Beginning of January is always the right moment to reflect on recent developments and their impact in the near future, so let’s focus on one of the most attractive legislations in Luxembourg, the law on financial collateral arrangements dated 5 August 2005 (the “Financial Collateral Law”) and on the question as to whether the recent law dated 7 August 2023 on modernisation of bankruptcy law and introduction of restructuring measures in Luxembourg (the “Restructuring Law”) cuts across the solutions of the Financial Collateral Law.
Please refer to our previous alerts for further details on the Restructuring Law.
Set off arrangements within the meaning of the Financial Collateral Law remain solid and enforceable and are unaffected by the measures laid down in the Restructuring Law.
Financial collateral arrangements within the meaning of the Financial Collateral Law remain reliable enforcement tools and are immune from the measures laid down in the Restructuring Law.
There may be very limited instances in which some restrictions could arise, notably if the enforcement trigger event is too narrow (and is linked to the acceleration of the debt based on the opening of the judicial reorganisation (article 30 of the Restructuring Law). However the situation can easily be fixed by a proper drafting in the relevant security interest and by including a simpler and standalone trigger event such as the opening of the judicial reorganisation, [or acceleration of the debt based on other grounds] or any other event of default agreed between parties.
For further information, please contact:
Melinda Perera, Partner, Linklatersmelinda.perera@linklaters.com
