Reorganisation by amicable agreement
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Summary:
Avoiding bankruptcy by negotiating an amicable agreement with your creditors with a view to reorganising your business.
The main purpose of reorganisation by amicable agreement is to attempt to rescue viable businesses facing temporary financial hardship. To do so, it provides businesses with the option of negotiating an agreement with their creditors to avoid liquidation or bankruptcy. However, the agreement must be endorsed by a judge.
More specifically, the objectives sought through reorganisation by amicable agreement are to enable the business to:
- continue operating;
- safeguard its employees' jobs; and
- preserve the business's commercial relations.
Who is concerned
This procedure is available to:
- traders;
- commercial companies;
- craftspeople; and
- civil companies.
A trader is any natural or legal person who:
- engages in commercial operations; and
- does so in a professional capacity.
Prerequisites
The business must be viable, i.e., it must show potential for recovery.
The business must be facing financial hardship that prevents it from honouring its debts as and when they fall due.
However, the financial hardship must be considered to be:
- temporary; and
- surmountable through an agreement with the business's creditors.
Costs
Reorganisation by amicable agreement entails a cost for the business, if the business requests the appointment of a company conciliator. In that case, the conciliator's fees are borne by the business.
However, engaging the services of a conciliator is optional.
How to proceed
Business's initiative
It is up to you, as the business facing financial hardship, to reach out to your creditors – of which there must be at least 2 – to propose reaching an amicable agreement for the purpose of reorganising all or some of your assets or operations.
The aim is to enable you to avoid bankruptcy by reorganising your assets or operations with your creditors' consent.
This process is voluntary and undertaken on the debtor's initiative.
Optional appointment of a conciliator
You can request the appointment of a company conciliator to facilitate the negotiations between you and your creditors with the aim of reaching an amicable agreement.
The conciliator's mission may be extended after an agreement has been reached so that they can assist with the implementation of the agreement and ensure that all the parties concerned honour their commitments.
Flexibility on the terms and conditions of the agreement
The amicable agreement may contain various measures, such as:
- debt deferments;
- debt reductions; or
- the renegotiation of contracts.
Owing to the degree of flexibility in establishing the terms and conditions of the agreement, solutions can be tailored to the business's specific needs, but always with the aim of avoiding bankruptcy.
Endorsement of the agreement
If the parties reach an agreement, you can bring the matter before the court – the district court (tribunal d’arrondissement) with jurisdiction to hear commercial matters – to have the amicable agreement endorsed.
This procedure ensures that the terms and conditions of the amicable agreement are honoured by all the parties.
Once it is endorsed by the court, the agreement becomes legally binding upon all the parties.
Confidential procedure
The amicable agreement is a confidential agreement, which means that you can discuss the matter freely with your creditors without compromising your reputation.
Since the agreement is confidential, you can engage in open and constructive negotiations with your creditors, with the knowledge that they will not come to the attention of third parties, such as your competitors or customers.
The endorsed agreement will neither be published nor communicated to third parties.
Protection for creditors and debtors
The court's decision to endorse the agreement cannot be appealed or contested.
To protect the creditors involved in the negotiations, neither you, nor another creditor, nor any third party may invoke their liability simply because the amicable agreement failed to allow the business to continue operating.
Who to contact
District Court District Court Luxembourg
- Address:
- Cité judiciaire L-2080 Luxembourg Luxembourg
- Phone:
- (+352) 47 59 811
District Court District Court Diekirch
- Address:
-
4, place Guillaume
L-9237
Diekirch
Luxembourg
B.P. 164, L-9202 Diekirch
- Phone:
- (+352) 80 32 141
Related procedures and links
Related procedures
Links
Legal references
- Code de Commerce
-
Loi du 7 août 2023
relative à la préservation des entreprises et portant modernisation du droit de la faillite
