A Q&A guide to lending and taking security in Luxembourg. The Q&A gives a high level overview of the lending market, forms of security over assets, special purpose vehicles in secured lending, quasi-security and guarantees. It covers creation and registration requirements for security interests; problem assets over which security is difficult to grant; risk areas for lenders; structuring the priority of debt; debt trading and transfer mechanisms; agent and trust concepts; enforcement of security interests and borrower insolvency; cross-border issues on loans; taxes; and proposals for reform.
To compare answers across multiple jurisdictions, visit the Lending and taking security in country Q&A tool.
This article is part of the PLC multi-jurisdictional guide to finance. For a full list of contents visit www.practicallaw.com/finance-mjg.
Following the financial crisis and the European sovereign debt crisis, only a limited number of new financing operations have been implemented during the past year, while numerous existing transactions have been subject to refinancing or amendments to the terms of their lending documentation. An increasing number of enforcement measures have been taken or considered. Further, the mezzanine tranche of many loans was refinanced by the issue of high yield bonds listed on the Euro MTF market of the Luxembourg stock exchange. In addition, the Luxembourg financial sector regulator (Commission de Surveillance du Secteur Financier ) (CSSF) is currently reviewing, in the context of the ongoing discussion regarding shadow banking, the exemption rules applying to lending structures involving a non-regulated Luxembourg entity as lender.
Real estate in Luxembourg includes land and anything permanently fixed to the land, such as buildings.
Property can be immovable:
By its nature (such as land and buildings).
By its purpose (such as certain types of tools used for the development of land).
Because of the object it is attached to (such as a right to use immovable property).
The most common forms of security over immovable property are:
Mortgages (hypothèques), which can be contractual, legal or judicial (only contractual mortgages are discussed in this chapter).
Pledges over real estate (antichrèse).
A seller's lien (privilège du vendeur), granted by operation of law to secure payment of the purchase price of a property.
A lender's lien (privilège du prêteur de deniers), granted by operation of law to the person or entity that lent the money to finance the acquisition of real estate.
The legal formalities required to make a security interest valid and enforceable against third parties depend on the type of security interest and the type of assets over which the security interest is granted to secure the obligations of the borrower:
Mortgage. Contractual mortgages must be in writing and are formalised in a notarial deed, in the presence of two notaries or of one notary and two witnesses.
The lender must register the mortgage with the Administration Registry (administration de l'enregistrement). To be enforceable against third parties, the original notarial deed must be registered at the Mortgage Registry (bureau de conservation des hypothèques) of the judicial district in which the property is located. The registration is valid for ten years. Before this period expires, it must be renewed to continue to be valid for the following ten years.
Real estate pledge. Real estate pledges must be in writing. The security is perfected by the transfer of possession to the secured party. Real estate pledges are registered with the Administration Registry and with the Mortgage Registry.
Lender's lien. A lender’s lien must be notarised to be valid. The loan agreement must state that the loan has been granted for the purpose of buying real estate. Further, when receiving payment, the seller must acknowledge that the received amount has actually been used to finance the acquired real estate. To be enforceable, the security interest must be registered with the Mortgage Registry and with the Administration Registry. The registration is valid for ten years and must be renewed before the expiry of this period to continue to be valid for the following ten years.
Seller's lien. A seller’s lien must be registered with the Mortgage Registry to be enforceable. The registration is valid for ten years and must be renewed before the expiry of this period to continue to be valid for the following ten years.
Property can be movable by its nature, if it can be moved from one place to another. Luxembourg law categorises machinery, trading stock, aircraft and ships as tangible movable property.
However, for aircrafts and ships (with a weight of more than 20 tons), the laws of 11 June 1966 and of 29 March 1978 provide for a specific kind of mortgage that may be granted over such assets, even though mortgages are usually restricted to immovable property.
Pledges are the most common form of security interest granted over movable property (whether tangible or intangible). They can secure most categories of assets, including financial instruments, intangible and future assets. Pledges over a going concern (gage sur fonds de commerce) are subject to specific requirements (Grand-Ducal Decree of 27 May 1937, as amended) (see below, Formalities) and can only be granted to authorised credit institutions and breweries.
