LUXEMBOURG Trends and Developments Contributed by: Ana Nicoleta Andreiana, Madeleine Dos Santos Marques, Patrick Ries and Sofia Polykandrioti, Loyens & Loeff
Assistance by the Article 9 Company Conciliator or the Article 22 Insolvency Practitioner The Law of 7 August 2023 allows the debtor to request the Minister for the Economy or the Minister for Small and Medium-sized Businesses, depending on their respective areas of competence, to appoint a company conciliator to facilitate the reorganisation its assets or activities, or a part of them, without any formal requirements being applicable. The mandate of the company conciliator can also be terminated or continued upon the commencement of judicial reorganisation proceedings. Under Article 22, the debtor or any interested party may further request the appointment of an insolvency practitioner to assist the debtor in such proceedings. Both options remain available to Luxembourg com - panies that form part of international groups; how - ever, they are not expected to play a significant role in cross-border restructurings. However, at least in theory and on a case-by-case basis, a skilled and neutral intermediary between the debtor and its various stakeholders may be capable of facilitating consensual transactions, which in most sit - uations would prove more cost-effective. This would apply in circumstances where a neutral professional is considered capable of addressing specific strategic needs. However, such role could also be assumed on an ad hoc basis without a formal court appointment necessarily offering any additional benefits. The Article 10 Court-Appointed Agent and Guidance by Case Law There are two key requirements for the application of Article 10 under the Law of 7 August 2023: • the existence of serious and aggravated miscon - duct to such an extent that business continuity is at risk; and • the likelihood that the appointment of a court- appointed agent would help preserve that continu - ity. In the decision by the Luxembourg District Court in the decision of 7 June 2024 (2024TALCH02/00950), the court reiterated that the principles of proportionality
and minimal interference, meaning the benefits must outweigh any harm to the company and the interven - tion should go no further than necessary, are applica - ble. Additionally, the mandate of a court-appointed agent must be sufficiently broad to enable them to effectively fulfil their role, including, when necessary, replacing the company’s management to ensure busi - ness continuity. This decision represents an important clarification of how Article 10 of the Law of 7 August 2023 should be applied. While adherence to the principles of pro - portionality and minimal interference remains essen - tial, the Luxembourg District Court recognised that interested third parties, including creditors, may now seek the appointment of an independent agent under Article 10 to effectively replace the company’s man - agement when necessary to preserve business con - tinuity outside the context of judicial reorganisation proceedings. The Article 23 Provisional Administrator and Guidance by Case Law Similarly to the designation of an Article 10 court- appointed agent, the appointment of a provisional administrator is an exceptional measure which must meet strict criteria – ie, serious and aggravated faults/ misconduct by the debtor or one of its bodies. The request must be sufficiently reasoned to justify this measure. The principles of limited interference and proportionality must also be adhered to. In several cases, including the ones listed below, Lux - embourg courts have decided to replace the manage - ment of the debtor with a provisional administrator after making a cumulative assessment of facts that could qualify as serious and aggravated faults: • non-publication of the annual accounts of the com - pany within the applicable deadlines; • a shareholder indebted towards the company and receiving a dividend; • activities carried out without the required business licences; • failing to keep complete accounting records; and • the existence of public creditors (such as the Lux - embourg tax administration) – which, interestingly,
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