Financial difficulties - Luxembourg
The Commercial Code (particularly Book III) covers situations where companies get into difficulty.
Stabilising a business
You may be faced with financial difficulties at some point during your business activities. This is why you need to anticipate, detect and deal with financial difficulties at all times.
When faced with difficult times, a job maintenance plan may be useful. The aim is to adapt a company's workforce, at the same time keeping employees in their jobs.
There are different forms of partial unemployment, in cases of:
- cyclical economic problems;
- structural economic problems;
- economic dependency;
- force majeure.
Access to different sources of finance can help overcome financial difficulties.
When filing for bankruptcy is the only option left for a business owner, it pays to cut your losses, initiate proceedings sooner rather than later, and move on to a new project.
Job maintenance plan
The aim of the job maintenance plan is to adjust the headcount of a company in difficulties while keeping the employees in work. The employer has to notify the secretariat of the Economy Committee (at the Ministry of the Economy and Foreign Trade) of the start of discussions on the plan.
Deferment of payment
The system of deferment of payment under common law enables an employer to deal with a temporary financial problem by authorising him to suspend payments to his creditors for a specified period.
The trader has to submit his request in paper form to the district court (tribunal d'arrondissement) and the Supreme Court of Luxembourg (Cour supérieure de justice).
A composition (concordat préventif) allows an entrepreneur experiencing financial difficulties to sign an agreement with his creditors and so avoid bankruptcy. This agreement has to be accepted by the court and by the creditors.
The trader must submit his request in paper form to the district court.
Controlled management of a business
If you get into financial difficulty, you can opt to follow a controlled management procedure. To benefit from this, you need to send a request to the Commercial Court. The request must include a list of the company creditors as well as documents providing evidence that the company can be reorganised.
You can make a request for partial unemployment. This must be sent before the 12th day of the month preceding the month during which the company wishes to lay off employees. It must be sent to the Economy Committee secretariat at the Ministry of the Economy and Foreign Trade.
Any employer who intends to dismiss at least 7 employees within 30 days or at least 15 employees within 90 days must make use of the mass redundancy procedure. To do this, he must:
- inform the Employment Administration and the staff representatives;
- negotiate a severance plan;
- implement the severance plan;
- where applicable, apply for tax exemption for the severance or dismissal payments.
Many sources of information for conducting market studies are available, such as the websites of the Chamber of Commerce and the Luxembourg Industry Federation.
To manage a company during difficult periods, you can use the data from the Central Service for Statistics and Economic Studies (STATEC). STATEC provides different information, including:
- statistical information on the national structure and activities;
- economic and social accounts and balance sheets (global or sectoral);
- statistical data and study findings;
- economic forecasts (global or sectoral).
The business plan toolbox and the cross-border portal leguichet.org can help you anticipate difficulties, particularly by helping you to produce a business plan.
The Chamber of Trades provides an example set of key business indicators.
The Guichet entreprises business portal provides a wealth of information to entrepreneurs in difficulty.
The Luxembourg government has set up direct support measures for companies to assist their financial recovery.
VaccinAntiCrise offers companies hit by the economic crisis a lifeline and support from experts selected by the professional chambers.
Check also the legislation on this topic in: