As businesses start to re-emerge, the pressure of the last few months and unknown months ahead will force some to consider the worst case scenario.
Graham Wilson and Louise Benjamin are two lawyers with a long history of living and working in Luxembourg. Speaking to Lisa Burke, they explain how bankruptcy works in Luxembourg.
Bankruptcy is a highly stressful and last resort option, but cannot be ignored at a time like this. Already in the US we've seen large names like J Crew and Neiman Marcus file for Chapter 11.
For some comparative figures in Luxembourg, Statec shows that in 2017, out of 3521 company formations and 2863 closures, 904 were bankruptcies. In effect, 80% of formations folded, and 25% were bankruptcies. And so, with the unexpected arrival of COVID-19, despite government support in the form of hand-outs and loans (still to be paid off at some point), bankruptcies are likely to increase.
In Luxembourg, there are three types of bankruptcy:
- of a company (faillite)
- of a trader
- of an individual
In this conversation we cover backruptcy of a company. By knowing as much as possible in advance, a company could opt for voluntary liquidation rather than bankruptcy, which would be a much stronger position. We also discuss the responsibility of a director and their liability in this situation.
Over the coming weeks we will discuss bankruptcy of a sole trader and of an individual.
Caveat - this is not legal advice. It is information and comment.
Graham Wilson, Wilson Associates
Graham was born in England and has lived in Luxembourg for more than 25 years, and has taken Luxembourg nationality. Graham is both an English Barrister and a Luxembourg Avocat. When not being a lawyer, he likes old cars and cats.
Louise Benjamin, Benjamin Law Firm
Louise Benjamin was raised in Guernsey, Channel Islands, and has lived in Luxembourg for 18 years. Married to a Luxembourger, she has three boys at local school. Louise is a Luxembourg Avocat à la Cour and an English solicitor. Louise doesn’t have any spare time but she enjoys helping out the business school for the slums LP4Y .