Following the Grand-Ducal regulation dated 18 March 2020 introducing various measures in relation with the COVID19 pandemic and the subsequent decisions taken in the framework of the fight against the spread of coronavirus in Luxembourg, companies may face significant difficulties in pursuing their activities.
Some measures have been adopted in order to limit the impact of the imposed restrictions on companies aimed at preventing the spread of the virus.
The following contribution contains a non-comprehensive overview of
- Financial incentives put in place to help companies overcoming temporary financial issues
- Special provisions adopted in order to allow the holding of general meetings and meetings of the management body with regards to current social distancing rules
- The suspension of delays in regards to bankruptcy declarations
- New rules applying to the deadlines in the context of bringing legal actions to courts and ongoing civil procedures
- Support measures in the field of employment.
As the situation is constantly evolving, executive and legislative powers are continuously adapting and extending these measures, so that this analysis relates to the measures in place at the time of writing and shall be updated according to the legislative and regulatory developments.
Financial incentives
Emergency contributions – The government has taken various financial measures in favour of small and large businesses as well as for the self-employed.
Small companies (or self-employed) required to operate with a business licence forced to close subsequently to COVID19 government measures are eligible to a non-repayable, non-taxable EUR 5,000.- emergency contribution provided they have less than ten (10) employees and a turnover amounting to EUR 15,000.- at least.
For the self-employed workers, a onetime non-repayable and non-taxable EUR 2,500.- allowance can be granted as an emergency contribution. This financial contribution will be granted provided that the self-employed is facing financial difficulties directly linked to the corona-virus crisis, earns an income being less than 2,5 times the social minimum wage and employs less than ten employees.
Furthermore, the Luxembourg government has announced on 22 April 2020 that two new regulations will soon be published in order to grant additional incentives for companies.
- Companies employing ten (10) to twenty (20) persons will be eligible to a one-time contribution of EUR 12,500.-
- The EUR 5,000.- contribution for companies of less than ten (10) employees will be extended to companies which were not forced to close in case they incurred a loss of at least 50% of turnover between 15 April and 15 May 2020. An additional EUR 5,000.- contribution will also be granted to companies of the same size which either, have not been granted the right to resume their activities yet or, having been authorized to do so, have nevertheless incurred a loss of at least 50% of turnover in between 15 April 2020 and 15 May 2020.
State guarantee granted in the context of new loans – A new law dated 18 April 2020 provides for the grant of a state guarantee for loans and credit lines granted by participating banks between 18 March 2020 and 31 December 2020 to companies facing financial difficulties as a result of the pandemic. Are however specifically excluded from the benefit of such state guarantee real estate companies and holding companies.
The guarantee will apply to loans having a six (6) year term maximum and will cover 85% of capital and interest being due under the loan. To be eligible to the state guarantee, the maximum amount of the loan may represent only up to 25% of the turnover of the company applying for the state guarantee.
SNCI’s deferred repayment of credits and special crisis measures – The Luxembourg “Société Nationale de crédit et d’Investissement” (the “SNCI”) has decided to suspend the reimbursement of existing loans granted to Luxembourg based companies for a period of six months.
During this term, companies having taken a loan with the SNCI are not required to repay their credit in capital. The loan period shall therefore be extended in accordance with the deferment period and may be subject to further deferrals, depending on the evolution of the crisis.
The SNCI also offers to finance 60% of loans subscribed by eligible companies needing financing as a result of the pandemic (“Financement Spécial Anti Crise” (the “FSAC”)), provided that the usual bank of the company provides the remaining 40%. The amount of the loan granted by the SNCI shall vary between EUR 12,500.- and EUR 10,000,000.-.
The maximum duration of the FSAC is five (5) years with a two (2) year-grace period on the capital reimbursement.
Taxes – The Luxembourg government has also planned other tax incentives for companies and self-employed, such as:
- The deferral of the payment of income taxes (upon request);
- The deferral of tax return filing until 30 June 2020;
- The deferral of VAT payment for companies subject to financial difficulties directly linked to the Covid-19 crisis (upon request);
- Deferral for the filing of VAT tax returns until further notice; and
- The cancellation of quarterly tax advances for the income tax (first and second quarter of 2020) (upon request).
General meetings and management bodies
Optional and temporary measures have been adopted for shareholders and board meetings notwithstanding the relevant statutory requirement.
General meetings – The management body may elect to postpone the holding of the annual general meeting notwithstanding contrary statutory provisions. As a result, shareholders may be convened to the annual general meeting, to either of these dates which is the latest one:
- A date within six (6) months after the end of a company’s financial year; or
- A date up to 30 June 2020.
