Challenging a Luxembourg bankruptcy decision

In Luxembourg, the legal representatives of a company can either file for bankruptcy (aveu de faillite), or a creditor can file for bankruptcy against a company by serving a bankruptcy claim (assignation en faillite).

  1. Legal conditions for bankruptcy

In both cases, the conditions for bankruptcy are met if (article 437 of the Luxembourg Code of Commerce):

  1. The company has ceased payments (cessation des paiements) and
  2. The company is unable to raise further credits/loans (ébranlement du credit)

A creditor may file for bankruptcy of against a debtor once i) he has obtained a title (usually a Court decision that can be enforced) that proves that he has a liquid and certain claim against the debtor and ii) he has proven that the debtor is unable to settle the claim.

If the Court comes to the conclusion that the conditions for the bankruptcy are met, a bankruptcy trustee (curateur) will be appointed, as well as a judge in charge of the supervision of the bankruptcy (juge-commissaire).

 

  1. Time limit to dispute the bankruptcy decision

The time limit to challenge the bankruptcy decision, will depend on whether the bankruptcy decision was contradictory or not. The judgment will be deemed to be contradictory if the bankruptcy claim was rightfully served to the company and/or the company was duly represented at the Court hearing deciding upon the bankruptcy.

If the procedure was not contradictory, the Court will render a judgment by default (jugement par défaut). In this case, the time limit to dispute the bankruptcy decision (by an « opposition« ) will start as of the day the bankruptcy trustee has published the bankruptcy decision in local newspapers. The time limit is eight days if the legal representative disputes the decision and fifteen days for “ any other interested third party”. According the Luxembourg Case Law, the shareholders of a company qualify as “interested third parties” (Lux Court 18 February 1970, Pas 21, p.393).

If the procedure was contradictory, the dispute in the form of an « opposition » will not apply: only an appeal can be filed in front of the Court of Appeal. The time limit to file an appeal will be fifteen days as of the day the decision has been served by bailiff.

  1. The procedure for disputing the bankruptcy decision

In order for the company to effectively challenge the bankruptcy decision (either in front of the first instance Court if the dispute is done via an opposition, or in front of the Court of Appeal, if the dispute is done via an appeal), it will need to prove that the aforementioned conditions for the bankruptcy were not met.

In practice, the company will need to prove that, at the time the case is pleaded, the company has sufficient funds to settle all debts officially declared within the bankruptcy, including the costs and fees of the bankruptcy trustee.

One of the more important challenges of such a procedure is that the company itself is not automatically informed of all claims officially filed within the bankruptcy. Such information is provided by the bankruptcy trustee to the company throughout the dispute procedure.

If the conditions are met, the Court will render a judgment deciding that the bankruptcy shall be considered as null and void and shall cease with immediate effect.