Suspension of insolvency filing obligations

Luxembourg Director’s Duties – Suspension of insolvency filing obligations – COVID-19

News

01-04-2020

In ordinary business circumstances, the directors/managers of a Luxembourg company have a duty to file for bankruptcy within one month of the meeting of the two criteria for bankruptcy (under threat of criminal sanction) – this is the so called “Insolvency Filing Obligation”. The two parts of the test for bankruptcy are: (i) cessation of payments (or so called missed creditor payment) and (ii) loss of creditworthiness.

In light of the Covid-19 crisis, the Luxembourg government has issued a Grand Ducal Regulation of 25 March 2020¹ (the “Regulation”), which suspends certain procedural deadlines applicable in civil and commercial matters during the state of crisis, which has been extended by law for a period of three months (the “Crisis Period”)².

This suspension applies to the one month period for the Insolvency Filing Obligation.

Although the directors duty to file is suspended for the Crisis Period it should be noted that the Regulation does not restrict creditors’ rights to petition for insolvency. In addition, despite the suspension, directors/managers of a Luxembourg entity may nevertheless decide to file for insolvency (aveu de faillite), depending on the particular position of the company.

For further information, please contact our Luxembourg Restructuring Team members: Michael Scott, Madeleine Marques and Diogo Morgado Filipe.

^{1 Règlement grand-ducal du 25 mars 2020 portant suspension des délais en matière juridictionnelle et adaptation temporaire de certaines autres modalités procédurales.}

^{2 Loi du 24 mars 2020 portant prorogation de l’état de crise déclaré par le règlement grand-ducal du 18 mars 2020 portant introduction d’une série de mesures dans le cadre de la lutte contre le Covid-19.}