with international standards and EU legislation, especially directives. Among those, it is useful to mention EC Regulation No 1346/2000 (EIR 2000)^[20] and Regulation (EU) 2015/848 (EIR 2015)^[21] which replaced the EIR 2000. The EIR 2000 had the aim of streamlining cross-border proceedings but replacing bilateral and multilateral conventions, while the latter continued the path of the harmonisation of cross border insolvency proceedings. As it will be analysed later when dealing with the recognition of foreign judgements,^[22] pre-pack and other restructuring proceedings introduced by the PRD 2019 and the related Luxembourg transposition are impacted by the EIR 2015.

The most recent and significant reform is encapsulated in the BPL, which modernised the insolvency framework, aligning it to the pre-packs introduced by the PRD 2019. This law aims to enhance the preventive restructuring options available to businesses, providing tools for early intervention and restructuring. It also introduced provisions for a more streamlined and efficient insolvency regime, ensuring greater protection for creditors and stakeholders while promoting the rehabilitation of viable businesses.

The above-described legislative milestones highlight the dynamic and evolving nature of Luxembourg insolvency law, shaped by both domestic needs and international influences. It also preliminarily shows the steep path of alternative measures to bankruptcy proceedings in the Grand Duchy, which might have reached a positive turning point with the adoption of the BPL. The continuous adaptation and modernisation of the legal framework underscores the commitment of the Luxembourg legislator to maintaining a robust and effective insolvency system that supports economic stability and growth in times of geopolitical tensions and growing competitiveness, especially for what concerns the broad financial sector.

2.2 Perception and gaps in the pre-reform regime

The pre-reform restructuring regime was perceived as insufficiently supportive of business recovery. Practitioners noted several deficiencies with the rigidity of the system being the leading element.

The lack of flexible restructuring tools retains the top spot among critics. The existing framework was criticised for being outdated and rarely used in practice due to its rigid and punitive nature, limiting the ability of viable businesses to reorganise and continue operations. In fact, the moment of liaising with creditors would occur too late, when the viability of the company was already compromised.^[23]

Unlike France,^[24] Luxembourg is well-known for being a creditor-friendly jurisdiction. This means that the liquidation of a business is generally the most preferred solution as the creditors are frequently interested in closing their positions, seeking to retrieve their funds as soon as possible. As a consequence, a priority for creditors might entail an inadequate protection for debtors. The pre-BPL framework provided limited protection for debtors seeking to restructure their debts, making it difficult for companies to gain the necessary breathing space to negotiate with creditors, even when the latter category was going to be interested in the continuation of the temporarily troubled business.

2.3 Introduction of reforms inspired by the PRD 2019

The implementation of the PRD 2019 through the BPL has brought significant changes to the restructuring and insolvency landscape in Luxembourg. Within the restructuring context, the reforms have modernised Luxembourg’s insolvency framework, aligning it with EU standards, thus facilitating the promotion of a culture of early intervention and business rescue.

Key elements of the new framework include, inter alia, early warning tools, the stay of individual enforcement actions, and restructuring plans. Early warning tools, enshrined in Recitals 17 and 22, and Article 3 of the PRD 2019, are mechanisms to detect financial difficulties at an early stage and provide businesses with the opportunity to address them proactively. In Luxembourg, the BPL assigned to the Ministries having the Economy and SMEs (Classes moyennes) in their portfolio (currently represented by one Minister) the task of identifying debtors in distress. When identified, those Ministries adopt an advisory role, collecting relevant information^[25] on the status of the troubled debtor or firm and informing the latter on available restructuring opportunities.^[26] The BPL allows a temporary stay of individual enforcement actions by creditors, giving individual debtors and companies the necessary respite to negotiate a restructuring plan. The BPL also introduced court-supervised restructuring plans that can be approved even against the dissent of certain creditor classes, the so-called cross-class cram-down.

3. PRD 2019: introducing domestic preventive restructuring laws

3.1 Reasons for introducing the reform

The introduction of the BPL in Luxembourg, implementing the PRD 2019, was driven by several factors beyond the mere “obligation” to align its legislation with EU requirements. This law was long awaited by academics and practitioners as one of the main aims and opportunities for reform was to address pre-existing shortcomings. The pre-reform insolvency framework was primarily liquidation-focused, with a lack of tools for effective preventive restructuring. The new law mainly aimed to modernise this regime, making it more conducive to business recovery and continuity. In times of geopolitical turbulences and growing competitiveness in financial services, enhancing business competitiveness by providing a more supportive legal environment for restructuring was considered crucial to enhance the Luxembourg’s attractiveness as a business hub.

As discussed, the reform brought the opportunity to change the paradigm for alternatives to insolvency proceedings, giving a new glance at restructuring due to the unsuitability of existing procedures. Through the reform, encouraging early intervention became a primary focus in order to shift the cultural perception of insolvency from a punitive process to one that encourages business rescue and continuity. This aims to reduce the stigma associated with financial distress and the related remedial procedures available pre-reform. This cultural shift came in a specific historical context in which businesses have had to face the consequences of the COVID-19 pandemic, followed by supply chain bottlenecks, the steep rise of stubborn inflationary pressures and the related strong and unprecedented responses from central banks. All these events contributed to put greater pressure on businesses, requiring an adequate bold response from the legislator to provide debtors and creditors with instruments that are flexible and fit for troubled and uncertain times. As a small but strongly interconnected and cross-border economy, Luxembourg is particularly exposed to geopolitical turmoil.

3.2 Reform process and timeline

The reform process involved extensive consultations and legislative efforts, reflecting the complexity and importance of the changes being introduced. To properly understand the path that led Luxembourg to adopt the restructuring proceedings introduced by the PRD 2019, it is necessary to take a significant step back and analyse this process from a broader point of view, that of the need of an overall modernisation of the Luxembourg law applicable to businesses in distress.

The process to such modernisation started several decades ago,^[27] but only materialised in early 2013 with the presentation of the bill no. 6539 “relative à la préservation des entreprises et à la modernisation du droit de la faillite”.^[28] The timeline of the introduction of the bill no. 6539 immediately shows that it took 10 years for Luxembourg to equip itself with a modern and more flexible regime for alternatives to insolvency proceedings and the reasons for such delay are manyfold. The title shows that the need to equip Luxembourg with a regime for the preservation of businesses was long overdue and the legislator wanted to embark on a wider and bolder project, thoroughly modernising its insolvency law.^[29] It can be said that, following the submission of the bill, the latter underwent the usual path of consultations and contributions from the various institutional and professional categories. This process involved, inter alia, the Chamber of Employees (Chambre des salaries), Prosecutor General, State Prosecutors in Luxembourg and Diekirch and the Courts of Luxembourg and Diekirch (i.e., the two District Courts of Luxembourg),^[30] the Bar Association,^[31] the Order of Chartered Accountants and the Chamber of Trades (Experts-comptables et de la Chambre des métiers), the Chamber of Commerce, the Chamber of civil servants and public employees (Chambre des fonctionnaires et employés publics), the State Council (Conseil d’État),^[32] and the National Commission for Data (Commission nationale de la protection des données).^[33]

The above consultation period took place from 2013 to 2015, while the former Minister of the Economy, Franz Fayot, was subsequently appointed as the rapporteur of the bill no. 6539 in February 2016 to pursue the exam of the articles and the various opinions. The year 2017 represents a turning point for the destiny of this reform, as the European Commission presented the proposal of a directive relating to preventive restructuring frameworks.^[34] The presentation of this proposal required a thorough discussion on the impact of the future directive on the ongoing project for reform in Luxembourg. As expected, the impact of the directive was considered significant, requiring the subcommittee in charge of the proposal (Sous-commission “Préservation des entreprises et Modernisation du droit de la faillite” de la Commission juridique) to inform the Parliament that it needed to pursue an in-depth review of the proposed directive,^[35] a decision that intensely impacted the path of the existing reform.

