A look at corporate, personal and, where relevant, partnership insolvency proceedings in Luxembourg, with a brief description to explain key features, as part of our Dictionary of Insolvency Terms in EU Member States. In particular, we highlight who controls the procedure and whether it is likely to be accompanied by a moratorium to prevent enforcement.

Gestion contrôlée

Controlled management

  • In view of avoiding bankruptcy or immediate cessation of business, a financially distressed company or partnership (but not its creditors) may apply for controlled management in order to: (i) reorganise and restructure its debts and business; and (ii) realise its assets in the best interest of its creditors.
  • The applicant must: (i) have lost creditworthiness or be in a situation that compromises the proper fulfilment of his/her commitments, (ii) be able to demonstrate that it is possible to recover or protect the business and (iii) not have been declared bankrupt.
  • The debtor’s management is placed under the control of one or more commissioners (commissaire) appointed by the court, who is in charge of preparing a reorganisation or liquidation plan.
  • The plan must be approved by more than 50% of creditors representing more than 50% in value of the debtor’s debts, and must also be approved by the court.
  • If the plan is approved, it binds all creditors who may not enforce guarantees or security interests (with exceptions for financial collateral arrangements and similar foreign law security interests).
  • During the process, the debtor cannot sell assets, grant security or enter into contracts without the court’s permission.
  • In practice, only a few applications for controlled management have been granted and most, once opened, are converted into bankruptcy.
  • Once the procedure is completed, the debtor’s normal operations are resumed.

Concordat préventif de faillite

Compositin with creditors

  • A procedure that allows a company or partnership in financial difficulty to enter into an agreement with its creditors in order to avoid bankruptcy. Only the debtor may submit the request to the court.
  • The request is approved only if the judge assesses that the debtor is honest but unfortunate; any failure to act in good faith leads to bankruptcy.
  • The judge appoints a delegate judge (juge délégué) to draft a proposed scheme of composition that must be approved by creditors representing 75% in value of the debtor’s outstanding debt and also by the court.
  • Throughout the procedure, the debtor may not dispose of, or mortgage, any assets or enter into any commitments without the prior authorisation of the delegate judge.
  • If the plan is approved, creditors may not enforce guarantees or security interests with exceptions for financial collateral arrangements and similar foreign law security interests.
  • The procedure is rarely used in practice.

Sursis de paiement

Suspension of payments

  • A procedure for companies or partnerships that face temporary liquidity issues to apply for a suspension of payments to creditors, for a given period of time. The procedure can only be initiated by the debtor.
  • Throughout the procedure, provided that the debtor pays accruing interest, creditors secured against real estate and assets necessary to carry out the debtor’s business may not enforce their security. The court’s permission is required to dispose of, pledge or mortgage movable or immovable assets, compromise, borrow or receive any sum, make any payment or carry out any administrative act.
  • This procedure is rarely used in practice.



  • A Luxembourg company or partnership is bankrupt when:
    • it has ceased paying its debts, ie cessation of payments: the failure to pay a single debt or the simple unwillingness of the debtor to pay, may establish such cessation of payments; and
    • it is unable to obtain credit from third parties or affiliated undertakings, ie loss of creditworthiness.
  • If the court considers that these two criteria are met, it will declare the company or partnership bankrupt, open bankruptcy proceedings and appoint a bankruptcy receiver (curateur).
  • A debtor can be declared bankrupt following: (i) a declaration by the company’s directors or partners; (ii) a request by a creditor; or (iii) on the court’s own motion at the initiative of the Public Prosecutor.
  • The directors or partners are legally required, within one month of the date on which the above mentioned (cumulative) conditions for bankruptcy (cessation of payments and loss of creditworthiness) are met, to declare the same at the competent court. Failure to do so constitutes a criminal offence.
  • Once bankruptcy proceedings are opened, the company or partnership is prevented from administering its assets. All payments and transactions by the company after that date are null and void.
  • The aim of the proceedings is to wind up the entity’s assets in the best interests of the bankruptcy estate.
  • Secured creditors are not prevented from taking enforcement action during the bankruptcy proceedings.

Liquidation judiciaire

Compulsory liquidation

  • Compulsory liquidation may be requested by the public prosecutor in order to liquidate a company that: (i) engages in activities that contravene criminal law; or (ii) contravenes the provisions of the commercial code, the laws of commercial companies, or the provisions governing the business licence in Luxembourg.
  • The court assesses whether the offences are deemed sufficiently serious to justify the dissolution/liquidation, regardless of the financial situation of the company.
  • Security interests may still be enforced.
  • Compulsory liquidation may be requested by the public prosecutor in order to liquidate a company that: (i) engages in activities that contravene criminal law; or (ii) contravene the provisions of the commercial code, the laws of commercial companies, or the provisions governing the business licence in Luxembourg.
  • The court assesses whether the offences are deemed sufficiently serious to justify the dissolution/liquidation, regardless of the financial situation of the company.
  • Security interests may still be enforced.

Régime spécial de liquidation du notariat

Special liquidation regime for notaries

  • This procedure is only applicable to the liquidation of notaries.

Surendettement des particuliers

Over-indebtedness of natural persons

  • A procedure for natural persons providing for the collective settlement of their debts.
  • It applies to a debtor domiciled in Luxembourg that is manifestly not able to meet all non-professional debts that are due and payable.
  • The procedure comprises three phases:
    • A phase that takes place before the Luxembourg Commission of Mediation.
    • A phase of judicial compromise (redressement judiciaire) that takes place before the court.
    • A phase of personal recovery, so called civil bankruptcy.
  • For phases (i) and (ii) the judge drafts a financial recovery plan that may lead to: (i) suspension of payments of all or part of the debts; and (ii) reduction of interest rates.
  • The third phase can only be initiated when the over-indebted debtor is in an irremediably compromised position. The judge decides on disputed claims and pronounces the liquidation of the debtor’s estate.
  • Creditors’ rights including those of secured creditors may be suspended by the judge during the procedure.

La réalisation des sûretés régies par la loi sur les contrats de garantie financière du 5 août 2005

Enforcement of security interests governed by the Luxembourg law on financial collateral arrangements of 5 August 2005

  • Local and foreign bankruptcy rules do not prevent the granting and the enforcement of Luxembourg security interests (pledges or assignments) governed by the 2005 law.
  • Enforcement of security interests does not require any prior court order or judgment.
  • Pledge: pre-enforcement – prior to enforcing a pledge, the exercise of rights attached to the pledged assets is governed by the pledge agreement. Pledge agreements generally provide that the pledgee may exercise the rights attached to the pledged assets upon the occurrence of an enforcement event (contractually agreed by the parties).
  • Pledge: main enforcement mechanisms – if an enforcement event occurs, the pledgee may:
    • Appropriate the pledged assets at a price determined before or after the appropriation, pursuant to a valuation method agreed between the parties and set out in the pledge agreement (Appropriation). In addition, the pledgee may elect, at its sole discretion, to appoint another person to which the ownership of the pledged assets will be transferred in lieu of the pledgee.
    • Sell all or part of the pledged assets in a private transaction on arms’ length terms (conditions commerciales normales, Private Sale).
    • Sell or cause the sale of any of the pledged assets on the Luxembourg Stock Exchange or any foreign stock exchange, or by public sale.
    • Request a Luxembourg court to be assigned title to the pledged assets for discharge of all or part of the secured obligations as determined by a court-appointed expert.
    • If the pledged assets are financial instruments, appropriate such financial instruments:
      • At the stock exchange price, if such financial instruments are listed on a regulated market.
      • At the price of the last published net asset value (NAV) if the financial instruments are units or shares of an investment fund calculating and publishing a NAV on a regular basis.
  • Appropriation and Private Sale are the preferred and most commonly used enforcement methods.
  • Pledges over bank accounts and receivables are generally enforced by way of a request for payment to the bank account/debtors.

La réalisation des hypothèques

Enforcement of mortgages

  • In order to enforce a mortgage over real estate, the mortgagee must hold an enforceable title (titre exécutoire), generally delivered by the notary, and the deed of mortgage must contain a clause authorising the sale (clause de voie parée) for the mortgagee to be entitled to sell the property (by public auction).
  • If the mortgagee does not hold such a title, it must obtain a court payment order prior to enforcing the mortgage by way of an attachment (saisie immobilière).
  • With the enforceable title in hand, the mortgagee asks the notary to proceed to a public auction. The adjudication price will be the highest bid and the proceeds will be paid to the mortgagee (after payment of the notary’s fees and any privileges mandatorily arising by law). Any surplus will be returned to the mortgagor.

