LUXEMBOURG Law and Practice Contributed by: Vassiliyan Zanev and Natalja Taillefer, Loyens & Loeff Luxembourg S.à r.l.
an SPE’s obligation to reassign the securitised claims back to the transferor included in the securitisation documents may not give basis for the requalification of the assignment and the risk that the assignment would be considered as a secured loan is thus limited as a matter of Lux - embourg law. Similarly, foreign law would usually also apply with regard to the grounds for the claw-back of the assets transferred to the SPE, as the origina - tors and sellers in a securitisation transaction are normally located outside Luxembourg. Where Luxembourg law does apply, certain transac - tions entered into, or payments made, during the pre-bankruptcy hardening period (which is of a maximum of six months and ten days preceding the bankruptcy judgment, except in the case of fraud, where no time limit is applied) could be clawed back. For example: • any transfer of assets made without consid - eration or for an inadequate consideration; • any payment of debt that has not fallen due, as well as any payment of due debt if made by any means other than in cash or by bill of exchange; and • any other payment of due debt or any other act made by the insolvent company after it has ceased payments to its creditors (such cessation of payments being one of the bankruptcy criteria in Luxembourg), if the counterparty was aware of such cessation of payment. The Securitisation Law excludes the claw-back risk in relation to security interests granted by the SPE no later than the time of issuance of the financial instruments or the conclusion of the agreements secured by such security interests, notwithstanding the security interests being extended to new assets or claims. The financial
collateral arrangements falling with the scope of the Collateral Law are also exempted from the claw-back in Luxembourg. The Securitisation Law seeks to mitigate the risk of bankruptcy by recognising standard non-peti - tion, limited recourse and subordination provi - sions included in the documentation governing the securitisation transaction (please see 6.5 Bankruptcy-Remote SPE ) that are meant to exclude the occurrence of the bankruptcy pro - ceedings in the first place. On 1 November 2023, the new Reorganisation Law entered into force. It provides for a new legal framework allowing a Luxembourg debtor claiming that the continuity of its business is threatened (whether in the short or long run) to benefit from a set of tools and procedures that would enable it to preserve its business and avoid bankruptcy, including in-court and out-of- court reorganisation, and court-sanctioned stay of enforcement proceedings. The Reorganisa - tion Law is applicable to securitisation compa - nies and partnerships but not to the securitisa - tion undertakings governed by the Securitisation Law that issue financial instruments to the pub - lic on a continuous basis. The Reorganisation Law is not applicable to the financial collateral arrangements under the Collateral Law and such arrangements, in principle, remain enforceable in accordance with their terms. 6.2 SPEs Securitisation transactions in Luxembourg are usually structured to avoid a potential bankrupt - cy of the SPE. For this purpose, securitisation undertakings are normally set up under – and need to comply with – the Securitisation Law to be able to benefit from its protection.
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