Nearly one year after the information provided by the subcommittee, former Minister Fayot announced the outcome of the review.^[36] The rapporteur acknowledged that the reform entailed profound changes in the broad insolvency regime applicable in Luxembourg. Such degree of reform was going to have repercussions beyond insolvency law as it was going to impact many areas and changing the role of certain public institutions (“impact sur de nombreux domaines et modifiera le rôle de certaines institutions publiques”).^[37] At the same time, the in-depth review had shown that the reform had given the chance to highlight the continuity of Luxembourg insolvency law with Belgian law, as well as an opportunity to improve the efficiency of Luxembourg’s restructuring proceedings. As a result, the name of the reform was modified to adapt it to an enlarged scope.^[38]

The extent of the modifications to the prior bill required a new round of consultations, which took place from 2018 to 2021. This period is relevant for two main events: the first is characterised by the opinion of the State Council that required the Parliament to temporarily suspend the reform, while the second concerns the split of the bill no. 6539. The opinion of the State Council addressed significant shortcomings, which range from a “succinct” motivation of the proposed amendments to problems in the partial “inspiration” from Belgian law. The State Council pointed out that the legislator failed to insert explicit references to the Belgian law of 11 August 2017 (Loi belge du 11 août 2017).^[39] This omission created confusion for the State Council during its assessment, particularly on whether the proposed amendments included the most recent developments in the Belgian insolvency regime or whether they still referred to the previous Belgian legislation (i.e, Loi belge du 31 janvier 2009).^[40] The latter Law of 2009 introduced in Belgium the regime of the preservation of businesses, further modified by the subsequent Law of 11 August 2017 that created a new “book” (i.e., the “Livre XX”) in the Belgian Code of Economic Law (BCEL)^[41] on the insolvency of businesses. Besides the legislation just mentioned, Belgian insolvency law has been likewise reformed with the transposition of the PRD 2019. However, the maturity and modernity of the Belgian regime required a less complicated path for the reform compared to Luxembourg.

In 2020, the reform was characterised by complex discussions over its future and, especially, on whether the objectives set in the law were too broad and ambitious to such an extent that the accomplishment of the reform and, most importantly, a satisfactory implementation of the PRD 2019, were going to be jeopardised. This brief impasse resulted in the split of the bill into two parts. On 22 February 2021, the new rapporteur, the lawyer and member of the Parliament Guy Arendt, proposed the split of the reform into two parts: bill no. 6539A^[42] and bill no. 6539B.^[43]

Bill 6539A maintained most of the original scope of the initial draft legislation (i.e., the preservation of businesses and modernisation of bankruptcy law). Bill 6539B aimed at introducing a new and simplified administrative dissolution procedure without liquidation for those commercial companies (sociétés commerciales) in the scope of Article 12000-1(1) of the Law of 10 August 1915 on Commercial Companies (Loi du 10 août 1915 concernant les sociétés commerciales) and having no assets (actifs) nor employees (salariés).

The split was not welcomed with a general agreement, as it was criticised for missing the chance to undertake a deep, broad and complete reform of Luxembourg insolvency law. However, the split was decisive to push forward the most pressing part of the reform (i.e., the preventive restructuring regime), allowing Luxembourg to comply with the transposition of the PRD 2019. Notably, bill 6539B was approved in a bit over one year, on 28 October 2022,^[44] after its submission in July 2021, thus ahead of the BPL.

Despite the split, the further path of the transposition of the PRD 2019 was still not straightforward. To draft the new law (i.e., bill no. 6539A), the rapporteur engaged with the abovementioned stakeholders, including legal practitioners, academics, and business representatives. This process ensured that the reform addressed the practical needs and concerns of those most affected (or interested) by insolvency and reorganisation proceedings. The draft law underwent rigorous scrutiny by parliamentary committees and was subject to amendments based on feedback from various stakeholders.

The entire process from initial consultations to the law’s enactment took approximately three years, reflecting the thoroughness and collaborative nature of the reform efforts, despite initial misalignments. The BPL was officially adopted on 19 July 2023, signed on 7 August 2023 and entered into force on 1 November 2023, thus roughly one year after the transposition deadline (17 July 2022).^[45]

Today, by virtue of the reform, Luxembourg offers a suite of preventive restructuring proceedings, including out-of-court amicable agreements with limited creditor involvement, judicial reorganisation by amicable agreement under court protection, judicial reorganisation by collective agreement involving creditor classes, and judicial reorganisation through transfer of assets by court order.

4. Main features introduced by the BPL

4.1 Objective and scope

4.1.1 Statutory objectives

The BPL has clear statutory objectives that can be divided into two groups: prevention and rescue; and business continuity. In line with the objectives of the PRD 2019, the primary aim of the BPL is to prevent insolvency and facilitate the rescue of viable businesses through early intervention mechanisms and structured proceedings that allow for the restructuring of debts. In the BPL, emphasis is placed on preserving the continuity of the business and its operations, which is essential for maintaining employment and economic stability.

4.1.2 Material and personal scope

Shifting the attention to the material and personal scope of the BPL, this framework has been designed for a broad application. The BPL applies to all enterprises engaged in economic activities, regardless of their legal form. In Article 2, the BPL specifically refers to debtors (debiteurs) to design the perimeter of the application of the law. The latter Article mentions various business categories, such as, for example, individual entrepreneurs according to Article 1 of the Commercial Code, commercial companies and special limited partnerships in line with Article 100-2(1) and (4) of the Law of 10 August 1915 on Commercial Companies respectively.

Despite what could seem as a broad reach of the law, Article 3 of the BPL contains a detailed list of companies that are excluded from its application as, for example, credit institutions, insurances and investment funds, all types of companies that are subject to ad hoc regimes for cases of distress. For what concerns the material scope, the proceedings can be initiated if the debtor is in financial distress and at risk of insolvency. Apart from “amical” proceedings, the BPL provides for both out-of-court and judicial restructuring options. This integrates, in the Luxembourg insolvency regime, a set of reorganisation measures that are suitable for the current economic and business environment, a real second chance for debtors experiencing short- or medium-term financial difficulties.^[46]

4.2 Criteria to enter the new proceedings under the BPL

Under the ordinary insolvency procedure enshrined in Article 440 of the Commercial Code, the burden of filing falls on the debtor. A request for opening such proceedings can also originate when the debtor is summoned by one or more of his creditors, or through a request from the State prosecutor, or ex officio by the court.^[47] Article 440 of the Commercial Code mandates the debtor to file for bankruptcy, referred to as aveu de faillite (a sort of admission or confession), under the formalities described in Article 441 of the Commercial Code.

