Bankruptcy Law to Change to Allow 2nd Chance

On Thursday 28 April 2022, Luxembourg's Minister for Small and Medium-Sized Enterprises, Lex Delles, presented the reform of the right of establishment.

This reform aims to modernise the right of establishment in order to create a modern legal framework, likely to stimulate the spirit of enterprise. In order to achieve this objective, the new right of establishment provides for four main measures:

• the second chance principle following a bankruptcy is implemented. The reform will facilitate the right to start a business a second time with a new business permit following a bankruptcy in the event of bad luck (for example: a bankruptcy due to the loss of a prominent client or following an illness of the company director) or bad management (for example: a bankruptcy following an error in the company's strategic choices).
• access to certain craft professions is simplified. The qualification requirement will be removed for certain activities included in a new list C, such as the profession of photographer, building technician or sound producer. The reform thus takes into account the new realities of certain professions, the requirements of which have evolved, particularly in the context of digitalisation.
• business transfer is facilitated. An employee who has held a position in a company for three years – compared to ten years previously – will be able to resume the business permit before acquiring professional qualifications within a period of five years. The reform thus considerably facilitates the transfer of businesses, which is gaining in importance in Luxembourg since it is estimated that a third of businesses will change hands over the next ten years.
• administrative procedures are simplified. It will therefore no longer be necessary to notify the Directorate General of the Small and Medium-Sized Enterprises directly of changes to data entered in the Trade and Companies Register. The business permit in the form of a two-dimensional barcode will allow the General Directorate of Small and Medium-Sized Enterprises to directly modify the information entered in the business permit and offers the advantage of updating the information relating to the authorisation of establishment for the benefit of the consumer.

However, the reform of the right of establishment is not limited to stimulating entrepreneurship, but also aims at other concrete objectives, such as the control of money laundering and terrorist financing. The reform provides for an exchange of data between the General Directorate for the Small and Medium-Sized Enterprises and all other administrations or authorities concerned, such as the manager of the Trade and Companies Register, the Registration, Domains and VAT Administration or the Common Social Security Center. The Directorate General for the Small and Medium-Sized Enterprises will also inform the Financial Intelligence Unit and the Financial Sector Supervisory Commission without delay in the event of suspicion of participation in money laundering or terrorist financing. In addition, specific authorisations will be put in place for certain commercial activities, such as the sale of cars and high-value goods.

The supervision of short-term rentals is also one of the objectives of the reform of the right of establishment. This reform is intended to be pragmatic, taking into account, on the one hand, the freedom to occasionally rent private accommodation and, on the other hand, taking into account the need to regulate any activity resembling the exploitation of an accommodation facility. A cumulative threshold of three months over a period of one year from the last rental to transient customers will therefore be introduced, from which the accommodation operator must have a business permit.

Finally, it should be noted that the new right of establishment improves consumer information. The draft law thus makes it possible to have real-time access to information relating in particular to professional qualifications and the validity of the authorisation to establish a business.

Minister Delles, said: “the reform of the right of establishment will stimulate the spirit of entrepreneurship and will boost the development of the small and medium-sized business sector. The second chance principle following bankruptcy, the simplification of access to certain craft professions, the facilitation of administrative procedures and the simplification of business transfers represent unprecedented opportunities in this context. We are also adapting the right of establishment to new realities, in particular by regulating short-term rentals following the appearance of new models of the 'sharing economy'”.