Administrative dissolution without liquidation
Good riddance empty shell
On 28 October 2022, a new Luxembourg procedure to wind up empty shell companies swiftly has been introduced: administrative dissolution without liquidation. The new procedure will be available to the Luxembourg Prosecutor (Procureur d’État) and Luxembourg Business Register (“LBR”) as from 1 February 2023.
The aim of the procedure is for the Luxembourg authorities to eliminate companies (i) without assets or employees and (ii) who have been in serious contravention of the provisions of the Luxembourg Commercial Code or the laws governing commercial companies, without the intervention of the court so that costly judicial dissolution proceedings are no longer needed.
Neglected empty shell companies
The procedure will apply to commercial companies that:
- have no assets; and
- have no employees; and
- pursue activities contrary to criminal law or are in serious contravention of the provisions of the Commercial Code or the laws governing commercial companies, including the right of establishment. Examples of serious contraventions include the failure to timely file and publish annual accounts, having no registered office or having no duly appointed managers (absence of renewal).
The procedure will not apply to credit institutions, investment firms and insurance and re-insurance companies subject to prudential supervision, as well as certain investment funds and vehicles.
To date, companies whose bankruptcy proceedings (faillite) have been closed, remained nevertheless registered with the Luxembourg Register of Commerce and Companies (“RCS”) which meant that such companies continued to exist despite the closure of the bankruptcy proceedings. The new law clarifies that all companies whose bankruptcy proceedings have been closed prior to the law entering into force, will be dissolved by operation of law and struck from the RCS on 1 February 2025 (unless the relevant company fulfils its legal obligations towards registration and filing with the RCS). Companies whose bankruptcy proceedings close after the entry into force of the law, will be dissolved as a matter of law upon the judgment of closure of the bankruptcy proceedings which will automatically entail the immediate closure of its liquidation.
The public prosecutor (Procureur d’État) may request the LBR to initiate the procedure when there are clear and concordant indications that the company meets the above-mentioned conditions. The LBR performs a screening test and has investigative powers to fulfil its task. The procedure should in principle not exceed six months. In case the LBR would be able to locate assets, a standard liquidation procedure will be opened.
The decision to initiate the procedure may be challenged before a judge within one month of the publication of such decision by the relevant company or any interested third party. If the judge considers that the conditions for administrative dissolution without liquidation have not been met, the decision to initiate the procedure may be revoked.