Article 440 of the Commercial Code has been modified by the BPL as such obligation is suspended from the moment in which the debtor files a request for judicial reorganisation.^[48] This is a suspension which lasts for the duration of the stay, as analysed below in Section 4.4. Hence, it is clear that the possibility and the responsibility for initiating a reorganisation procedure lies solely with the debtor, as the only one who can act promptly in case of financial difficulties. Moreover, the debtor has all the interests to maintain control over its business and to avoid the opening of insolvency proceedings.

In line with Article 11 of the BPL, the debtor can propose to at least two of his creditors an amicable agreement, also referred to as a hybrid procedure,^[49] aimed at the reorganisation of the entirety (or a part) of its assets or activities. To obtain this agreement, the debtor can request to the court to assign a conciliator (conciliateur d’entreprise),^[50] who can also continue to support the debtor once the parties have reached an agreement with the aim to facilitate its execution. Unlike the procedure for the judicial reorganisation, the (out-of-court) amicable agreement requires no particular formalities as the key point is the mutual consent between the debtor and the involved creditors. The agreement should contain a clear scope (the reorganisation of the business), which will be verified and declared executory by the court.^[51] Yet, there is no obligation of result, as the debtor, other creditors or third parties cannot pursue those creditors that are part of the amicable agreement solely for the responsibility for the failure of the preservation of the business. Moreover, third parties are usually banned from gaining knowledge about the agreement if not through an express agreement of the debtor, denoting the secrecy of the agreement.

The amicable agreement terminates on two grounds, a successful reorganisation of the firm, or via a declaration of bankruptcy of the latter company, which entails an automatic dissolution of the agreement. In addition, the provisions of the Commercial Code that deal with the so-called avoidance actions^[52] are not applicable to the agreement. Also, a stay of payment (sursis) can be granted by the court, following the debtor’s request, under the conditions for the judicial reorganisation.

Concerning the judicial reorganisation, the BPL provides for three broad objectives enshrined in its Article 12, namely: (i) to obtain a stay aimed at facilitating the conclusion of an amicable agreement, which applies similarly to the alternative procedure under Article 11 of the BPL, as described in the previous paragraph; (ii) to reach a collective agreement with all creditors (réorganisation judiciaire par accord collectif) on a restructuring plan; and (iii) to transfer the entirety (or a part) of the debtor’s assets or activities by court order (réorganisation judiciaire par transfert par decision de justice).

The amicable agreement, as it has been conceived, has been designed to address a temporary difficulty of the debtor which should not necessarily involve the whole company in terms of activities, the entirety of the debtor’s assets, or all the creditors. The absence of publicity and the minimum limit of two creditors characterise this agreement for its potential limited scope. Whereas, in case of a larger restructuring plan that aims at the overall continuity of the business of a distressed firm, the legislator has conceived a more structured judicial reorganisation regime, as inspired by Belgian law but with less ramifications compared to the Belgian implementation of the PRD 2019.^[53] The limited requirements and formalities of the amicable agreement versus those of the judicial proceedings is reflected in several parts of the procedure, including its commencement.

Unlike a “simple” initiative by the debtor, the standard for initiating the judicial proceedings is based on the “likelihood of insolvency” referred in Article 19 of the BPL as the mise en péril de l’entreprise. This is the moment in which (either immediately or in the short term) the company is endangered. The latter Article also requires the filing of a request in which the debtor will have to specify financial difficulties and the objectives of the restructuring, according to the formalities listed in Article 13 of the BPL,^[54] as also shown in some early case-law.^[55] This standard is defined as a situation in which the debtor is not yet insolvent but is facing financial difficulties that may soon lead to insolvency, if not addressed. However, a potential bankruptcy status (état de faillite) of the debtor does not impede the opening of a judicial reorganisation. Statutory limits concern the cases in which the debtor already filed for such a reorganisation in the past and can still access the judicial proceeding, although there are some exceptions.^[56]

Following the submission of the request, the court, assisted by a delegated judge (juge délégué), reviews and examines it within 15 days from its filing. From the examination, the court, having listened to the debtor in occasion of the hearing, has eight days to decide over the debtor’s petition. In the case of a positive ruling, the judge fixes the stay^[57] and sets the date and venue for the vote on the collective agreement by the creditors.^[58] This last step is fundamental, as the court has the primary objective of ensuring that the reorganisation will be in the creditors’ best interest. The ratification of the agreement is the other circumstance in which the court will ensure that this objective is met.

4.3 Involved actors

In the newly reformed restructuring framework under Luxembourg law, several key actors play distinct and vital roles, each with specific rights, powers, and duties, such as the court, the debtor, the Practitioner in the field of restructuring (PIFOR), and the creditors.

The district court (Tribunal d'arrondissement) of Luxembourg or Diekirch is central to the restructuring process. It has the authority to open the proceedings, appoint a delegated judge, and oversee the entire process. The court ensures that the legal conditions for restructuring enshrined in the BPL are met and that the proceedings are conducted fairly, leading to the continuity (or preservation) of the business, the retention of jobs, and the satisfaction of creditors, often conflicting objectives. The court has also the power to grant a stay of individual enforcement actions, to approve restructuring plans, and to make critical decisions regarding the duration of the proceedings.

Unlike what happens during “ordinary” insolvency proceedings, during the restructuring the debtor retains control of the business operations, following the principle of the so-called “debtor in possession” (DIP) under Article 5 of the PRD 2019. Moreover, the debtor is in charge of identifying the creditors and drafting the plan.^[59] However, Article 22 of the BPL grants the possibility for the debtor to be assisted by a PIFOR, a judicial representative appointed by the court, denominated in Luxembourg as mandataire de justice (judicial representative), in line with the Law of 7 July 1971, as amended.^[60] A PIFOR includes insolvency practitioners and other experts to assist in the restructuring process and his services can be requested, at any time of the reorganisation procedure, also by an interested third party. The roles of a PIFOR can vary but typically include evaluating the debtor’s financial situation, assisting in the preparation of the restructuring plan, and monitoring the debtor’s compliance with the terms of the plan. The law mandates that PIFORs act impartially and in the best interests of both debtors and creditors.

Creditors are crucial participants in the restructuring process as, even in reforming its insolvency regime with the aim to include proceedings to facilitate recovery and business continuity, Luxembourg remains a creditor-friendly jurisdiction. Creditors have the right to be informed about the proceedings,^[61] to participate in the voting on the restructuring plan, and to challenge the decisions that may affect their interests, including to request the revocation of the plan if the debtor is not anymore able to perform the plan.^[62] The framework includes mechanisms to protect the rights of creditors while balancing the need for a viable restructuring plan.

4.4 Stay

The stay can be described as BPL’s most critical component, designed to provide distressed businesses with a temporary respite from creditor’s individual actions,^[63] allowing them to negotiate a restructuring plan without the immediate threat of insolvency proceedings or enforcement actions. The establishment of this tool represents a real game changer for debtors. As mentioned in Section 4.2, a stay can be requested by the debtor in the context of an amicable agreement, representing a “request-based” stay. However, the stay falls within the scope of judicial reorganisation proceedings (i.e., collective agreement and transfer by court order) for which the legislator envisaged a sort of “automatic” stay associated with the ruling opening the reorganisation procedure.

