The bankruptcy process in Luxembourg
commences when a company is not able to pay its debts anymore. As the company can no longer make any payments it also loses its creditworthiness. Bankruptcy
is the most common cause for the initiation of insolvency in Luxembourg
Declaration of bankruptcy
The bankruptcy process starts with a declaration of bankruptcy. After this declaration is pronounced, the company or trader loses its control over the assets (movable and immovable property) and the right to take legal action. Any payments or transactions made by the company after this point will be considered null and void.
Bankruptcy proceedings are judged in the district court belonging to the territory where the company is located. The commercial court will declare that the company is bankrupt and set the dates for creditor claims and the cessation of payments. A trustee is appointed to manage the assets of the company and meeting the debtor's claims.
Laws governing bankruptcy and insolvency in Luxembourg
The laws governing insolvency and bankruptcy in Luxembourg
are contained in the Commercial Code. The EU Insolvency Regulation is also applicable, especially in cross-border insolvency proceedings
, for example in the case of branches in Luxembourg
The bankrupt party can be held liable for its actions if the bankruptcy came as a direct result of unlawful actions committed by a natural person representing the company. An individual can be held criminally liable in case of bankruptcy if he fails to file a declaration of cessation of payments or fails to respond to the summons declaring bankruptcy. Individuals can also be accused of fraud in bankruptcy cases if they intentionally hide some of the assets belonging to the company, conceal or alter the company's accounts.
A company's bankruptcy can also be extended to its manager as personal bankruptcy
. Depending on the type of company
they open in Luxembourg, shareholders must pay attention to their liability in the event of liquidation.