LUXEMBOURG Law and Practice Contributed by: Claire-Marie Darnand, Victorien Hémery, Johan Léonard and Benjamin Marthoz, Stibbe
3.9 Effects of a Borrower Becoming Insolvent A specific regime applies for insolvency proceed - ings. Debtors who qualify for bankruptcy must submit their filings to Luxembourg courts within one month. The assets subject to the financial collateral arrangement(s) shall not be considered part of the assets subject to insolvency proceed - ings (estate), enabling the beneficiary to enforce the relevant security regardless of the opening of insolvency proceedings and regardless of other estate creditors. Moreover, any actions taken during the “suspect period” cannot be contested by the court-appointed receiver. Mortgages over real estate property remain in full force and effect even in the case of an insol - vency proceeding. 3.10 Taxes on Loans Under existing rules, the registration of a mort - gage loan or a mezzanine loan related to real estate triggers a registration tax of 0.29%, cor - responding to a 0.24% registration duty and a 0.05% inscription fee, with both rates being applied to the total secured debt (usually borne by the purchaser). 4. Planning and Zoning 4.1 Legislative and Governmental Controls Applicable to Strategic Planning and Zoning See 2.8 Permitted Uses of Real Estate Under Zoning or Planning Law . 4.2 Legislative and Governmental Controls Applicable to Design, Appearance and Method of Construction The construction of new buildings or the refur - bishment of existing buildings is subject to the
be applied to the enforcement of Luxembourg security agreements. If that is not the case, the creditor informs the debtor of the occurrence of an event of default and the enforcement of its security (all or only some of them). Usually, the enforcement is realised over the shares of the company owning the real estate. The creditor usually creates a specific purpose vehicle, which will appropriate the shares. Unless there are creditors benefiting from privi - leged rights, no other creditors may take prec - edence over the rights of secured creditors. 3.7 Subordinating Existing Debt to Newly Created Debt Contractual subordination is allowed under Lux - embourg law. The existing creditor may agree to subordinate the existing secured debt contrac - tually to newly created debt by entering into an intercreditor agreement or subordination agree - ment. This will determine the rights of each class of creditors (senior, mezzanine, junior), particu - larly with respect to their rank and subordination, the payment arrangements and the enforcement of security interests. In theory, contractual subordination survives an insolvency situation of a Luxembourg borrower. 3.8 Lenders’ Liability Under Environmental Laws A lender holding or enforcing security over a real estate property or shares should not be liable for environmental damage if it did not cause the damage to the environment itself, nor otherwise controlled the activities of the operator of the real estate property at the origin of any environ - mental damage.
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