One of the strongest safeguards for debtors is represented by Article 18(1) of the BPL. In line with the latter Article, the debtor cannot be declared insolvent by a tribunal during the stay, meaning that bankruptcy proceedings cannot be opened. This prohibition starts from the moment in which the debtor has filed its request for the opening of the restructuring procedure, and not when the court rules on such request. The prohibition extends to the procedure for administrative dissolution without liquidation described in Section 3.2.

During the stay, the debtor is barred from executing payments.^[64] This ban focuses on payments for debts that already existed ahead of the judgement opening the reorganisation procedure and excludes those payments essential for the continuity of the distressed business.^[65] Avoidance actions are also excluded for payments made during this period.^[66] Moreover, the stay under the BPL impedes unsecured creditors (créanciers sursitaires) to undertake enforcement actions against movable or immovable property,^[67] while attachment or garnishment proceedings (procédure de saisie-arrêt) are suspended.^[68]

The most relevant novelty introduced by the BPL, in its Article 30, is the possibility for the debtor to unilaterally suspend the performance of its contractual obligations, provided that every creditor is informed within 14 days.^[69] This possibility, which does not apply to employment contracts,^[70] should be “imperative”^[71] for the reorganisation of the company. For example, the resources needed for such obligations are deemed essential to restructure the business or to avert further disruptions. In this respect, the Luxembourg legislator carefully balanced the powers of the debtor to safeguard a category of contracts which are considered vital for the functioning of Luxembourg’s financial hub, the financial guarantees arrangements governed by the Law of August 2005 on Financial Collateral Arrangements (Loi du 5 août 2005 sur les contrats de garantie financière). Notwithstanding the stay of payments, practitioners are of the opinion that, under ordinary circumstances, guarantees under the latter law would still be enforceable.^[72]

As expected, the above-described right for the unilateral suspension of debtor’s obligations has initially puzzled creditors and practitioners who feared the inability to enforce guarantees agreed ahead of the adoption of the BPL. The solution to this issue, awaiting a legislative refinement, has been “to draft security agreements in a manner that allows for their realization without being contingent on the execution terms of the credit agreement that the guarantee secures”.^[73] In practice, this can be achieved by including a contractual provision based on a specific enforcement event, such as an acceleration of the secured debt (i.e., the advancement of the maturity of the loan agreement which makes the debt immediately due); or the request/opening of a reorganisation procedure.^[74] In this way, creditors avoid having to wait until the conclusion of the reorganisation or, in any case, the duration of the stay, to enforce the guarantee, therefore de-risking the possibility of a decrease in value of collateral.^[75] On top of that, Article 30 of the BPL provides the opportunity for a creditor to suspend its own obligations vis-à-vis the debtor, except when it is considered as a retaliatory move, meaning when a creditor reacts on a unilateral suspension by the debtor. The mechanism of the suspension and the related criteria and exceptions represent a peculiarity of the Luxembourg legal system, therefore not fully aligned with the PRD 2019.

Another fundamental and, at the same time, controversial element of the stay is its duration. In line with Article 6(6) of the PRD 2019, the stay under the BPL is set at maximum 4 months.^[76] During the hearing the debtor usually requests a specific duration of the stay, which is usually of four months. However, the duration of the stay is at the exclusive discretion of the court that can grant also a shorter period that the one solicited, as shown in one of the first cases following the adoption of the BPL.^[77] This does not represent the maximum duration of the stay for two reasons.

First, the stay starts automatically from the moment in which the request for the opening of the proceedings is filed by the debtor, until the judgement that opens the reorganisation proceeding. This means that the total duration would be already longer than four months, as it would have covered also the period preceding the court decision.

Second, in line with Article 6(8) of the PRD 2019, the stay can be further extended. Article 6(7) of the PRD 2019 details the circumstances under which an extension of the stay should be granted, such as when there is a progress in negotiating the plan; when the stay does not represent a prejudice to the parties; or when insolvency proceedings have not yet been opened.^[78] The BPL does not follow the same approach. Article 18(1) of the BPL impedes that the debtor is declared insolvent until the judgement for opening the proceeding, an impediment which applies also for the entire duration of the stay. Other elements of Article 6(7) of the PRD 2019, such as the progress in the negotiation, are not relevant for the duration of the stay under the BPL and the same is valid for the prejudice of the stay towards creditors and third parties. This last element is guaranteed by the opening of the proceedings in which the judge has already verified that the debtor’s request balances the objective of the continuity of the business with the safeguard of creditors’ rights and interests.^[79]

As for the maximum duration, both Article 6(8) of the PRD 2019 and Article XX.59 of the BCEL set it at 12 months, ensuring that the restructuring process is swift and does not drag on indefinitely. Article 33(1) of the BPL states that the extended duration of the stay cannot surpass 12 months from the date of the judgement opening the proceeding, thus being in line with both the PRD 2019 and the BCEL. However, the following paragraph, Article 33(2) of the BPL, gives the possibility, in exceptional circumstances,^[80] for an additional six-month prorogation. The same Article continues in stating that, in any case, the maximum duration should not exceed 12 months in total. At this point, the formulation seems rather unclear.

It is fairly complicated to understand the reason for specifying twice the 12-month limit while giving the possibility for an additional six-month exception. A reason that could explain this ambiguous formulation could be traced in Article XX.59 of the BCEL prior the transposition of the PRD 2019. In fact, Article XX.59 pre-PRD 2019 provided for a “base” six-month stay, which could be extended to 12 or 18 months.^[81] With the transposition of the PRD 2019, Belgian law was aligned to the directive and the maximum extension was reduced to 12 months. Hence, in light of the path for reform carefully analysed in Section 3.2 and, considering the criticism of the State Council, the BPL has been inspired by the pre-PRD 2019 version of Article XX.59 BCEL, while overlooking to align Article 33 of the BPL with the novelties of the PRD 2019. At this point, in the case of a legislative refinement, it is advisable to merge Article 33(1) and (2) of the BPL, leaving the possibility of an extension up to the 12-month limit, but cancelling the reference to the additional six-month extension.

4.5 The plan

In the context of the new restructuring framework, the adoption and confirmation of a restructuring plan involve several key steps and criteria, guided by Articles 38 to 54 of the BPL, transposing Articles 8 to 11 of the PRD 2019.

The plan can be considered at the near exclusive competence of the debtor. While the debtor or (interested) third parties can request for the PIFOR’s intervention,^[82] the creditors are not involved in its preparation. Nevertheless, such a plan should respect the principle of the “equitable treatment of creditors”^[83] according to the category to which they belong, while prioritising their best interest, especially in choosing and applying the foreseen restructuring measures. Moreover, the creditors participating to the collective agreement will receive a payment proposal.^[84]

The required information in the plan under the BPL largely mirrors that under Article 8 of the PRD 2019, as transposed in Articles 42 to 47 of the BPL. The most important section of the plan represents the explanation about how the debtor plans to redress its business while dealing with the ongoing financial difficulties. In this part, the debtor should mention measures, such as amendments to financial agreements, debt for equity swaps or set-offs. Once the plan has been drafted, it is submitted to the creditors for their vote and approval.