Additionally, movable assets can be secured by transfer of ownership, where either:
The legal title to the collateral will be transferred to the lender on the basis that the lenderretransfer the collateral, except in the case of partial or total default in relation to the secured obligations.
The ownership rights in relation to the asset are transferred to the lender through a fiduciary contract, and the exercise of these rights is limited by the agreement between the parties (contrat fiduciaire).
Generally, pledges are only validly created (even between the parties) after transfer of possession of the pledged assets to the secured party. The rules governing the creation and the enforceability of a pledge vary:
Civil pledge (gage civil). A civil pledge must be formalised in a written agreement (this can be either a notarised document or a private deed (that is, a deed signed between the contracting parties which normally does not need to comply with any formal requirements and does not need to be registered with a public authority)), containing a description of the pledged assets. Its validity depends on the dispossession of the pledgor. The pledged assets must be held by the pledgee or by a third party designated by the pledgee and the pledgor.
Commercial pledge (gage commercial). A commercial pledge does not have to be in writing, although commercial pledges are usually entered into by written agreement. For the commercial pledge to be valid and enforceable, the pledgor must be dispossessed of the pledged assets, which must be held by the pledgee or by a third party designated by the pledgee and the pledgor.
Pledge over a going concern. A pledge over a going concern must be in writing (private agreement or notarial deed). To be enforceable against third parties, the agreement or deed must be registered with the Administration Registry and with the Mortgage Registry.
Shares, book-entry securities or other types of financial instruments and claims are eligible assets which can be used as collateral in connection with an agreement governed by the provisions of the Law of 5 August 2005 on financial collateral arrangements, as amended (Law on Financial Collateral). This law implemented Directive 2002/47/EC on financial collateral arrangements, as amended, into Luxembourg law.
Pledges are the most common form of security granted over financial instruments. Financial instruments can also be secured by transferring their ownership to the lender, which needs to be re-transferred when the secured obligations are discharged.
The rules governing the creation and the enforceability of a security interest over financial instruments depend on the financial instruments, which compose the collateral:
Pledges over financial instruments under the Law on Financial Collateral. These pledges may be created by private deed and are perfected by a transfer of possession of the pledged assets from the pledgor to the pledgee or to a designated third party. Depending on the category of financial instruments, the dispossession of the pledgor for the purpose of perfection of the security interest may take different forms, which include:
the entry into the pledge agreement provided the pledgee is also depository of the book-entry securities;
the entry into the pledge agreement made between the pledgor, the pledgee and the depository or between the pledgor and pledgee with notification to the depository, provided the latter will follow the pledgee's instructions relating to the book-entry securities;
the registration of the book-entry securities with an account opened in the name of the pledgee, provided the book-entry securities are held on an account opened in the name of the pledgor with the depository and are marked as pledged;
the entry of the parties into the pledge agreement, provided receivables are pledged;
the transfer of the collateral by material delivery to the pledgee or a designated third party (for bearer shares).
The pledgor can also be dispossessed by notification of the creation of the pledge to the issuer (if different to the pledgor) or a third party holding the pledge (if different to the pledgor), or that issuer or third party's acceptance of the pledge.
Notification and acceptance must be made by notarial or private deed.
Transfer of title by way of security. The transferee becomes the legal owner of the transferred assets, which must be re-transferred to the transferor when the secured obligations are discharged. If the transfer of title by way of security is entered into by way of a fiduciary agreement, the fiduciary must be a finance professional. The transfer becomes effective and enforceable, depending on the nature of the financial instruments, by:
their entry into the bank account of the transferee or a designated third party;
an indication in the transferor's account that they are the transferee's property; or
the execution of the transfer agreement between the parties.
Loan receivables of the Luxembourg SPV are the most common type of receivables over which security is granted.
Pledges and transfers of ownership are the most common forms of security granted over claims and receivables.
