LUXEMBOURG Law and Practice Contributed by: Laure-Hélène Gaicio Fievez, Fabio Trevisan and Carolina Vasselli, BSP
• Unsecured creditors, meanwhile, typically rank lower in priority and are paid from the remaining assets after secured creditors are satisfied. How - ever, they may have influence through collective agreements or voting on restructuring plans. The Law of 7 August 2023 also permits unsecured creditors to object to or negotiate terms, though these rights do not usually allow them to unilater - ally block the process. Regarding claims trading, it is generally assumed ‒ given that this has not yet been contested due to the recent nature of restructuring proceedings in Lux - embourg ‒ that the general provisions of the Luxem - bourg Civil Code allow for the transfer of claims during restructuring. However, such transfers may need to be properly documented and notified to the debtor to ensure their enforceability. Specific disclosures or approvals for claim transfers will also depend on the circumstances and any contractual or court-imposed restrictions. 5. Statutory Insolvency and Liquidation Procedures 5.1 The Different Types of Liquidation Procedure Liquidation can broadly be divided into voluntary liq - uidation and compulsory liquidation, with each type subject to specific initiation criteria, requirements for initiating parties and category of entities involved. In both voluntary and compulsory liquidation, a liqui - dator must be appointed to manage the assets and liabilities of the company. This actor takes on signifi - cant responsibilities, such as collecting debts, realis - ing assets and ensuring fair distribution to creditors or partners. In voluntary liquidation, the liquidator is chosen by the shareholders or partners, while in com - pulsory liquidation, the court generally appoints the liquidator. Voluntary Liquidation Voluntary liquidation applies exclusively to corporate entities. Unlike compulsory liquidation, it is not an insolvency procedure and, thus, individuals and sole traders do not fall within its scope. There is no for - mal obligation to initiate voluntary liquidation unless
specified in the company’s articles or the company’s continued existence is untenable under financial dis - tress. However, if the company can no longer pay its debts, shareholders or directors may instead consider compulsory liquidation, usually initiated through insol - vency proceedings. It typically applies when a company’s shareholders or partners decide to dissolve the entity, often due to the cessation of its business activities or because it has fulfilled its purpose. Dissolution requires formal shareholder or partner approval, generally through a resolution passed at an extraordinary general meet - ing. For public limited companies ( sociétés anonymes , SAs) and partnerships limited by shares ( sociétés en commandite par actions , SCAs), the meeting must be held with a quorum representing at least half of the company’s capital for the initial meeting, though a second meeting can be convened with no quorum requirement. A two-thirds majority vote of present or represented capital is necessary for approval. In lim - ited liability companies ( sociétés à responsabilité limi- tée , SARLs), general partnerships ( sociétés en nom collectif , SENCs) and limited partnerships ( sociétés en commandite simple , SECSs), a three-quarters major - ity from partners representing half of the share capital is required. Compulsory Liquidation Contrarily, this kind of liquidation is a court-ordered process typically initiated when a company: • is insolvent; While voluntary liquidation focuses on dissolving an entity that may still be solvent or has no major finan - cial distress, compulsory liquidation primarily seeks to manage the orderly dissolution of insolvent enti - ties, with greater court involvement to protect creditor interests and address unpaid liabilities systematically. This procedure ensures creditors’ rights are prioritised through judicial oversight and may result from a credi - tor’s petition or a debtor’s own declaration of bank - ruptcy. • is unable to meet its debts; or • has lost its creditworthiness.
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