While the PRD 2019 enlarges the type of individuals/entities that can submit the plan,^[85] the BPL restricts this task to debtors according to the modalities described in Article 48 of the BPL, which also mandates the court’s registry to inform the creditors listed in the request for reorganisation introduced by the debtor.^[86] The vote of the creditors is performed according to the respective class, based on the nature of their claims (i.e., secured versus unsecured) to ensure equitable treatment within the same class. Prior to being approved by the court, the plan should be positively voted by the majority of the creditors for each class,^[87] representing half of the total amount of the (principal) claims within each class.^[88] As for the calculation of the quorum, Article 49(6) of the BPL excludes those creditors (and their claims) that did not participate to the vote. This voting process under the BPL contains a relevant departure from the PRD 2019. Article 9(6) of the latter Directive envisages the possibility for a double majority which, apart from the amount of the claims, it includes the total number of creditors. Article 49(2) of the BPL foresees only the calculation of the claims. This departure from the Directive can be considered immaterial as the latter phrased it as an option.

Once the vote is performed, the court must confirm the plan for it to become binding against creditors. The court’s confirmation (homologation) is contingent upon the verification of three “limited”^[89] criteria listed in Article 50(2) of the BPL. According to the latter Article, the court should (i) verify that every new financing is essential for implementing the plan; (ii) such plan must not unduly infringe creditors’ rights; and, (iii) in case that some creditors oppose the plan by virtue of Article 49(7) of the BPL, the court should verify that the plan respects the creditors’ best interest. Following the verification of these criteria, the court approves a plan that considers credible, meaning that it will avoid the insolvency of the distressed firm or ensuring its viability, although recent court cases might question how judges appreciate this criterion.^[90] By doing so, the court ratifies the collective agreement, having also excluded violations of public order.^[91] From this moment, creditors part of the ratified agreement have 15 days from its notification to appeal the judgement.^[92] However, should the court reject the agreement, such decision is not subject to appeal.^[93]

In case of a negative vote by one of the creditors’ classes, in principle, the plan should be rejected. However, Article 11 of the PRD 2019 provides for the plan to be imposed on dissenting creditors. This mechanism, referred to as “cross-class cram-down”,^[94] can be granted by the court on the debtor’s request (or with his consent) upon the fulfilment of three conditions: (i) approval of the plan by one class; (ii) application of the priority rule; and (iii) prohibition on receiving more than is due. It is necessary to see those conditions more in detail for understanding the degree of the transposition of the PRD 2019.

Notwithstanding the recourse to the cross-class cram-down, a plan that is rejected by the voting classes opens the opportunity for creditors and interested parties to request the court for a transfer of all or a part of the distressed business. Such request can be also made by the debtor/company upon the request for the opening of the reorganisation proceedings or during the latter proceedings. The transfer of a part or all of the business can by voluntary or imposed and is led by an appointed PIFOR, who develops one of more sale proposals to be examined and then authorised by the court. Article 55(2) of the BPL lists the circumstances for which such a request can be filed by a state prosecutor or by summons of a creditor^[95] (or interested party). These circumstances are either when the firm meets the conditions for insolvency under the Commercial Code,^[96] or upon a series of court decisions, such as the rejection of the request for opening the proceedings, the early termination of those proceedings; the revocation of the plan; or the refusal of the plan’s ratification.

Unlike what is envisaged in Article 11(b) of the PRD 2019, Article 50(2) of the BPL requires that the plan, respecting the criteria described in the previous paragraph, is voted positively by one of the other classes. This means that Luxembourg law does not make any distinction on the type of creditors’ class that approves the plan. If the plan has been approved by the unsecured creditors’ class (créanciers sursitaires ordinaires), the class of the secured creditors (créanciers sursitaires extraordinaires)^[97] is treated more favourably than the former creditor class, meaning that the BPL follows what can be referred to as the relative priority rule, thus partially in line with Article 11(c) of the PRD 2019. The last condition under Article 11(d) of the PRD 2019 is transposed verbatim since, under the BPL,^[98] no class receives or retains more than the total amount of its claims or interests.

4.6 Executory contracts

Regardless of the split of the original bill no. 6539, the BPL maintained a broad scope, impacting areas of law beyond insolvency, such as labour law. Under the BPL, in line with Article 13 of the PRD 2019, employees of the company under restructuring benefit from specific protections under the new framework.^[99] Apart for the preservation of workers’ rights to information and consultation,^[100] one of the key elements of the BPL is the principle of the continuity of contracts. In fact, Article 30 of the BPL clearly states that, despite the opening of the reorganisation proceedings, contracts remain executory. Moreover, in line with the PRD 2019 and Article XX.56 of the BCEL, the debtor’s right to unilaterally suspend the execution of its contractual obligations does not apply to employment contracts.^[101]

4.7 Jurisdiction for and recognition of court decisions in Europe

Given the near absolute cross-border nature of Luxembourg’s economic and financial ecosystem, the recognition and enforcement of restructuring and insolvency decisions is crucial. In this respect, Article 2(4) of the EIR 2015 and its Annex A assume a pivotal role for this purpose, as the latter lists the types of insolvency and reorganisation proceedings currently recognised across EU MS, ensuring automatic recognition and enforcement within the EU.

Apart from being a “product” of the transposition of the PRD 2019, in order to be included in Annex A of the EIR 2015, reorganisation proceedings under the BPL should be public or collective procedures. This means that both the judicial reorganisation procedures of the collective agreement and the transfer of assets by court order fall within the scope of Annex A of the EIR 2015. Hence, the out-of-court amicable agreement under Article 11 of the BPL would be excluded from the latter Annex. This assumption could be corroborated by the close similarity between Belgian and Luxembourg restructuring proceedings, as analysed throughout the text.

Belgian judicial reorganisation proceedings (including the judicial reorganisation by amicable agreement) are duly listed in the Annex A. However, those are the proceedings in force prior the transposition of the PRD 2019, since the Belgian legislator adopted the Act of 7 June 2023, transposing the latter Directive, only two months before the adoption of the BPL in Luxembourg. As a result, both post-PRD 2019 proceedings are currently not listed in the Annex A of the EIR 2015. The last revision/amendment of the EIR 2015 dates back to the end of 2021.^[102] At that time, only few EU MS^[103] implemented the PRD 2019, and therefore, only their new or revised reorganisation proceedings were inserted in the Annex. This status calls for a new revision of the EIR 2015 in order to update Annex A and include all the suitable reorganisation proceedings, including those under the BPL.

For the moment, since the new regime under the BPL is not reflected in Annex A of the EIR 2015, Luxembourg will rely on alternative legal bases to ensure jurisdiction and recognition of court decisions as, for example, the Brussels I bis Regulation.^[104] The latter Regulation, governing jurisdiction and the recognition and enforcement of civil and commercial judgments across EU MS, ensures that judgments rendered in one EU Member State are recognised and enforced in others without the need for special procedures. By virtue of Recital 7 of the EIR 2015, its applicability could be interpreted as extendable to include reorganisation measures.^[105] Despite not having adopted the 1997 UNCITRAL Model Law on Cross-Border Insolvency,^[106] Luxembourg recognises the universality of bankruptcies,^[107] and its private international law provides for a framework under which judgments from EU MS are generally recognised if they comply with due process standards and do not contravene Luxembourg’s public policy.

5. Conclusion

The BPL represents a pivotal advancement in Luxembourg’s approach to insolvency and restructuring, bringing its regime to the 21^st century. Following a long, deep and comprehensive work (despite the split of bill no. 6539 in 2021), Luxembourg has achieved a higher ground for reform, addressing longstanding gaps identified in the pre-reform regime and starting to promote a culture of recovery and business continuity.

