Stabilisation and restructuring law in Luxembourg

On 25 March 2020, the Luxembourg government adopted, by way of a Grand-Ducal Regulation, a regime putting in place an emergency indemnity regime for microenterprises and independent workers which fulfil certain criteria. The indemnity, which consists of a lump sum of EUR 5,000, will be granted to microenterprises and self-employed workers that were forced to cease their activities as a consequence of the social distancing measures put in place under the Grand-Ducal Regulation of 18 March 2020 due to the outbreak of the COVID-19 pandemic.

Furthermore, on 3 April 2020, the Luxembourg government adopted a law that enables the Luxembourg state to provide financial assistance to companies that suffer from the economic effects of an event having detrimental economic repercussions, such as the COVID-19 pandemic.

Such financial assistance will be limited to personnel and rental costs for the period determined by way of a Grand-Ducal Regulation (calculated on the basis of the financial statements of the previous year). The aid will cover a maximum of 50% of the above-mentioned costs and is limited to the amount of EUR 500,000 per company. This financial assistance will be repayable by the companies, but not until a period of 12 months has elapsed from the date of the first payment.

Finally, on 8 April 2020, the Luxembourg government adopted, by way of a Grand-Ducal Regulation, an emergency indemnity to be granted to self-employed workers. The indemnity, which consists of a lump sum of EUR 2,500, will be granted to self-employed workers that are affected by the COVID-19 outbreak, that employ fewer than 10 people and whose professional revenue used as a basis for the calculation of its social contributions does not exceed 2.5 times the social minimum wage.

This indemnity may not be added to the indemnity for microenterprises.

On 25 March 2020, the Luxembourg government introduced several economic stabilisation measures, including the above described state aids.

Amongst others, the stabilisation package comprises a moratorium on loans, that has been negotiated between the Luxembourg government and the six largest credit institutions of the Luxembourg financial sector. The moratorium may be granted to small and medium sized enterprises (SMEs), as well as larger companies and self-employed workers. The modalities of the moratorium should be discussed with the relevant client relationship manager, as no further detail on these measures can be found publicly. The following is a list of the relevant credit institutions which, to our knowledge, participate in the moratorium scheme:

• Banque et Caisse d’Epargne de l’Etat, Luxembourg (BCEE);
• BGL BNP Paribas;
• Banque internationale à Luxembourg (BIL);
• Banque Raiffeisen;
• Banque de Luxembourg;
• ING Luxembourg.

Furthermore, the Luxembourg government announced it will establish a state-backed guarantee scheme for new loans. The state would back loans granted to SMEs and larger Luxembourg companies to a maximum amount of 85% of the loan. The relevant bill of law is currently being discussed by the Luxembourg parliament.

For more detail on all the stabilisation measures to be established by the Luxembourg government, see the following page (only in French).

In addition to the financial assistance regimes described above, the Luxembourg Chamber of Commerce has additionally put in place a guarantee scheme. Specifically, the Luxembourg Chamber of Commerce has announced that it will back loans requested by certain entities experiencing cash flow difficulties in the amount of 50%. The guarantee granted by the Chamber of Commerce will be limited to a maximum of EUR 250,000 per guarantee.

• https://www.cc.lu/coronavirus/ („Les mesures de la Chambre de Commerce pour soutenir les entreprises“)
• Please also refer to https://meco.gouvernement.lu/fr/dossiers/2020/coronoavirus-entreprises.html („Quelles mesures de soutien existent pour les entreprises établies au Luxembourg“)

Furthermore, the National Credit and Investment Company (Société Nationale de Crédit et d’Investissement – SNCI) has announced that it will finance up to 60% of a loan requested by a company experiencing financial difficulties during the COVID-19 crisis, with the bank granting the loan financing the remaining 40%. The amount financed by the SNCI may not be less than EUR 12,500 and may not exceed the amount of EUR 10m. This amount will be repayable within a maximum period of five years with an initial grace period of the capital of maximum two years. The interest rates for the loan will be determined by the SNCI directly.

