LUXEMBOURG Law and Practice Contributed by: Laure-Hélène Gaicio Fievez, Fabio Trevisan and Carolina Vasselli, BSP
Gross negligence and shortfall of assets If a manager is found guilty of gross negligence lead - ing to bankruptcy and the company’s assets are insuf - ficient to cover creditors’ claims, the court may hold the manager personally liable for the outstanding debts of the company. Personal misuse of the company When managers use the company for personal inter - ests at the expense of its financial health, including treating the company’s assets as if they were their own and continuing a loss-making activity for per - sonal gain, knowing it would inevitably lead to bank - ruptcy, the court may declare the managers personally bankrupt, making them liable for the company’s debts and disqualifying them from future business roles. 7.2 Personal Liability of Directors As explained at 7.1 Duties of Directors , directors can be personally liable if they fail in their duties, either individually or collectively, depending on the situation. The liability grounds include: • neglecting the mandate; • misconduct in management; and • any fault or negligence causing damage to the company or its stakeholders. Liability can extend to individual creditors, not just the company, especially in cases like selective payments that unfairly favour certain creditors over others. Lux - embourg law requires directors to file for bankruptcy within one month of the company’s cessation of pay - ments; failure to do so incurs liability. Creditors may bring claims directly against directors if their actions caused personal losses to those creditors. 7.3 Duties and Personal Liability of Officers Officers, including supervisory board members, also bear responsibilities for oversight, particularly in financially distressed scenarios. They must monitor the company’s financial state actively and ensure that board discussions cover potential risks and restruc - turing options. They should also ensure their actions align with the company’s best interest to avoid liability. Supervi -
sory board members or other officers can be liable for failure to execute their supervisory duties or for negligence in oversight, particularly if their inaction contributes to financial losses. 7.4 Other Consequences for Directors and Officers Directors and officers may face additional risks, such as civil disqualification from holding future director - ships, particularly if they breach their fiduciary duties or fail in their statutory obligations. Criminal liability may also arise if misconduct is found, especially in cases involving fraud or gross negligence. In certain cases, shareholders or lenders who interfere with management decisions can be deemed “de facto directors” and face liability if their actions result in harm to the company or its creditors. 8. Setting Aside or Annulling a Transaction 8.1 Circumstances for Setting Aside a Transaction or Transfer In Luxembourg, the suspect period (referred to as the période suspecte ) is a legally defined timeframe preceding a declaration of bankruptcy during which certain acts performed by the debtor that could harm creditors’ rights are subject to scrutiny. Typically, this period extends up to six months prior to the bank - ruptcy declaration. Extension of the Suspect Period for Fraudulent Intent The suspect period can be retroactively extended if there is evidence of fraudulent intent ( fraude ) by the debtor. Such an extension may be applied, for instance, in cases where the debtor deliberately acted to prejudice creditors, including: • hiding or transferring assets to place them beyond creditors’ reach; and • making preferential payments to certain creditors to favour them over others. The exact start date of the suspect period is not fixed but is determined by the court. This is based on the debtor’s cessation of payments ( cessation des paie-
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