The new framework has made significant strides in closing the gaps identified in the pre-reform regime as discussed in this text. By providing more flexible and supportive tools for restructuring, it addresses many of the deficiencies related to the rigidity and punitive nature of the previous regime. The emphasis on early intervention and business rescue aligns with the objectives of the PRD 2019 and enhances the overall efficacy of today’s Luxembourg insolvency regime.

Since this study concerns the implementation of the PRD 2019, it can be stated that such implementation, although delayed and particularly politically sensitive, is largely in line with the PRD 2019. The latter directive has had the benefit of enlarging the scope of the reform and granted to Luxembourg the chance to undertake a comprehensive modernisation of its broad insolvency regime. This reform promotes early intervention, business rescue, and balanced stakeholder interests. As is frequently the case with new laws, some areas may require further refinement to address certain deficiencies identified in this analysis, with particular regard to the uncertainties stemming from the maximum duration of the stay or the unilateral suspension of contractual obligations by the debtor. In this regard, some adjustments may be necessary to ensure that creditor rights are fully safeguarded.

In conclusion, the new restructuring framework represents a substantial advancement for Luxembourg, aligning its insolvency and restructuring regime with EU standards and addressing many of the previous regime’s shortcomings. This preliminary success is the result of the maturity of the Luxembourg legal regime and institutional framework, the influence of Belgian law and the final push driven by the need to ensure the alignment with the PRD 2019. It should also be recognised that the ongoing work of academics, practitioners and courts has already identified several points that will optimistically be addressed in the near future. As the framework evolves, ongoing attention to emerging legal issues and the practical implementation of the new provisions will be crucial to ensuring its effectiveness and fostering a resilient business environment in Luxembourg.

[1] The cut-off date for the information included in this article is 18 April 2025.

[2] In the EU, the insolvency of certain firms, such as banks or investment funds are sometimes handled outside of court-ed proceedings. This is the case of the resolution of a bank by an ad-hoc administrative authority.

[3] Insolvency reforms at the EU level represent core elements of the “Action Plan on Building a Capital Markets Union”. See Gerard McCormack, The European Restructuring Directive (Edward Elgar Publishing, Cheltenham, United Kingdom 2021), 19-20.

[4] Major reforms in the EU insolvency framework could be set to have started as from the EIR 2015, meaning Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast), O.J. L 141/19.

[5] Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt, and amending Directive (EU) 2017/1132 (Directive on restructuring and insolvency), O.J. L 172/18.

[6] Loi du 7 août 2023 relative à la préservation des entreprises et portant modernisation du droit de la faillite, modifiant :1° le livre III du Code de commerce ;2° le livre II, titre IX, chapitre II, section Ière du Code pénal ;3° les articles 257 et 555 du Nouveau Code de Procédure civile ;4° la loi modifiée du 10 août 1915 concernant les sociétés commerciales ;5° la loi uniforme modifiée sur les lettres de change et billets à ordre, telle qu'elle a été introduite dans la législation nationale par la loi du 8 janvier 1962 ;6° la loi modifiée du 7 juillet 1971 portant, en matière répressive et administrative, institution d'experts, de traducteurs et d'interprètes, de conciliateurs d'entreprise et mandataires de justice assermentés et complétant les dispositions légales relatives à l'assermentation des experts, traducteurs et interprètes ;7° la loi modifiée du 23 juillet 1991 ayant pour objet de réglementer les activités de sous-traitance ;8° la loi modifiée du 8 juin 1999 sur le budget, la comptabilité et la trésorerie de l'État ;9° la loi modifiée du 19 décembre 2002 concernant le registre de commerce et des sociétés ainsi que la comptabilité et les comptes annuels des entreprises ;10° la loi modifiée du 5 août 2005 sur les contrats de garantie financière. - Mémorial A n° 521 de 2023, p. 1. An unofficial English version of the law can be found at: https://www.fisch.legal/Lois%20et%20reglements/Law%20of%207%20August%202023.pdf, last accessed 16 April 2025.

[7] A. Fostier, ‘Insolvency framework for international groups in Luxembourg’ (2024) 6 ACE, 19.

[8] In this study, as the BPL uses the term réorganisation, terms like restructuring and reorganisation are used quite interchangeably.

[9] See T. Mastrullo, ‘Panorama du droit luxembourgeois de la prévention et de la restructuration après la loi du 7 août 2023 sur la préservation des entreprises’ (2024) 9(1-2) JurisNews Procédures d'insolvabilité, 209-210.

[10] See, for example, A. Fostier, op. cit., 27. In this study, various terms are utilised for referring to a debtor, such as business, company, entity, or firm.

[11] Luxembourg, Belgium and France still share important parts of their civil law thanks to the heritage of the 1804 Code Napoleon.

[12] See Articles 437 to 614 of the Third Book (Livre III) of the Commercial Code. The title of the Third Book has been recently renamed by the BPL in “Bankruptcies and rehabilitation” (Des faillites et de la rehabilitation).

[13] Loi du 14 avril 1886 concernant le concordat préventif de la faillite. - Mémorial A n° 21 de 1886, p. 225.

[14] Arrêté grand-ducal du 24 mai 1935 complétant la législation relative aux sursis de paiement, au concordat préventif de la faillite et à la faillite par l'institution du régime de la gestion contrôlée. Mémorial A N° 35 de 1935. For a comprehensive overview of the pre-PRD 2019 Luxembourg insolvency regime, see C. Mara-Marhuenda et al., ‘Luxembourg’ in D. S. Bernstein, The Insolvency Review (9^th edn., The Law Reviews, London, United Kingdom 2021), 189-205.

[15] Please note that, similar to many other European jurisdictions, the term insolvency is not defined in Luxembourg law. The term faillite usually denotes insolvency proceedings.

[16] When referring to the debtor, the Commercial Code refers to the merchant (commercant) identified as the subject of an economic activity in contrast to a debtor as an individual non-merchant (particulier), who can benefit from the ad hoc procedure of overindebtedness (surendettement). This is a distinction that can be broadly found also in Belgian and French law, although with some differences.

[17] The suspension of payment is governed by Articles 593 to 614 of the Commercial Code.

[18] J.-P., Winandy, Manuel de droit des societés (Legitech, Luxembourg 2019), 1782.

[19] See L. Fredericq, Gestion Contrôlée: Commentaire de l’Arrêté Royal Du 15 Octobre 1934 et Modifications Apportées à La Législation Sur Les Faillites et Sur Les Sursis de Payement Par La Loi Du 27 Juillet et Les Arrêtés Royaux Des 15 et 24 Octobre 1934 (Van Rysselberghe et Rombaut, Ghent, Belgium 1934).

[20] Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings, O.J. L160/1. Although repealed by the EIR 2015, it still applies to procedures under the scope of this regulation opened before 26 June 2017.

[21] In line with the previous footnote, EIR 2015 applies to cross-border proceedings opened after 26 June 2017.

[22] See Section 4.7 below.

[23] B. Fémelat and N. Marchand, ‘Corporate Reorganisations and Restructuring in Luxembourg’ (15 December 2020) Global Restructuring Review, available at: https://globalrestructuringreview.com/review/europe-middle-east-and-africa-restructuring-review/2020/article/corporate-reorganisations-and-restructuring-in-luxembourg, last accessed 15 April 2025.