Pledges can be created by private deed. Pledges are perfected by transferring possession of the pledged assets from the pledgor to the pledgee or to a designated third party. In relation to claims and receivables, the pledge will be perfected upon notification of the pledge to the debtor or, as the case may be, if the debtor has accepted the pledge. Pursuant to the Law on Financial Collateral, the transfer of title by way of security and the pledge of receivables may both be perfected and enforceable against third parties by the mere agreement between the parties. The debtor of pledged or transferred receivables can, however, validly pay its initial creditor, as long as the debtor is not aware of such transfer or pledge.
See also Question 3.
Typically, the balance standing in a cash account will be pledged by the obligor for the benefit of the lender.
See Question 5.
IP rights are considered to be intangible assets, including patents (brevets), trade marks (marques), designs (dessins et modèles) and copyrights (droits d’auteur).
Generally, the most common forms of security interests over IP rights are pledges and transfers of title by way of security.
To be enforceable against third parties, specific pledges over registered IP rights must be registered with the relevant IP registry:
The Benelux Office of Intellectual Property (for trade marks and designs).
The Patent Registry of the National Intellectual Property Service (for patents).
Registration fees apply.
If the IP rights are not registered, the pledge is made by private agreement. No mandatory public registration is needed in those cases.
Pledges over a going concern (which can include IP rights or consist only of IP rights) are made by private agreement or notarial deed. They are enforceable against third parties after registration at the Administration Registry and at the Mortgage Registry of the judicial district, in which the business is run or the stock or goods are located. Pledges on going concerns can only be granted to credit institutions and breweries authorised by the Luxembourg government.
Security granted by transfer of title of registered IP rights is perfected by the mere agreement between the parties and is enforceable against third party debtors (for example, licensees or parties owing royalties arising from the IP right) on registration with the Benelux Office of Intellectual Property (for trade marks and designs) or with the Patent Registry of the National Intellectual Property Service (for patents).
Mortgages cannot be granted over future assets, but any kind of pledge can be granted over future assets.
Fungible goods, such as agricultural products, can be pledged (warrant agricole) as a commercial pledge or even under the Law on Financial Collateral (see Question 4).
Intangible assets can be secured by pledges or by transfer of ownership.
The release formalities depend on the nature of the pledged assets. The release over financial instruments pledged pursuant to the provisions of the Law on Financial Collateral requires on of the following: With respect to pledges regarding mortgages and IP rights, the release must be reflected in the relevant register.
The inscription of the release in the share register of the company whose shares are pledged.
The notification to the account bank.
The notification to the debtor.
With respect to pledges regarding mortgages and IP rights, the release must be reflected in the relevant register.
Taking a security interest over all or part of the shares of a Luxembourg SPV, which holds assets abroad, is a common practice, to benefit from the lender friendly provisions of the Luxembourg Law on Financial Collateral in the context of restructuring and insolvency.
The following legal structures are most commonly used. If they are put in place in compliance with the criteria described below, the risk of recharacterisation is remote. In practice, the lenders prefer to be granted a security interest in addition to one of these structures.
In a sale and leaseback structure an undertaking sells an asset to the creditor (usually a credit institution) and leases it back. The undertaking makes periodic payments equal to the selling price and interest. The credit institution is secured by the property right it acquires over the asset.
To secure payment of receivables, it is possible to use specialised undertakings to collect the receivables by transferring them to the undertakings against payment.
Hire purchase is often used to acquire plant, machinery or immovable property. Usually, a leasing company or a credit institution acquires the item and enters into a leasing contract with an undertaking. After termination of the leasing contract, the undertaking can choose to purchase the item for a residual price. There are different forms of hire purchase (such as financial or operational leasing).
A secured creditor who is in possession of the secured asset (for example, the holder of a pledge) has the right to retain possession of these assets until its claims have been fully paid. This right continues even against other, higher ranked creditors. A right of retention can also exist without a pledge. A seller who is still in possession of the sold goods will not be required to deliver them as long as the purchase price has not been paid (Article 1612, Civil Code). This right of retention prevails and can be exercised, even if there are other secured creditors (for example, creditors secured by pledges, mortgages and privileges).