The SNCI financing scheme will be accessible to SMEs as well as larger companies, provided they fulfil the following criteria:

1. they are soundly managed;
2. they did not have financial difficulties before the COVID-19 outbreak;
3. they are facing temporary financial difficulties and require exceptional financing in light of the COVID-19 outbreak;
4. they have a business licence within the meaning of the law of 2 September 2011 regulating the access to the professions of the craft, commercial and industrial sector, as well as certain independent professions, as amended. 

The SNCI furthermore announced that it will ease reimbursement conditions on all its outstanding direct or indirect loans. No further action from the relevant client is required in this respect. The duration of all loans benefiting from the moratorium will be extended by six months.

• https://www.snci.lu/newsfeed/publications/moratorium-loans/

Yes.

Please specify

The European Commission has approved the Luxembourg state aid regime by approving a total budget of EUR 300m in order to support companies that have been affected by the outbreak of COVID-19. 

Conditions vary from one programme to another. For example, pursuant to the law of 3 April 2020, companies are eligible for state-provided financial assistance when they fulfil the four following conditions:

1. an unexpected event has been recognized as having a detrimental impact on the Luxembourg economic activity by the Luxembourg government; 
2. a relevant company is experiencing temporary financial difficulties;
3. the company carried out its activities before the unexpected event occurred; and 
4. the financial difficulties of the company are caused by the unexpected event described under point 1.

The global pandemic of COVID-19 and its economic repercussions will be considered as an event fulfilling condition number 1.

With respect to the state provided emergency indemnity for microenterprises and certain independent workers under the Grand-Ducal Regulation of 25 March 2020, a relevant applicant must fulfil the following four criteria:

1. the applicant was forced to cease its activities as a consequence of the social distancing measures put in place under the Grand-Ducal Regulation of 18 March 2020;
2. the applicant must have an annual turnover equal or superior to EUR 15,000; 
3. the applicant must have a business licence within the meaning of the law of 2 September 2011 regulating the access to the professions of the craft, commercial and industrial sector, as well as certain independent professions, as amended; and 
4. the applicant must further qualify as a microenterprise within the meaning of the law of 9 August 2018 on an aid scheme for SMEs.

With respect to the indemnity to be provided for self-employed workers, the latter will have to fulfil the following five criteria:

1. the self-employed worker was registered with the CCSS in that capacity on 15 March 2020; 
2. he/she holds all the authorisations and approvals necessary for carrying out the activity as a self-employed worker; 
3. the self-employed worker’s professional income used as the basis for calculating his/her social contributions for 2019 plus any pensions paid by a pension insurance body must not exceed the sum of 2.5 times the social minimum wage (EUR 5,354.98 per month or EUR 64,259.70 per year); 
4. the self-employed worker employs fewer than 10 people; 
5. the self-employed worker is experiencing temporary financial difficulties directly caused by the Covid-19 pandemic. 

Yes.

Please specify.

With respect to the state aid regime given under the law of 3 April 2020, companies will need to demonstrate the causality between the economic repercussions of the COVID-19 virus and their financial difficulties. It is therefore possible that companies that were in crisis before the pandemic may not be eligible for this financial assistance.

With respect to the state provided emergency indemnity for microenterprises and certain independent workers under the Grand-Ducal Regulation of 25 March 2020, no specific restrictions have been foreseen.

With respect to the indemnity for self-employed workers, the Luxembourg legislator indicated that this indemnity may not be used along with the indemnity for microenterprises mentioned above.

Yes.

Please specify

If the subsidiary or branch complies with the aforementioned conditions, nothing prevents the subsidiary or branch from benefiting from the aids which have been implemented. 

No.

Comments

No such restrictions are foreseen.

Deadlines applicable in the context of judicial proceedings have, with certain exceptions, been suspended.  

Except for the changes in deadlines for insolvency proceedings as described above, no further changes were implemented in this respect under Luxembourg law.

No.

Comments

There are no specific coronavirus-related rules on cross-border insolvencies and restructurings in place in Luxembourg at the moment.

There is no specific coronavirus-related restructuring regime in place in Luxembourg at the moment.