[24] The French insolvency regime (comprehensive of restructuring measures) “has been perceived as a debtor-friendly framework due to limited creditor involvement and extensive protection granted to the debtor and its shareholders.” See S. Golshaniand and A. Hojabr, ‘France’ (16 May 2023) Global Restructuring Review, available at: https://globalrestructuringreview.com/guide/the-art-of-the-pre-pack/edition-3/article/france#:~:text=Historically%2C%20the%20French%20restructuring%20and,the%20debtor%20and%20its%20shareholders, last accessed 25 May 2024.

[25] Such information should not be solely provided by the debtor. In line with Article 6 of the BPL, for the achievement of their tasks under the law, both Ministries can collect information from a variety of sources, such as the Luxembourg Institute for Statistics and Economic Studies (STATEC) or courts.

[26] Article 5 of the BPL.

[27] Menjucq reports that the project for the modernisation of Luxembourg insolvency law originated in the 1990s at the Centre de droit économique, at the time under the direction of Professors André Prüm et Françoise Pérochon. See M. Menjucq, Introduction. “Genèses des mesures nationales de transposition de la directive” in Directive (UE) 2019/1023 du 20 juin 2019 relative aux cadres de restructuration préventive, (1st edn., Bruylant, Bruxelles, Belgium 2023) 29.

[28] Chambre des Députés, Document de dépôt, Dossier 6539 (1 February 2013), available at: https://wdocs-pub.chd.lu/docs/exped/198/111/119170.pdf, last accessed 4 June 2024.

[29] M. Menjucq, op. cit., 29.

[30] Opinion of the Prosecutor General, State Prosecutors in Luxembourg and Diekirch and the Courts of Luxembourg and Diekirch, available at: https://wdocs-pub.chd.lu/docs/exped/143/264/124623.pdf, last accessed 4 June 2024.

[31] Opinion of the Luxembourg Bar Association, available at: https://wdocs-pub.chd.lu/docs/exped/152/205/125014.pdf, last accessed 20 January 2025.

[32] Opinion of the State Council, available at: https://wdocs-pub.chd.lu/docs/exped/146/555/154554.pdf, last accessed 4 June 2024.

[33] Opinion of the National Commission for Data, available at: https://wdocs-pub.chd.lu/docs/exped/131/577/153706.pdf, last accessed 4 June 2024.

[34] European Commission, Proposal for a Directive of the European Parliament and of the Council on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures and amending Directive 2012/30/EU, COM(2016) 723 final.

[35] Chambre des Députés, Sous-commission "Préservation des entreprises et Modernisation du droit de la faillite" de la Commission juridique, P.V. PMCJ 04 (27 March 2017), available at: https://wdocs-pub.chd.lu/docs/exped/0005/147/11474.pdf, last accessed 10 June 2024.

[36] Chambre des Députés, Commission juridique Procès-verbal de la réunion du 21 février 2018, P.V. J 11 (21 February 2018), available at: https://wdocs-pub.chd.lu/docs/exped/0008/090/16901.pdf, last accessed 12 June 2024.

[37] Ibid.

[38] The revised title of the bill was the following: Projet de loi relative à la préservation des entreprises et portant modernisation du droit de la faillite, modifiant: (1) le livre III du Code de commerce, (2) la section Ière du chapitre II du titre IX du livre II du Code pénal, (3) les articles L. 125-1, L. 127-3 à L. 127-5 et L. 512-11 du Code du Travail, (4) les articles 257 et 555 du Nouveau Code de Procédure civile, (5) la loi modifiée du 8 juin 1999 sur le budget, la comptabilité et la trésorerie de l'Etat, (6) la loi modifiée du 8 janvier 1962 concernant la lettre de gage et le billet à ordre, (7) la loi du 7 juillet 1971 portant, en matière répressive et administrative, institution d'experts, de traducteurs et d'interprètes assermentés et complétant les dispositions légales relatives à l'assermentation des experts, traducteurs et interprètes, (8) la loi modifiée du 19 décembre 2002 concernant le registre de commerce et des sociétés ainsi que la comptabilité et les comptes annuels des entreprises, (9) la loi modifiée du 23 juillet 1991 ayant pour objet de réglementer les activités de sous-traitance, (10) la loi modifiée du 5 août 2005 sur les contrats de garantie financière, (11) la loi modifiée du 10 août 1915 concernant les sociétés commerciales, et (12) la loi générale des impôts (« Abgabenordnung »), et abrogeant : la loi du 14 avril 1886 concernant le concordat préventif de la faillite, la loi du 15 mars 1892 sur la procédure en debet en matière de faillite et l'arrêté grand-ducal du 24 mai 1935 complétant la législation relative aux sursis de paiement, au concordat préventif de la faillite et à la faillite par l'institution du régime de la gestion contrôlée.

[39] 11 AOUT 2017. - Loi portant insertion du Livre XX "Insolvabilité des entreprises", dans le Code de droit économique, et portant insertion des définitions propres au livre XX, et des dispositions d'application au Livre XX, dans le Livre I du Code de droit économique.

[40] 31 JANVIER 2009. - Loi relative à la continuité des entreprises.

[41] Code de droit économique, available at: https://www.ejustice.just.fgov.be/img_l/pdf/2013/02/28/2013A11134_F.pdf, last accessed 5 February 2025.

[42] Chambre des Députés, Dossier 6539A (22 July 2021), available at: https://www.chd.lu/fr/dossier/6539A, last accessed 12 June 2024.

[43] Chambre des Députés, Dossier 6539B (22 July 2021), available at: https://www.chd.lu/en/dossier/6539B, last accessed 12 June 2024.

[44] Loi du 28 octobre 2022 portant création de la procédure de dissolution administrative sans liquidation et modifiant : 1° le Code de commerce ; 2° le Nouveau Code de procédure civile ; 3° la loi modifiée du 19 décembre 2002 concernant le registre de commerce et des sociétés ainsi que la comptabilité et les comptes annuels des entreprises ; 4° la loi modifiée du 19 décembre 2008 ayant pour objet la coopération interadministrative et judiciaire et le renforcement des moyens de l’Administration des contributions directes, de l’Administration de l’enregistrement et des domaines et de l’Administration des douanes et accises et portant modification de - la loi modifiée du 12 février 1979 concernant la taxe sur la valeur ajoutée; - la loi générale des impôts (« Abgabenordnung »); - la loi modifiée du 17 avril 1964 portant réorganisation de l’Administration des contributions directes; - la loi modifiée du 20 mars 1970 portant réorganisation de l’Administration de l’enregistrement et des domaines ; - la loi modifiée du 27 novembre 1933 concernant le recouvrement des contributions directes et des cotisations d’assurance sociale ; 5° la loi modifiée du 25 mars 2020 instituant un système électronique central de recherche de données concernant des comptes de paiement et des comptes bancaires identifiés par un numéro IBAN et des coffres-forts.

[45] European Commission, National transposition measures communicated by the Member States concerning: Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt, and amending Directive (EU) 2017/1132 (Directive on restructuring and insolvency), PE/93/2018/REV/1, O.J. L172/18.

[46] P. Santer et al., ‘La nouvelle procédure de réorganisation judiciaire, un changement de paradigme pour les créanciers’ (2024) 91 Journal des tribunaux Luxembourg, 1.