This is when a creditor obtains an additional debtor to secure payment of the debt.
A parent company issues a statement about the value and standing of one of its subsidiaries. Although it indicates solidarity between the companies, the parent is not automatically legally bound to back the subsidiary's debts. The value of a comfort letter depends on its exact wording. The obligations contained in the comfort letter can be either reinforced by a guarantee or only be of moral value.
In a letter of patronage a parent company commits itself to back the debts of its direct or indirect subsidiary. The letter is not necessarily legally binding and its value depends on the exact wording. The obligations contained in the letter of patronage can either be reinforced by a guarantee or only be of moral value.
A creditor may set-off any amount owed to the debtor against any amount owed by the debtor to the creditor.
Guarantees granted by a Luxembourg company are often used in secured lending transactions involving a Luxembourg company and are typically created by written agreement made between the parties.
For the avoidance of any manager liability a guarantee (whether governed by foreign law or Luxembourg law) should be limited to a certain percentage of the net assets of the company.
Under Luxembourg law exist the independent: and the An independent first demand guarantee and a suretyship diverge in their effects as
First demand guarantee (garantie à première demande). The validity of the first demand guarantee is independent from and not accessory to the underlying obligation.
Suretyship (cautionnement). A suretyship constitutes an accessory obligation to a principal obligation and is therefore subject to the validity of the principal obligation.
A Luxembourg public limited liability company (société anonyme) (SA) may for the purpose of acquiring its own shares (Law of 10 June 2009):
However, this may only be done if the following conditions are satisfied:
The board of directors of the company has responsibility for the operation, and verifies before the operation is carried out that it will be concluded at "fair market conditions" in relation to all parties involved.
The board of directors must submit the operation, by way of a written report, for the prior approval of the company's shareholders.
The financial assistance must at no time result in the reduction of the company's net assets below the amount of the subscribed capital plus the non-distributable reserves.
This provision only applies to transactions entered into by a company with a view to acquiring its own shares (not to acquiring shares of third parties, including group companies). Generally, companies cannot encumber their assets or provide guarantees in favour of third parties (including group companies) without any direct consideration.
Unlawful financial assistance results in the guarantee or security being void. The directors of the company can be held liable.
All transactions of a company (including providing guarantees or security) must both:
Fall within the company's corporate objects set out in its articles of association.
Be in the corporate interests of the company.
A company will usually not breach these rules if it provides collateral to secure debt of a third party or of other group companies in exchange for arm's-length consideration (for example, a commission paid by the secured party or by the debtor).
There is no general prohibition under Luxembourg law for the granting of an upstream guarantee.
However, when a guarantee is granted to secure indebtedness of a group company without direct consideration, it must be ensured that the company benefits at least indirectly from the granting of the guarantee to meet the corporate benefit requirement set out above.
Directors must act in the corporate interest of the company. Otherwise, the managers could be held liable for the misuse of corporate assets (provided certain conditions are met) (Law of 10 August 1915 on commercial companies, as amended).
Loans to directors are in principle valid, with the following restrictions:
Public limited liability companies (sociétés anonymes), may not grant loans to finance the acquisition of their own shares.
A director having an interest opposite to the interest of a public limited liability company in a given transaction must disclose that interest to the board convened to decide on the transaction and abstain from taking part in the deliberation of the board.
Pursuant to the provisions of the Luxembourg Civil Code a Luxembourg court (if competent) could reduce the rate of interest to the level of legal interest, if, in the view of the court, the interest rate was manifestly excessive.
It is recommended that the company's management body previously approves the granting of any type of guarantee.
There are several statutory provisions that impose liability for damage caused by pollution of the environment or the neighbourhood. Liability usually derives from the property right in the polluted land. The lender can potentially become liable for damage if it enforces a mortgage on a polluted or polluting property, as it will become the owner of the land.
Debt subordination is, in principle, possible in Luxembourg. Generally, debts are subordinated by a contract in which a creditor either:
Subordinates the payment of its claim to the payment of other claims or creditors (subordination clause).
