LUXEMBOURG Law and Practice Contributed by: Laure-Hélène Gaicio Fievez, Fabio Trevisan and Carolina Vasselli, BSP
However, these rights may be limited once insolvency or restructuring proceedings commence, as automatic stays can prevent unsecured creditors from unilateral enforcement actions. 3. Out-of-Court Restructuring 3.1 Out-of-Court Restructuring Process The Law of 7 August 2023 introduced a framework for out-of-court restructuring arrangements by mutu - al agreement ( accord amiable ), offering a strategic opportunity for commercial entities, businesspersons and civil companies to reorganise their financial and operational structures outside formal judicial proceed - ings. These arrangements, rooted in the principles of early warning mechanisms, provide an efficient path - way for restructuring a debtor’s assets or business activities through agreements with at least two credi - tors ‒ avoiding public scrutiny and the complexities of court procedures. A significant benefit of this mechanism is its resilience against insolvency. Transactions executed under the out-of-court restructuring arrangement remain valid even if the debtor later enters into insolvency pro - cedure, although their enforcement is suspended upon the commencement of insolvency proceedings. Importantly, creditors participating in such arrange - ments are shielded from liability for failing to preserve the continuity of the debtor’s business. The confidentiality of these proceedings is another critical feature. This discretion safeguards the debtor’s business reputation and operational stability, allow - ing reorganisation efforts to proceed without external interference. Additionally, court homologation ‒ avail - able at the debtor’s request ‒ can grant legal enforce - ability to the arrangement, further solidifying its legiti - macy. Furthermore, a conciliator can be appointed at the debtor’s request, playing a pivotal role in the success of out-of-court arrangements. Beyond facilitating the agreement’s formation, the conciliator can provide guidance throughout the reorganisation process, ensuring a practical and sustainable implementation of the agreed terms.
As to the initiation of an out-of-court arrangement, the debtor must meet basic requirements, primarily involving the participation of at least two creditors. The reorganisation plan may target the restructuring of part or all of the debtor’s operations or assets. Once an agreement is reached, the debtor may seek court homologation. The court verifies that the arrangement aligns with the goal of business reorganisation before granting homologation. 3.2 Legal Status As stated at 3.1 Out-of-Court Restructuring Pro- cess , the out-of-court restructuring agreement, once homologated by the court, is given a legally enforce - able status that allows it to bind both the debtor and the participating creditors. However, its binding effect is limited in scope and applies primarily to the parties who have agreed to participate in the restructuring. This means that the homologated arrangement can be invoked against those consenting creditors, but does not automatical - ly extend to all other creditors who may have claims against the debtor but did not participate in or consent to the restructuring. Notably, the homologation process grants the agree - ment legal resilience in certain situations. For instance, if the debtor subsequently enters into insolvency pro - cedure, transactions executed under such agreement remain protected from standard claw-back actions that usually apply in insolvency cases, although the agreement’s execution may be suspended during the bankruptcy proceedings. This legal protection offers significant security to creditors involved in the restruc - turing, insulating the arrangement from certain insol - vency risks. Additionally, the terms of the agreement are not pub - licly disclosed, and third parties may only be informed of its content with the debtor’s explicit consent, pre - serving the confidentiality of the arrangement. As such, while the out-of-court agreement holds enforce - able status among consenting creditors and the debt - or, its application and effects do not extend to credi - tors who were not part of the agreement or to other third parties, unless specific conditions allow for their involvement.
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