New bankruptcy law brings “rescue culture,” but also “blind spots”

Publication

08-04-2024

1 minute read

Luxembourg’s new bankruptcy and business preservation law brings new options and a “rescue culture.” But there are “blind spots” in the law, they add. More judicial certainty is needed, but this will only come with court decisions in the future.

Key insights

As of 1 November 2023, Luxembourg has a new law that focuses on business preservation and the modernisation of bankruptcy law. It gives other options to companies in distress

This new law, which implements EU directive 2019/1023 on preventive restructuring frameworks, emphasises the fact that companies now have options to restructure their debt.

Based on the Belgian law, the drafting was not perfect. The Luxembourg implementation of the directive has several blind spots that need to be highlighted

Restructuring & Insolvency Banking & Finance Litigation & Risk Management

Our two specialists in Restructuring & Insolvency, Anne-Marie Nicolas and Véronique Hoffeld, were interviewed on the topic:

Because we are late in the process of implementation [of the new restructuring law], we also don’t have the judicial certainty that other countries have now. For example, if you look at the restructuring proceedings in the Netherlands, in England, in France, in the US, even in Germany--they are tested, so people know what to expect. In Luxembourg, we don’t have that advantage because it’s new, it’s late and it has blind spots. Time will tell.

Anne-Marie Nicolas, Banking & Finance

[In a court decision in November 2023] the court decided that you do not have to prove your good faith-you just have to prove that there is risk for the continuation of the business.

That’s a bit astonishing and could open the door to bad-faith entrepreneurs.

Véronique Hoffeld, Litigation & Risk Management

To read the full article, please visit the Delano website