LUXEMBOURG Law and Practice Contributed by: Laure-Hélène Gaicio Fievez, Fabio Trevisan and Carolina Vasselli, BSP
the law, may be bound to the terms of the restructur - ing if a cross-class cram-down is applied, underscor - ing the court’s commitment to pursuing reorganisation where possible. Lastly, new funds injected during the process may be granted priority, and these contributions may also be secured to encourage investment in the reorganisation effort, aligning with the broader objective of maintain - ing or restoring the debtor’s financial stability. Timelines for restructuring proceedings vary based on the complexity of the case, with distinct phases for negotiation, plan voting and the official conclusion, which may culminate in either a successful reorgani - sation or, if restructuring proves unfeasible, liquida - tion. Furthermore, the length of the proceedings varies depending on the specific timeframe for the morato - rium set by the court, which cannot be longer than four months, unless extended upon request and for a duration which cannot exceed 12 months in total. The court can close the restructuring proceedings when it becomes clear that the debtor is no longer able to ensure the continuity of all or part of its business or assets. 4.3 The End of the Restructuring, Rehabilitation and Reorganisation Procedure Throughout the restructuring process, the court main - tains oversight through the reports submitted by the delegated judge. If any issues arise ‒ such as the debt - or no longer being able to continue its operations, or if the debtor provides incomplete or inaccurate informa - tion ‒ the judge may recommend the early termination of the procedure. In such cases, the court can decide to end the procedure prematurely and may declare the debtor bankrupt or order liquidation of the debtor’s assets. This step typically occurs if the court deter - mines that the debtor’s financial situation is irrepa - rable or that the debtor has not been forthcoming in providing necessary information. If, however, the procedure reaches a point where a viable restructuring plan is agreed upon and success - fully implemented, the court will issue a judgment to formally close the procedure. This marks the end of the restructuring process, and creditors will no longer
be able to pursue claims as they are bound by the terms of the agreed plan. In certain situations, either the debtor or the creditors may fail to adhere to the agreed terms of the restruc - turing plan. If this happens, the court has the authority to terminate the procedure early, lifting the suspen - sion on creditors’ actions. This means creditors can resume legal actions to recover their debts. In extreme cases, failure to comply with the plan may lead to insolvency procedure or liquidation of the debtor, as the reorganisation will no longer be deemed viable. Once the procedure ends ‒ either by completion of the restructuring plan, early termination, or declara - tion of insolvency ‒ the court issues a final judgment. This judgment is published and communicated to the debtor and the creditors, ensuring that all parties are informed of the outcome. If the procedure has ended successfully, the debtor is granted the opportunity to continue operations under the new terms; if the pro - cedure ends with bankruptcy, the debtor’s assets may be liquidated to satisfy outstanding claims. The debtor may continue to operate their business under supervision during the proceedings, provided it is in line with the reorganisation objectives. This operational continuity is designed to preserve the business’s economic value and facilitate its potential return to viability. Nevertheless, restrictions apply regarding the debtor’s use of assets, particularly those pledged as security for creditors. Any significant transaction or disposal of assets typically requires judicial approval or oversight from a court-appointed administrator to ensure that creditor interests remain safeguarded throughout the process. 4.4 The Position of the Debtor in Restructuring, Rehabilitation and Reorganisation Lastly, while under restructuring, the debtor may seek new funding, subject to court consent. The court may prioritise this new funding over pre-existing claims to ensure the business has sufficient capital to complete the restructuring process. This flexible approach to funding underscores the Luxembourg courts’ commit -
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