Legal Business

Luxembourg controlled management proceedings

 MARKET VIEW – LITIGATION 

Bonn Steichen & Partners’ head of disputes Fabio Trevisan explores the ‘soft alternative’ to bankruptcy and what it means for both debtors and creditors

Luxembourg law provides for a range of insolvency procedures, of which the most common have as their purpose the winding-up and realisation of the assets of the debtor, namely bankruptcy and judicial liquidation; whereas other insolvency procedures, such as suspension of payments (sursis de paiement), composition with creditors (concordat préventif de faillite) and controlled management (gestion controlée), aim at preserving and/or recovering the business of the debtor. Controlled management (gestion contrôlée) was devised as a less blunt measure than bankruptcy and as a softer alternative to composition with creditors; it permits companies in a temporarily weakened financial state to find a solution while avoiding the harshness and finality of bankruptcy. The controlled management regime is governed by the Grand-Ducal Decree of 24 May 1935, supplementing the legislation on suspension of payments, composition with creditors and bankruptcy.