[47] Article 442 of the Commercial Code.

[48] Article 440(2) of the Commercial Code.

[49] See T. Mastrullo, op. cit., 211.

[50] Article 9 of the BPL contains further specificities on the role of the conciliator and his designation. For example, the person to be appointed as conciliator can be proposed by the debtor.

[51] Article 11(2) of the BPL.

[52] See Articles 445(1)(2°) and 446 of the Commercial Code. On this matter, which is part of the latest corporate insolvency proposal by the European Commission, see A. Prüm and P.M. Lupinu, ‘Luxembourg’ in R. Bork and P.M. Veder (eds.), Harmonisation of Transaction Avoidance Laws (Intersentia, Cambridge, United Kingdom 2022), 1021-1041.

[53] Cfr. Section 3 in M. Vanmeenen and D. Taşman, ‘SPECIAL ISSUE PREVENTIVE RESTRUCTURING 14. Cannot See the Forest for the Trees: The Belgian Transposition of the Preventive Restructuring Directive 2019/1023’ (2024) 3 HERO, available at: https://www.online-hero.nl/art/4757/special-issue-preventive-restructuring-14-cannot-see-the-forest-for-the-trees-the-belgian-transposition-of-the-preventive-restructuring-directive-2019-1023, last accessed 15 January 2025.

[54] Article 13(2) of the BPL contains a detailed list of documents that the debtor will have to attach to the request, such as recent financial statements and a list of creditors.

[55] Trib. arr. Lux., 12 April 2024, TAL-2024-02787, 3-4 and T. Mastrullo, op. cit., 212-213.

[56] Article 19(3), (4) and (5) of the BPL.

[57] Article 20(2) of the BPL.

[58] Article 20(3) of the BPL.

[59] Articles 41 to 47 of the BPL. See also A. Fostier, op. cit., 21.

[60] Loi du 7 juillet 1971 portant, en matière répressive et administrative, institution d´experts, de traducteurs et d´interprètes assermentés et complétant les dispositions légales relatives à l´assermentation des experts, traducteurs et interprètes.

[61] P. Santer et al., op. cit., 1.

[62] Article 54 of the BPL.

[63] P. Santer et al., op. cit., 2.

[64] Article 27 of the BPL.

[65] See the Opinion of the Luxembourg Bar Association mentioned in Section 3.2 and, in particular, its analysis of Article 28, now Article 27 BPL under the version of the law currently in force.

[66] See Section 4.2 above.

[67] Article 25 of the BPL.

[68] Article 26 of the BPL.

[69] The legislator specified the modalities for such notification (registered letter or email). Moreover, the creditor has the right to challenge the suspension on the grounds of the absence of

[70] Article 30(2) of the BPL.

[71] P. Santer et al., op. cit., 4.

[72] A. Fostier, op. cit., 20-21.

[73] Ibid.

[74] This can be also referred to as a pre-bankruptcy procedure.

[75] Recital 37 of the PRD 2019 explicitly excludes compensation or guarantees for creditors experiencing a decrease in value of their collateral.

[76] Article 20(2) of the BPL.

[77] See Trib. arr. Lux., 22 November 2023, TAL-2023-09252, 3 and 5. As shown, the debtor “PERSONNE1” made a request for a stay of four months. However, the court granted a stay for the duration of three months. This case is also relevant in terms of the feasibility of the reorganisation and for excluding that, in principle, for the court the reorganisation “is not conditional on the debtor’s good faith. See A.-M. Nicolas and A. Sensi, ‘New Luxembourg Restructuring Law and the Double Luxco: An Im-perfect Match?’ (2024) 21(3) International Corporate Rescue, 152 and T. Mastrullo, op. cit., 212-213.

[78] Article 6(7)(a)-(c) of the PRD 2019.

[79] Articles 12-13 and 19-20 of the BPL.

[80] According to Article 33(2) of the BPL, exceptional circumstances could be the size of the distressed entity or the complexity of the matter.

[81] M. Vanmeenen and D. Taşman, op. cit., footnotes 33 and 34.

[82] Article 22 of the BPL.

[83] A. Fostier, op. cit., 21.

[84] See Article 44 of the BPL. Currently, the law does not provide for minimum thresholds for such payments. However, initially, bill no. 6539A envisaged a minimum threshold of 20% of the principal debt which was later dropped. See P. Santer et al., op. cit., 6.

[85] See Article 9(1) of the PRD 2019.

[86] See Article 13(2) of the BPL.

[87] This is in line with Article 9(4) of the PRD 2019.

[88] See Article 49(2) of the BPL. It is relevant to specify that those claims should be either not contested or provisionally admitted to the proceeding, in line with Article 40(3) of the same law.

[89] See P. Santer et al., op. cit., 8.

[90] As analysed by Mastrullo, in a case of the 10 of January 2024, a judge of the Luxembourg district court approved a reorganisation by collective agreement with creditors for a company indebted for around EUR 7 million with only EUR 28.000 of available liquidity, raising doubts on the actual feasibility of the reorganisation. See Trib. arr. Lux., 10 January 2024, TAL-2023-10048 and T. Mastrullo, op. cit., 212-213.

[91] A. Fostier, op. cit., 22.

[92] Article 51(3) of the BPL.

[93] Article 51(1) of the BPL.

[94] See T. Richter and A. Thery, ‘Claims, Classes, Voting, Confirmation and the Cross-Class Cram-

Down’ (2020) INSOL Europe, 27-29.

[95] For the analysis of three recent court cases (confirmed in appeal) on the conditions of a request for a judicial reorganisation for transfer by court order, see N. Bernandy, ‘Commentaire de jurisprudence en matière de rèorganisation judiciaire par transfert d’entreprises sous autorité judiciaire’ (December 2024) 75 ALJB Bulletin Droit & Banque, 83-87.

[96] See Article 437 of the Commercial Code. The (cumulative) conditions are the cessation/inability to pay (due and payable) debts (cessation de paiements) and the loss of creditworthiness (ébranlement de crédit).

[97] For the definition of secured and unsecured creditors, see Article 1(d) and (e) of the BPL.

[98] Article 50(2)(3°) of the BPL.

[99] For example, under Article 40(2) of the BPL, workers’ claims are considered in the restructuring plan.

[100] Workers may be represented in the proceedings.

[101] Article 30(2) of the BPL.

[102] Regulation (EU) 2021/2260 of the European Parliament and of the Council of 15 December 2021 amending Regulation (EU) 2015/848 on insolvency proceedings to replace its Annexes A and B, O.J. L 455/4.

[103] See, for example, the proceedings for Italy and Hungary in Annex A of the EIR 2015.

[104] Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast), O.J. L 351/1.

[105] See J. Schmidt, ‘Preventive restructuring frameworks: Jurisdiction, recognition and applicable law’ (2022) 31 Int Insolv Rev., 89-90.

[106] See United Nations, Status: UNCITRAL Model Law on Cross-Border Insolvency (1997), available at: https://uncitral.un.org/en/texts/insolvency/modellaw/cross-border_insolvency/status, last accessed 3 March 2025.

[107] On the current approach to universalism, see I. Mevorach, The Future of Cross-Border Insolvency: Overcoming Biases and Closing Gaps (OUP, Oxford, United Kingdom 2018).