Agrees to enforce its claim only against a limited number of assets owned by the debtor, or waives its right to enforce its claim against a certain number of assets (limitation of enforcement clause).
Subordination and limitation of enforcement clauses are contractual and must therefore comply with the general law on the validity of contracts.
Subordination clauses can be specific (for example, limited to a defined financial operation) or general. In general subordination clauses, the creditor accepts that, if the debtor becomes insolvent or is liquidated, its claim will be paid after the payment of the claims of other creditors ranking prior to that creditor. Such a clause does not prevent the creditor from being paid when the debt becomes due and payable.
Limitation of enforcement clauses have a similar effect. Except in undertakings for the collective investment of transferable securities (UCITS) or securitisation matters, these clauses are not governed by any specific legal provisions. Their scope and extent, and therefore their effect, vary with the agreed contractual terms.
Structural subordination is possible as long as generally applicable Luxembourg provisions are complied with.
Inter-creditor agreements establishing the order of priority of the creditors and the security available to them are common in Luxembourg and are, in practice, mostly governed by foreign law.
Debts can be traded or assigned. These transactions generally include the debt and its related components, such as security interests, privileges and mortgages (Article 1692, Civil Code).
For enforcement purposes, the transfer of the debt must be notified to, or accepted by, the debtor.
Debts secured by a pledge over a going concern can only be transferred to an authorised brewery or credit institution.
The principle of the agent concept (mandat) is recognised by the Luxembourg Civil Code as a contract under which a principal grants to an agent power to act in the principal’s name and for its account.
In the context of secured lending, the Law on Financial Collateral expressly provides that financial collateral may be created in favour of a person acting on behalf of the beneficiaries of that financial collateral.
Financial collateral may thus be granted to security agents acting for the lender(s) who do not own any of the debt secured by the collateral.
Luxembourg has adopted the Law of 23 July 2003 on trusts and fiduciary agreements implementing the applicable provisions of the HCCH Convention on the Law Applicable to Trusts and on their Recognition 1985 (Hague Trusts Convention). Therefore, foreign trusts are recognised in Luxembourg to the extent that they are authorised by the law of the jurisdiction in which they are created. The following rules apply (Law of 23 July 2003):
Trusts are not required to be registered (except for specific publishing requirements relating to the transfer of certain goods such as movable property or registered shares).
When completed, a trust is enforceable against third parties without further publishing requirements (except relating to the transfer of certain items such as movable property or registered shares).
Limitations of trustee powers are enforceable against third parties that have notice of these limitations.
When completed, a transfer of debt to a trust is enforceable against third parties.
Generally, secured creditors are entitled to enforce their security if the secured debt has become due and payable, and the debtor has failed to repay the debt.
In relation to pledges over financial instruments and claims governed by the Law on Financial Collateral, the lender has the right, upon the occurrence of an event of default, without prior notice, to enforce the pledge by appropriation, sale or compensation of the assets, unless the parties agree otherwise. The lender can also apply to a court to obtain a decision ordering the appropriation of the secured assets after their valuation by an expert.
The beneficiary of a pledge over a going concern or of a mortgage, whose claim has become due and payable, can serve a summons to pay and, without a judicial order, seize the pledged assets. Enforcement, however, is a court driven process: a court order is required for realisation by public auction or appropriation.
Regarding a transfer of title by way of security, the creditor may, without prior notice, set off the remaining debt due against the transferred assets, if the secured debt is not repaid in full. If there is a remainder in relation to the collateral, the creditor must return the remaining assets to the debtor.
Mortgages and civil and commercial pledges are usually enforced by public sale of the secured assets.
Pledges on financial instruments and claims governed by the Law on Financial Collateral can be enforced by:
Appropriating, directly or through a third party, the pledged assets at a price determined before or after such appropriation by a valuation method agreed between the parties.
Selling the pledged assets or having them sold at arm’s length commercial terms in a private sale organised by a stock exchange or in a public auction sale.