EU Directive Implementation

The EU Directive on Restructuring and Insolvency1 requires Member States to adopt a number of minimum common standards into their national restructuring and insolvency laws by 17 July 2021, with an option to extend that deadline by one year. The objective of the Directive is to reduce barriers to the free movement of capital and freedom of establishment, which result from differences between national laws and procedures concerning preventive restructuring, insolvency, discharge of debt, and disqualifications. In particular, the Directive aims to ensure access to effective national preventive restructuring frameworks, a second chance for honest insolvent or over-indebted entrepreneurs and an improvement of the effectiveness and shortening the length of restructuring and insolvency procedures. Notable features required to be included in Member States’ national laws include:

  • An effective preventive restructuring framework to enable debtors experiencing financial difficulties to restructure at an early stage, with a view to preventing insolvency and ensuring their viability.
  • A stay of up to four months extendable to up to 12 months to support negotiations of a restructuring proposal, which should prevent individual enforcement action and include rules preventing the withholding of performance, termination, acceleration or modification of essential contracts.
  • An ability to cram down dissenting classes of creditors.
  • Adequate protection for financing needed to allow the business to survive or to preserve the value of the business pending a restructuring, and for new financing necessary to implement a restructuring plan.
  • Provision for honest, insolvent entrepreneurs to have access to a procedure that can lead to a full discharge of their debts (subject to limited exceptions) within three years.

Implementation in Luxembourg

  • The EU Directive has not yet been implemented in Luxembourg.
  • A draft act no. 6539 introducing a reform of the Luxembourg insolvency law was presented to the Luxembourg Parliament on 1 February 2013 and aimed at substantially modifying and modernising Luxembourg insolvency procedures. The draft act has been under discussion for many years, and it is likely that such reform will take place in the context of the implementation of this EU Directive. However, it is not clear when such reform will be introduced, as there have been no further developments in respect of the draft act since January 2020.

Implementation date

The implementation date is currently unknown.

Recognition of foreign insolvency processes

EU Regulation on Insolvency Proceedings

The EU Regulation on Insolvency Proceedings2 applies to all EU Member States except Denmark and requires that certain collective insolvency proceedings, which are listed in Annex A to the Regulation, occurring in one EU Member State are automatically recognised in all other EU Member States and that each EU Member State automatically recognises the powers and authority of an insolvency practitioner appointed in another EU Member State.

However, the Regulation provides that a Member State may refuse to recognise insolvency proceedings opened in another Member State or to enforce a judgment handed down in the context of such proceedings where the effects of such recognition or enforcement would be manifestly contrary to the State’s public policy, in particular to its fundamental principles or constitutional rights and liberties of the individual.

Recognition of third country insolvency processes

Luxembourg private international law adheres to the principle of unity and universality of bankruptcy pursuant to which there can only be one court which should have jurisdiction over the bankruptcy procedure for a given debtor and the opening of a proceeding against a debtor excludes the opening of another proceeding against the same debtor in another jurisdiction. The existence and recognition of a foreign bankruptcy proceeding would therefore preclude the opening of another proceeding against the same debtor in Luxembourg.

  • Measures adopted during foreign insolvency proceedings (which claim an exterritorial effect) would be recognised in principle in Luxembourg save if they are contrary to the Luxembourg international public order rules. Luxembourg law recognises that the foreign law applicable to insolvency proceedings (lex concursus) also governs related aspects such as the capacity and assets of the debtor, suspension of payments and stay of enforcement, determination of the debtor’s debts and the filing of claims against the bankruptcy estate, enforceability of security interests during bankruptcy and legal consequences of the end of bankruptcy proceedings. Contrary to the approach of the EU Regulation on Insolvency Proceedings, Luxembourg law does not automatically reject the application of foreign bankruptcy laws to assets located in Luxembourg. While some foreign process measures are recognized without any local formality, any enforcement measures in Luxembourg require an exequatur.

The international public order exception to the recognition of foreign bankruptcy proceedings applies to aspects such as mandatory jurisdiction of Luxembourg courts (eg for bankruptcy proceedings against debtors which have their main establishment in Luxembourg) and does not allow, among other things, the recognition of foreign measures providing for the extinction of any rights of creditors which did not file their claim within the legally prescribed periods or the prohibition or the loss of any right of individual pursuit by creditors against the bankruptcy estate at the end of the bankruptcy proceedings.

Insolvency changes in response to COVID-19

For more information on changes to insolvency laws in Luxembourg as a result of the COVID-19 pandemic, please see our Guide to changes in insolvency laws in response to COVID-19.

Law stated as at 28 May 2021.

Contact: Catherine Pogorzelski

1Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt, and amending Directive (EU) 2017/1132.
2Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast).