On 14 December 2021, the Luxembourg court of appeal rendered a decision setting out the potential grounds for overturning a judicial liquidation of a company based on the right to an effective legal action (“droit au recours effectif”), as provided in the European Convention of Human Rights, the Charter of Fundamental Rights of the European Union and the Luxembourgish Constitution.
In the case at hand, in November 2020, the state prosecutor (“procureur d’Etat”) required the dissolution and liquidation of a Luxembourg public limited liability company due to the lack of a known registered office since 2015 and of a regularly composed board of directors and to the failure to publish its financial statements since the year 2013, based on article 1200-1 of the law of 10 August 1915 relating to commercial companies, as amended (the “Law”), which allows for the judicial liquidation of Luxembourg companies inter alia when those carry out activities in serious breach of the provisions of the Law.
The lower court judgment having granted the state prosecutor's request by ordering the dissolution with liquidation of the company and appointed a liquidator, the latter sought to appeal such decision, as the company had recently remedied its breaches by appointing a director, setting up a registered office and approving the financial statements for the years 2014 to 2020. In addition, the company had settled the fees of the liquidator appointed by the court.
The appealing party argued that the case-law of the Luxembourg highest jurisdiction (“Cour de Cassation”) which allowed the judge to assess whether the facts of which a company is accused are sufficiently serious to justify its dissolution and liquidation at the time of the request of the state prosecutor, breaches the right to an effective legal action (“droit au recours effectif”).
As a reply to this argument, the court of appeal reminded that within the framework of the review and of the power granted to the courts to determine whether the seriousness of the contraventions justifies a sanction as final as the dissolution of the company, the court may not totally disregard the facts subsequent to the request of the public prosecutor's office (“Ministère Public”), without jeopardizing the right to an effective legal action (“droit à un recours effectif”).
The court of appeal noted that the irregularities committed were remedied, that the costs and fees of the liquidator were paid and that no creditor had produced any liabilities in the liquidation.
Considering that the appealing company demonstrated its awareness of the seriousness of the deficiencies and its efforts to remedy those, the court of appeal concluded that the breaches no longer justified the sanction of dissolution and liquidation of the company and therefore overruled the decision of judicial liquidation relating to the company.
This decision illustrates the possibility for a Luxembourg company to remedy serious breaches of the Law, even after a judicial decision relating to the liquidation has been rendered.
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