Obtaining a court order that the pledged assets are assigned to the pledgee, according to a valuation made by an expert.
Setting off the pledged assets against the secured obligations.
As a result, a creditor can directly appropriate pledged financial instruments or claims out of court. The parties can directly agree on a valuation method for the pledged assets, which may include the appointment of an independent auditor or reputable bank to determine the appropriation value of the pledged assets.
Company reorganisation procedures are available, but rarely used, given the enforcement procedures of the Law on Financial Collateral (see Question 23).
A court may grant a moratorium (sursis de paiement) to a company that either (Articles 593 to 614, Commercial Code):
Is temporarily in arrears but has sufficient means to pay off all its creditors.
Is in a situation where re-establishment of a proper balance between assets and liabilities appears likely.
The moratorium grants a stay on enforcement of security interests (Article 604, Commercial Code).
The Luxembourg Grand-Ducal Decree of 24 May 1935 provides for a controlled management procedure (gestion contrôlée), if the debtor's credit is weakened or the full execution of its obligations is compromised. The judgment, ordering a controlled management procedure, includes an initial stay by law on enforcement of any mortgages, liens and pledges.
In winding-up arrangements (concordat) companies in financial difficulties may also benefit from stays on security enforcement. In the context of such arrangements, secured creditors will be required to waive their mortgages, liens and pledges, should they want to take part in the decision-making process relating to the debtor company (Article 513, Commercial Code).
Luxembourg law does not provide for specific rules regarding the voting requirements applying in the above procedures. Therefore, if they are not otherwise set out in the articles of incorporation, the board of directors/managers can take decisions with respect to such procedures.
In general, a company's transactions, including security agreements, can be affected by insolvency procedures if they were concluded during the:
Suspect period (période suspecte).
Ten days preceding the suspect period.
The suspect period starts from the moment the company stopped paying its debts (cessation de paiements), though the exact date is fixed by the court (a maximum of six months before the start of insolvency procedures).
The following transactions are automatically void, if concluded during the suspect period:
Contracts entered into by the insolvent company, if its obligations are significantly more onerous than the obligations of the other party.
Any payment made by the insolvent company in respect of debts that are not yet due.
Any payment made by the insolvent company in respect of debts that are due, unless it was paid in cash or made by bills of exchange.
Any security granted over an asset of the insolvent company to secure obligations contracted before the security contract was entered into.
Mortgages and privileges duly acquired can be registered until the court has issued a judgment declaring insolvency. However, registrations can be annulled if both:
Registration took place during the suspect period or during the preceding ten days.
The date of the creation of the security and the date of the registration are separated by more than 15 days.
Additionally, any contract or payment can be annulled by the court if the other party had personal knowledge that the company was insolvent.
However, as an exception to these rules, security interests governed by the Law on Financial Collateral can, in principle, not be challenged under Luxembourg nor foreign bankruptcy law (including reorganisation measures and winding-up proceedings), are not subject to the Luxembourg law suspect period rules set out above and are valid and enforceable against third parties, auditors, administrators, liquidators and other similar entities, even if they were granted on the day when a reorganisation or winding-up proceeding was opened by a court, provided that they were granted before the court decision.
If the debtor becomes insolvent, secured creditors are paid before unsecured creditors from the proceeds of sale of the debtor's assets, if all the required formalities have been complied with. However, several privileges and claims rank above the claims of secured creditors.
The order of priority payments is as follows:
Creditors of the bankrupt estate.
Ordinary unsecured creditors.
Shareholders, who are treated as subordinated creditors and receive any surplus from the liquidation (boni de liquidation), if any, in proportion to their shareholding.
If there is a conflict in relation to movable assets among preferred creditors with a preferential right, these creditors are paid according to the following priority list (Article 2012, Luxembourg Civil Code):
Pledgees' claims (unless the pledge is governed by the Law on Financial Collateral, in which case the pledgees have priority over any claims).
Costs of preserving assets.
The unpaid price of equipment used in the debtor's industrial undertaking (établissement industriel).
Other preferential claims.
