Learn how bankruptcy (faillite) works in Luxembourg. Court procedure, receiver role, creditor rights, and implications for directors and shareholders.
Bankruptcy in Luxembourg, known as faillite, is a form of judicial liquidation that occurs when a company is declared insolvent by the court. It represents the most severe insolvency procedure, aimed at protecting creditors by liquidating the company’s assets under court supervision.
Unlike voluntary liquidation, which is initiated by shareholders of a solvent company, bankruptcy is imposed by law when the company can no longer meet its obligations. It involves the District Court (Tribunal d’Arrondissement), the appointment of a receiver (curateur), and a structured process to liquidate assets and distribute proceeds to creditors.
A company may be declared bankrupt if it meets the following conditions:
It has ceased payments (unable to pay debts when due).
It has lost access to credit (cannot secure financing to continue operations).
Insolvency is proven before the District Court.
The declaration may be triggered by:
A petition from creditors.
A filing by the company itself (directors must file within 1 month of insolvency).
The public prosecutor in cases affecting public interest.
The District Court examines evidence of insolvency.
If conditions are met, it issues a judgment declaring bankruptcy.
The court appoints a receiver to manage the liquidation.
The receiver replaces directors and takes control of assets, records, and bank accounts.
Receiver collects and sells company assets (real estate, machinery, IP, receivables).
Sales may be by private contract or public auction.
Creditors are repaid in strict order of priority:
Secured creditors (mortgages, pledges).
Employees (salaries, severance).
Tax authorities (VAT, corporate tax, social charges).
Unsecured creditors (suppliers, contractors).
After liquidation, the company is struck off the Luxembourg Business Register (RCS).
Lose their investment.
Rarely recover value, as proceeds are usually absorbed by creditors.
Must file for bankruptcy within one month of insolvency.
May be held personally liable for late filing, negligence, or fraudulent management.
Risk of bankruptcy sanctions (disqualification, fines, in severe cases criminal liability).
Employment contracts are terminated.
Outstanding salaries are partly guaranteed by the Employment Fund.
Filing to judgment: a few weeks.
Liquidation process: 6–24 months depending on asset complexity.
Cross-border cases: may take several years.
Scenario: A Luxembourg retail group with €8M liabilities and €3M assets.
Suppliers filed insolvency petitions.
Court declared bankruptcy, appointed receiver.
Assets (inventory, leases, equipment) liquidated within 12 months.
Secured creditors recovered ~70%, unsecured creditors <20%.
Directors faced sanctions for delaying bankruptcy filing by 8 months.
Lesson: Early filing protects directors and improves creditor recovery rates.
Voluntary liquidation (if solvent).
Restructuring agreements with creditors.
Controlled management (“gestion contrôlée”) under court supervision.
Bankruptcy carries serious legal and financial consequences. Directors and shareholders should seek professional support to:
Assess solvency early.
Explore restructuring before court intervention.
Protect themselves from liability.
Prepare compliant financial statements for proceedings.
At Financial Services Accountant Luxembourg, we assist companies and directors facing insolvency by providing strategic advice, legal coordination, and accounting support.
Bankruptcy (faillite) is a specific form of judicial liquidation declared by the court when insolvency is proven. Judicial liquidation may also cover other insolvency situations.
Creditors, the public prosecutor, or the company’s directors.
Directors must file for bankruptcy within one month of insolvency; failing to do so may trigger personal liability.
Typically 6–24 months, depending on asset complexity and litigation.
Employment contracts are terminated, but salaries and severance are partly covered by the Employment Fund.
Bankruptcy in Luxembourg (faillite) is a court-supervised process designed to protect creditors and wind up insolvent companies. It involves strict legal obligations for directors, risks for shareholders, and protective measures for employees.
At Financial Services Accountant Luxembourg, we guide companies through insolvency, from early assessment to legal compliance and creditor negotiations.
Contact us today for confidential advice on insolvency and bankruptcy procedures in Luxembourg.
“In Luxembourg, bankruptcy demands swift action. Acting fast allows us to protect assets, manage risks, and secure the best possible outcome for all stakeholders.” Mickaël LOC Managing Director Financial Services Accountant Luxembourg
They talk about us on Le Figaro, read the full article Financial Services Luxembourg, expert en création d’entreprise et services comptables
See also: Judicial Liquidation Luxembourg
See also: Voluntary Liquidation Luxembourg
See also: Company Takeover Luxembourg