Administrative dissolution without liquidation

On 18 October 2022, a new law introducing the administrative proceedings allowing for a simplified dissolution without liquidation of qualified Luxembourg companies upon request of the Public Prosecutor (Procureur d’Etat) was adopted by the Luxembourg Parliament. The law will enter into force on 1 February 2023. The purpose is to enable a quick dissolution of Luxembourg companies that are mere empty shells and in serious breach of certain Luxembourg laws. This new law is the first part of a more ambitious reform meant to preserve businesses and modernise bankruptcy law in Luxembourg.

On 18 October 2022, the law no. 6539B (the “Law”) introducing new administrative proceedings allowing for a simplified dissolution without liquidation of qualified Luxembourg companies upon request of the Public Prosecutor (Procureur d’Etat) (the “Dissolution Proceedings”) was adopted by the Luxembourg Parliament.

What is the scope and objective?

The Law aims at introducing new simplified dissolution proceedings that shall, in a  more expedited manner than the existing dissolution and liquidation provisions included notably in the Luxembourg companies law dated 10 August 1015, as amended (the “1915 Law”), enable a quick one-step dissolution of Luxembourg companies that are mere empty shells and in serious breach of the law.

Companies must meet the following cumulative conditions (the “Conditions”) to fall into the scope of the Law and thus run the risk of being subject to Dissolution Proceedings:

  • to pursue activities contrary to the Luxembourg criminal law or which seriously contravenes provisions of the Luxembourg Commercial Code or the laws governing commercial companies, including those laws governing authorisations to do business (i.e. falling then under the scope of article 1200-1 (1) of the 1915 Law);
  • to have no assets; and
  • to have no employees.

Certain regulated entities fall outside the scope of the Law, including in particular credit institutions, insurance and reinsurance companies, certain specialised investment funds and securitisation vehicles.

How does it work?

In order to identify the commercial companies meeting the Conditions, the Public Prosecutor (Procureur d’Etat) will be able to use the following information:

  • lists of companies in breach of the 1915 Law, as established by the RCS;
  • archives from the National Institute of statistics and economic studies of the Grand Duchy of Luxembourg. (STATEC) as regards commercial companies; and
  • documentation provided by public administrations, in line with article 16 of the law of 19 December 2008 on inter-administrative and judicial cooperation, as amended.  

Following such identification process, the Public Prosecutor (Procureur d’Etat) shall request the administrator of the Luxembourg Trade and Companies’ Register (the “RCS”) to open such Dissolution Proceedings.

In order to do so, the RCS shall, within three (3) days of such request, (i) formally notify the concerned commercial company about the Dissolution Proceedings initiated and (ii) publish such notification in the Recueil Électronique des Sociétés et Associations (RESA) and two Luxembourg newspapers.

Further to the publication, the RCS shall verify whether or not the company concerned effectively has no assets and no employees.

The RCS shall for this purpose request information as regards the company’s financial or administrative situation. Such request is addressed to official authorities (e.g. CCSS, Tax, etc.). These authorities shall reply within 1 month as from the RCS’ request. Following such verification process, the RCS shall inform the Public Prosecutor (Procureur d’Etat) about its conclusion:

  • the RCS either confirms that the Conditions to be verified by it are met and that the Dissolution Proceedings can insofar be fulfilled. Then, the decision is published in the RESA, resulting in the dissolution of such company. In this scenario, the Dissolution Proceedings shall close no later than six (6) months after the publication of the decision to open them; or
  • the RCS indicates that at least one of the Conditions to be verified by it is not met, and therefore, the Dissolution Proceedings is stopped. The decision shall be published in the RESA.

Any remedies for the company?

The company subject to the Dissolution Proceedings or any interested third party who would consider that the Conditions are not met may contest the decision to open such proceedings before the District Court (tribunal d’arrondissement) dealing with commercial matters, within one month after the publication of the opening of the Dissolution Proceedings. In that case, if the court concludes that the Conditions are indeed not met, it shall overturn the decision to open the Dissolution Proceedings. Such decision shall be published in the RESA.

Finally, in the event that any assets appear after the closure of the Dissolution Proceedings, the Public Prosecutor (Procureur d’Etat) may request the District Court (tribunal d’arrondissement) dealing with commercial matters to revoke the decision to close the Dissolution Proceedings and order the liquidation of the concerned company through standard judicial liquidation proceedings.

When will it enter into force?

The Law and consequently the Dissolution Proceedings will enter into force on 1st February 2023.

Anything else?

Stay tuned - as another law bill on the business preservation and bankruptcy law modernisation is still pending under the reference N°6539A before the Luxembourg Chamber of Deputies.

Should you need more insight, please get in touch with Alexander Koch, Benoit Serraf or Adèle Rousseau from our Luxembourg Corporate team.

 

Authored by Alexander Koch, Benoit Serraf, and Adèle Rousseau.

Hogan Lovells (Luxembourg) LLP is registered with the Luxembourg bar.

 

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