Being a sole trader in this climate of minimised work could lead, for some, to bankruptcy. Being forearmed with knowledge of the process could mitigate some emotional pain. In this interview, we also discuss what is meant by 'Force Majeure' in Luxembourg - can you question some of your contracts?

In our previous interview with lawyers Louise Benjamin and Graham Wilson we discussed bankruptcy of a company. The process for a sole trader is similar, but loaded with the added burden of individual assets being potentially tied up; and this gets even more complicated if one is married or in a partnership. Some of us will be more accustomed to English 'Common Law' compared to the Napoleonic Code. For awareness of personal assets, the Napoleonic law mindset seems to work best. Trying to keep personal and trading assets as separate as possible is key.

At what point do I contemplate bankruptcy?

Effectively, perhaps obviously, there are two questions:

  1. Can you meet your debts as and when they fall due?
  2. Can you still raise credit?

Notably, this situation is more blurred currently as the government alters what help is available to people via aid or loans (to be paid back - will this be possible?).

Should I set up as a Sole Trader or as a Company?

It's not easy being a sole trader in Luxembourg. So much so, that the Luxembourg Chamber of Commerce noted, in December 2019, the cost of working and of tax must be at the centre of the next economic political discussions. And through this conversation we question whether, at the onset of creating a business, one should set up as a company or as a sole trader in the first place. The answer is not clear.

Will COVID-19 be considered as Force Majeure?

In the UK, one needs to write 'force majeure' in a contract, otherwise it does not apply. Here in Luxembourg, it is not necessary to write it, and so, maybe you could get out of a contract if Covid-19 is considered as force majeure.

Graham provides interesting examples in French law, as there are not so many examples in Luxembourg law. Ebola was considered as force majeure; the mosquito-spread disease of chikungunya is not considered as force majeure.

Finding Support

For personal 'overindebtedness' (an individual cannot go 'bankrupt' in Luxembourg), which we will cover next time, one can seek emotional and practical support from SICS (Service d’Information et de Conseil en matière de Surendettement).

A sole trader / commercant cannot go there initially, but can do so once his/her sole trader bankruptcy is closed or 6 months after the end of his/her sole trader business.

Caveat - this is not legal advice. 

Graham Wilson, Wilson Associates

Graham was born in England and has lived in Luxembourg for more than 25 years, taking Luxembourg nationality. Graham is a barrister in English & Welsh law, and a Luxembourg Avocat à la Cour. He has a penchant for old cars, cats and trees. 

Louise Benjamin, Benjamin Law Firm 

Louise is a Luxembourg Avocat and a solicitor in English & Welsh law. She is also Vice-President of the British Luxembourg Society, and is actively working to raise €10,000 for the business school for the slums LP4YLouise Benjamin was raised in Guernsey, Channel Islands, and has lived in Luxembourg for 18 years, during which time she married a Luxembourger. They have three young sons.