Preferred creditors with a general preferential right are paid according to the following priority list (article 2101 of the Luxembourg Civil Code):
Legal fees incurred in creditors' interest.
Super-preferential employee claims. These are claims by the debtor's employees which relate to their last six months of employment, and any claim which relates to the termination of employment contracts.
Employees' social security charges.
Other preferential claims.
If the company's assets are not sufficient to pay the preferred creditors with a general preferential right, the claims of these creditors take preference over the other creditors (including creditors with a special preferential right or with a mortgage).
There is no restriction on granting security over movable and immovable property to foreign lenders. However, pledges on going concerns can only be granted to authorised credit institutions and breweries.
There are no exchange controls in force that could prevent any repatriation of realisation proceeds or other payments to a foreign lender under the security document or loan agreement.
Taxes vary depending on the nature of the security.
Stamp duty of EUR2 is payable per filing for a mortgage, a pledge on real property or a pledge on a going concern.
The following fees apply:
Mortgage. A fee of 0.24% on the total amount of the secured debt.
Pledge on real property. A fee of 2.4% on the total amount of the secured debt.
Pledge over an ongoing business concern. A fee of 0.24% on the total amount of the secured debt, or a fixed duty of EUR12 (about US$18). The fixed duty may be available if the underlying credit agreement has a sufficient connection with a foreign jurisdiction.
Nominal registration fees are also payable in all these cases.
The following fees apply to registration of a mortgage in the Mortgage Registry:
Mortgage or pledge on an ongoing business concern. A tax of 0.05% on the total amount of the secured debt, for first registration and renewal.
Pledge on real property. A tax of 1% on the total amount of the secured debt, for first registration and renewal.
Nominal registrar's fees are also payable in all these cases.
Notary fees are calculated on a sliding scale, based on the value of the mortgaged or pledged property, or the amount secured if the security is over a going concern. A notarial deed is not strictly required for a real estate pledge or pledge on a going concern, but is recommended.
The usual sliding scale is as follows:
EUR50 to EUR3,800: 0.3% to 4%.
EUR3,800 to EUR10,000: 0.15% to 1.5%
EUR10,000 to EUR50,000: 0.1% to 0.6%.
EUR50,000 to EUR100,000: 0.025% to 0.5%.
EUR100,000 to EUR990,000: 0.01% to 0.1%.
EUR990,000 to EUR1.25 million: 0.01% to 0.05%.
Creditors should take taxes and fees into consideration when deciding which kind of security to take, though enforceability and legal certainty are also important factors. Costs can be minimised by taking security over shares, claims and financial instruments under the Law on Financial Collateral. This is because the costs of taking security over such assets are minimal. Security over such assets also offers a high degree of certainty to financial markets participants because the Law on Financial Collateral aims to protect such interests, even if the agreement was entered into during the pre-bankruptcy suspect period (see Question 23).
There are currently no proposals for major reform in this area.
Description. Official website giving, among others, access to Luxembourg laws in French language. The information is up-to-date, subject to legal gazette publication delays. There is currently no official translation of the Law on Financial Collateral available in the English language.
T +352 27 855
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Qualified. Belgium, 1979; Luxembourg, 1983
Areas of practice. Corporate; banking and finance; investment management; regulatory
Additional qualifications. Lic. Jur., University of Brussels, Belgium, 1978; Lic. Droit Européen, Institute of European Studies, Belgium, 1980; LL.M., Harvard Law School, US, 1981; Lecturer at University of Luxembourg: Banking and Financial European Law
Languages. English, French, German, Italian
T +352 27 855
F +352 27 855 855
Qualified. Germany, 2005; Luxembourg, 2010
Areas of practice. Banking and finance; capital markets; securitisation; structured finance
Additional qualifications. International Business Law, Universität of Padova, Italy, 2000; First State Exam in Law, Humboldt University of Berlin, Germany, 2002; LLM European Law & European Management, Europa Institut of Saarland University, Germany, 2004; German Second State Exam in Law, State of Saarland, Germany, 2006
Languages. German, English, French, Italian, Spanish