LUXEMBOURG Law and Practice Contributed by: Laure-Hélène Gaicio Fievez, Fabio Trevisan and Carolina Vasselli, BSP
ments ), which marks the point when the debtor is deemed insolvent. The cessation date is critical, as it retroactively sets the anchor for identifying actions that fall within the suspect period. Acts Automatically Deemed Null and Void Certain actions performed by the debtor during the suspect period are automatically null and void with - out requiring further proof of intent. These include the following. • Disposal of assets – transactions involving movable or immovable assets where the debtor: (a) transfers such assets without receiving any consideration (eg, gifts or free transfers); or (b) disposes of assets for a consideration that is significantly lower than their fair market value, thereby diminishing the estate available to creditors. • Premature payments of non-due debts – any payments made towards debts that were not yet due, regardless of the payment method (eg, cash, assignment of rights, sale, offsetting debts through reciprocal obligations). • Non-cash payments for due debts – payments made for debts that were already due but settled using methods other than cash or commercial paper (eg, by barter or asset transfers). • Granting of mortgages or other security interests – the creation of mortgages, pledges or other rights in rem to secure debts that were contracted before the cessation of payments. These provisions are intended to prevent actions that unfairly prioritise certain creditors or deplete the debt - or’s estate to the detriment of the collective body of creditors. Acts Not Automatically Null and Void Other actions during the suspect period are not auto - matically invalid but may be declared null and void by the court under specific circumstances, as set out below. • Payments to creditors with knowledge of insol- vency – payments made by the debtor for validly due debts or other transactions during the suspect period may be invalidated if the recipients or other
counterparties knew or should have known that the debtor had ceased payments and was insolvent. • Registration of rights of lien – rights of lien or other security interests that were validly acquired and registered before the declaration of bankruptcy are generally protected. However, any liens registered after the bankruptcy declaration may be subject to invalidation, particularly if they prejudice creditors’ rights or violate the principle of equal treatment. Legal and Practical Implications The rules governing the suspect period serve several essential purposes: • protection of creditors – preventing unfair treat - ment by ensuring that no creditor gains undue advantage during the insolvency process; • preservation of the estate – safeguarding the debt - or’s assets to maximise recovery for the collective pool of creditors; and • deterrence of fraudulent behaviour – discouraging debtors from engaging in suspicious transactions that could harm creditors before a bankruptcy filing. The suspect period and related provisions are fun - damental to maintaining the fairness and integrity of bankruptcy proceedings in Luxembourg. By invalidat - ing prejudicial acts, the Law of 7 August 2023 seeks to ensure that creditors’ claims are handled equitably Claims to annul transactions that violate insolvency principles can be initiated by the appointed insolvency administrator or trustee, who acts on behalf of the creditors. While individual creditors may have limited rights to bring such actions directly, the administra - tor can file claims to reverse preferential or fraudulent transactions within the designated look-back period. If the claim to annul a transaction succeeds, the prop - erty or its cash equivalent is typically returned to the insolvency estate, benefiting all creditors rather than any individual. This mechanism allows the administra - tor to recover assets for equitable distribution among creditors, reinforcing the integrity of the insolvency process. and in accordance with legal priorities. 8.2 Claims to Set Aside or Annul a Transaction or a Transfer
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