In a decision delivered on 31 January 2025 (2025TALCH02/00210) (the Decision), the Luxembourg District Court has, for the first time, applied article 10 of the Luxembourg Law of 7 August 2023 on the continuation of businesses and modernisation of insolvency law (the Restructuring Law) to appoint a judicial agent. This article empowers the Court to appoint judicial agents (mandataires de justice) in case of serious and aggravated misconduct (manquements graves et caractérisés) by the debtor or its corporate bodies, threatening the continuity of the business.
Key takeaways from the Decision
In this case, pleaded by Loyens & Loeff, the District Court has used its powers to appoint a judicial agent to accompany a Luxembourg holding company in a distressed position with its restructuring process.
The Court found that the difficulties resulting from a shareholders' dispute threatened the going concern status of the company's business. It appointed a judicial agent with a precise mission for a duration of one year.
The Court also held that the judicial agent should be present during all board meetings to make sure that the corporate interest is respected. However, the Court did not give the judicial agent a voting right during the board meetings as it considered that, as a court-appointed officer, the judicial agent was not supposed to interfere too actively in the company's business decisions. The Court then noted that it hoped that the judicial agent may try to influence the decisions of the board by directly discussing with the different shareholder groups in conflict.
At the request of the claimant, the Court held that any sale of assets exceeding EUR 25,000 could only be done with the authorisation of the judicial agent.
In the same vein and fully in line with the purpose of the Restructuring Law to preserve business continuity, the Court held that it was appropriate for the judicial agent to try to mediate a solution for the shareholders' conflict, or at least, a way to address the financial difficulties of the company which would be acceptable for all shareholders.
Why this matters
The Decision confirms that Article 10 is an appropriate legal basis to obtain tailor-made solutions to difficult situations in the broader context of a distressed company. The Decision shows that on the basis of Article 10, the Court can significantly intervene in the decision-making process of a commercial company.
It is for the claimants, Loyens & Loeff acting for the claimant in this dispute, to suggest an appropriate mission of the judicial agent to the Court.
The Court also held that it could amend its order if circumstances were to change and it ordered the judicial agent to provide a report before the end of his mandate (limited to one year). This shows that the Court is fully taking its responsibility to oversee the process and that such oversight does not end with the appointment of a judicial agent.
Conclusion
The Decision is a ground-breaking example of the options offered by Article 10 of the Restructuring Law. The Decision is the first order appointing a judicial agent on the basis of Article 10 of the Restructuring Law, i.e. in a scenario where a debtor did not (yet) request the opening of a restructuring process under the Restructuring Law.
The Decision shows that the Luxembourg courts will apply their powers based on the Restructuring Law, but that they will do so in a measured and proportionate way.
The Decision finally illustrates our team's commitment to finding innovative and cutting-edge solutions for complex situations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
