The Law of 28 October 2022 creating the procedure for administrative dissolution without liquidation ("Law") allows for a simplified dissolution of "empty" commercial companies at the request of the Public Prosecutor (Procureur d’État) in collaboration with the managing entity of the Luxembourg Register of Commerce and Companies ("RCS"), the Luxembourg Business Registers ("LBR"). The Law will become effective on 1 February 2023.
Three cumulative conditions must be met for the administrative dissolution procedure to be initiated against commercial companies: an infringement of criminal law or a material breach of commercial law, as per Article 1200-1 of Law of 10 August 1915 on commercial companies, as amended, committed by the relevant company (1), the absence of employees (2) and the absence of assets (3).
Certain entities subject to prudential supervision, such as insurance and reinsurance companies, credit institutions, law firms, etc., are excluded from the scope of the Law.
The sequencing of the administrative dissolution requires a continuous exchange of information:
- the LBR carries out initial specific checks with respect to the three conditions mentioned above and gathers financial, administrative and tax information from governmental or public bodies or authorities in Luxembourg. The findings are provided to the Public Prosecutor;
- the Public Prosecutor, at his entire and sole discretion, requests the LBR to open the dissolution procedure;
- the LBR opens the procedure, a decision which is notified to the company and published in the Recueil électronique des sociétés et associations ("RESA") ("Opening Decision"). As from the date of publication of the Opening Decision, the company is prevented from administering its assets as if it were declared bankrupt by a commercial court. Article 444 of the Luxembourg Commercial Code applies and any payment made by the company or to the company and any operation or action made by it are void;
- the LBR only then requests banks, Luxembourg insurance companies and other public authorities to provide evidence of any potential employee or assets of the company;
- the results of the administrative investigation are presented to the Public Prosecutor, who shall request the LBR to either continue or stop the procedure:
- should one of the conditions not be fulfilled, the procedure ends and a concurring decision is published at the RESA; and
- should the cumulative conditions be met, the administration dissolution procedure is closed at the latest within 6 months following the Opening Decision, the dissolution decision published on the RESA, the company dissolved and struck off the RCS.
The administrative dissolution was thought to avoid court-ordered liquidation, but the procedure remains driven by the Public Prosecutor under the control of the District Court (Tribunal d’arrondissement) dealing with commercial matters.
Any recourse from the company or any third party shall be addressed to the President of the District Court dealing with commercial matters within 1 month following the date of publication of the Opening Decision. No reference is made to the filing of claims held against the company.
Should any asset be evidenced after the closing of the dissolution, the District Court may revoke the decision to close the administrative dissolution and order the liquidation of the company. The company is deemed to exist (again) for the purpose of the liquidation and a relatively standard court-ordered liquidation is then conducted.
The Law further provides that a judgment, rendered after 1 February 2023, and deciding to close the insolvency proceedings of a company, automatically entails the dissolution of the company and the immediate closing of its liquidation. Consequently, the company will immediately cease to exist, which is not the case under the current legislation.
The Law finally provides that any company whose insolvency proceedings were closed prior to 1 February 2023 and whose RCS file was not updated in compliance with their filing obligations is automatically dissolved and struck off the RCS on 1 February 2025.
As regards investment fund structures, the Law expressly excludes regulated UCIs (i.e., UCITS, Parts II Funds, SIFs, SICARs) as well as RAIFs, while UCITS management companies and authorised AIFMs are expected to fall outside the scope (as a result of the substance requirements and the supervision they are subject to). However, non-supervised investment funds (other than RAIFs) and their managers might fall under the administrative dissolution procedure without liquidation, to the extent they qualify as empty shell.