COVID-19 | Impact on Insolvency Proceedings in Luxembourg
Background
In response to the Covid-19 crisis, the Luxembourg Government declared the state of emergency by its regulation of March 18th, 2020, and passed several measures in the fight against Covid-19. These measures are limited to what is indispensable and strictly necessary and are adequate and proportionate to the aim pursued and in conformity with the Constitution and international treaties.
The state of crisis was extended by the law of March 24th, 2020.
Regulation suspending time-limits in jurisdictional matters
On March 25th 2020 the Government adopted a Regulation suspending time-limits in jurisdictional matters and temporarily adapting certain other procedural arrangements (hereinafter the “Regulation”).
Article 6 of the Regulation, as amended by the Regulation of April 2nd 2020, extended the suspension of the deadline related to the obligations pursuant to Article 440 of the Commercial Code (obligation to file for bankruptcy within one month of becoming aware of the state of insolvency).
What about the bankruptcy applications by creditors by writ of summons during the state of emergency?
According to current regulations, bankruptcy applications by summons are still admissible, even during the state of emergency.
In the light of this lack of regulation, a bill to fill this void is presented to the Chamber of Deputies, aiming to protect entrepreneurs in economic difficulties due to the ongoing health crisis.
Bill of the Chamber of Deputies of April 6th 2020
A bill has therefore been submitted to the Chamber of Deputies for the suspension for bankruptcy by summons during the state of emergency and the two months after its end. The members of the Chamber of Deputies underlined that this proposal is tied to the current health emergency to prevent it from turning into an economic and financial crisis afterwards. Therefore, it is pointed out that the grounds of inadmissibility should only benefit companies in financial difficulties due to the pandemic COVID-19.
The Chamber of Deputies underlines, ex officio petitions by the public prosecutor’s office and requests for the judicial winding-up of commercial companies which pursue activities against the law, or which commit serious violations of the law (i.e. commercial code and Company law), including the right of establishment, should remain free to be initiated.
The first considerations of the Chamber of Deputies are in favour of the inadmissibility of bankruptcy petitions by summons against companies in a sound financial situation before the current state of emergency, and lodged during the state of emergency. Such measure would remain in force during the state of emergency and two months after the end of it.
Similarly, the current proposal provides for the suspension of the obligation to self-declare the insolvency for a merchant or commercial company during the same period.
We will closely monitor developments regarding the Chamber of Deputies’ vote on this bill to report on the enforcement of these measures and under which conditions.