There are hopes that a new law will reduce the number of companies declaring bankruptcy in Luxembourg with a raft of measures to help companies in difficulty.
The draft law, which has been two years in the making, was presented by rapporteur Franz Fayot, the LSAP MP, on Wednesday. Its purpose is to modernise the existing bankruptcy law through four key components, a statement from the parliament explained.
The first component focuses on prevention by detecting companies in difficulty, which is not currently the case. The second will enable companies who have shown “good faith” to have a second chance. It means the trader will no longer be a debtor for the outstanding balance of liabilities of the bankruptcy after the closure.
However, if company owners act in “bad faith” by neglecting their obligations and responsibilities, the law allows for more repressive punishments. The last component is summarised by a handful of social measures to maintain employment and employee rights in the event bankruptcy is declared.
Last year, 985 bankruptcies were filed in Luxembourg, compared to 983 in 2016 and 873 in 2015, according to figures compiled by Credit Reform. The majority of bankruptcies were reported in the services sector (689).
This week a sub-committee will analyse the opinions given by state council and stakeholder organisations about the draft law. They will also consider a European directive proposal and the Belgian insolvency law.