Convening notices to general meetings that have already been sent may be modified accordingly to benefit from these measures.
As a result of the postponement of the annual general meetings, the deadline to file the 2019 annual accounts with the Luxembourg business register has been deferred for four (4) months and the extra charges for late filing have been suspended until 30 November 2020.
In order to limit social interactions and the physical attendance of participants at general meetings, the management body of a company may organise the holding of a general meeting without the physical attendance of its shareholders and other participants either by:
- A postal or electronic vote prior to the meeting; (provided that the full text of the resolutions has been published or communicated to the shareholders in advance);
- By giving a proxy to a single representative appointed by the company;
- By holding a videoconference or by using other telecommunication mediums allowing the identification of the attendants.
Management body – The management body may, notwithstanding the relevant statutory requirements:
- Take all decisions by means of written circular resolutions; or
- Hold its meetings and deliberate by means of telecommunication mediums such as video conferences, provided that they allow the identification of the attendants.
Bankruptcy declarations on hold
Although there are no specific restrictions on creditor’s actions against defaulting companies to call for enforcement of securities or making insolvency filings, Luxembourg has adopted measures to suspend the legal requirement for a company to file for bankruptcy within one month of the bankruptcy conditions being cumulatively met. In other words business owners are not obliged to file for bankruptcy during the state of crisis and should not be liable for abstaining to do so (grace period).
A bill of law has been recently presented to the parliament. If adopted, all summons for bankruptcy introduced by creditors during the crisis period and two months after the end of the crisis shall be declared inadmissible.
Furthermore, the grace period referred to above would also be extended for two months after the end of the state of crisis (currently set at 24 June 2020).
Judicial proceedings
Extension of deadlines – Legal deadlines with a civil law court which expire between 26 March and 24 June 2020 included are extended as of right for a period of two months after the end of this period. This also applies to procedural deadlines, appeal deadlines as well as the filing of submissions. Legal deadlines expiring within a month after the 24th of June are postponed for a period of one month from their due date.
If a procedure is urgent, the Court may, upon request from one party, rule out the extension of the procedural deadline after having requested a written or oral statement from the other party.
Written procedure – Proceedings which have been set for a court hearing to take place between 26 March and 24 June 2020 included, and where all parties have already filed written submissions, will be considered by the judge on the basis of these submissions and items filed, without oral arguments.
However, legal counsels may insist on the holding of a court hearing provided they do so forty-eight hours before the scheduled court hearing. In such case the court may decide to adjourn the case to another date and at a fixed time.
Employment support measures
Temporary unemployment – Specific measures in the area of employment law, such as the implementation of temporary unemployment incentives, have been adopted. Companies which had to put their activity on hold as a result of the enactment of the Grand Ducal decree of 18 March 2020 mentioned above, are eligible to resort to an accelerated ‘force majeure/coronavirus’ temporary unemployment procedure whereby the employers will request the repayment of the inactive work hours directly online with the ADEM.
For the others, the resort to temporary unemployment procedure is subject to an analysis from the ‘Comité de Conjuncture’.
As a general principle, an employer having recourse to the temporary unemployment procedure, will be reimbursed 80% of the normal salary of an employee (with a cap set at 250% of the minimum social wage applicable for unskilled workers).
However, in order to further relieve employers facing financial difficulties due to the pandemic, the pandemic relief scheme provides that companies will receive the financial contribution by means of an advance payment.
As a consequence, the employer shall then, on a monthly basis, perform a detailed breakdown with all the off-hours (heures chômées) and the amount exactly due by the State. In case of overpayment by the State, the extra monies will need to be reimbursed by the employer.
Working time increase – The legal working time for employees working for a company in the field of vital activities for the country such as medical services, the sale of food products etc… may be increased up to twelve working hours per day and up to sixty hours per week. This measure may be granted upon detailed and motivated request addressed to the ministry of labour. Should the company also have an employee delegation, the previous agreement of the latter is required.
Suspension of the trial period – The trial period has been suspended with regard to labour contracts entered into with companies forced to close because of the above mentioned Grand Ducal regulation or to employees which are currently on temporary unemployment due to the coronavirus crisis.
The suspension trial period shall resume after the end of the state of crisis.
Work incapacity protection – During the state of crisis the twenty-six weeks protection period against dismissal in case of work incapacity is extended.
Hence, an employer being informed of the sick leave of an employee may not dismiss him during its incapacity period – whatever the duration, except for serious reasons.
After the state of crisis ends, the remaining fraction of the twenty-six weeks protection period will resume and the employer will recover its right to dismiss the employee at the expiration of this twenty-six weeks period subject to usual employment law provisions.