Administrative dissolution without liquidation

The Law of 28 October 2022 (“Law”) introduces a new procedure of administrative dissolution without liquidation (“Administrative Dissolution Procedure”), which will enter into force on 1 February 2023.

The objective of the Administrative Dissolution Procedure is to allow an administrative dissolution of a commercial companý at the request of the Public Prosecutor in collaboration with the Luxembourg Register of Commerce and Companies, without having to go through a formal procedure of full judicial liquidation as provided for in Article 1200-1 of the Law of 10 August 1915 on commercial companies, as amended. .

In particular, the intention of the Legislator is to prevent the survival of so-called “shell companies” by simplifying and accelerating their dissolution.

Companies falling within the scope of the Administrative Dissolution Procedure must fulfil three cumulative conditions:

• No employees
• No assets
• Companies falling within the scope of Article 1200-1, paragraph 1 of the Company Law, i.e., companies which pursue activities contrary to criminal law or which seriously contravene the provisions of the Commercial Code or the laws governing commercial companies, including the right of establishment.

As regards investment fund structures, the Law expressly provides that it does not apply to regulated UCIs (i.e., UCITS, Parts II Funds, SIFs, SICARs), or to RAIFs.

Investment fund managers (“IFMs”) are not explicitly excluded from the scope of the Law. However, it seems difficult to conceive that the Administrative Dissolution Procedure could apply to UCITS management companies ("ManCos") and authorised AIFMs due to their legal regime and status as entities supervised by the CSSF.

Indeed, these UCITS ManCos and authorised AIFMs will not generally be able to qualify in practice as “shell companies” and to meet the cumulative conditions imposed by the Law to the extent that the UCI Law and AIFM Law require UCITS ManCos and authorised AIFMs to have assets/own funds and employees and to effectively make use of their CSSF authorisation/licence. Therefore, if these entities no longer meet the conditions under which their authorisation was granted (e.g., in terms of assets/employees) or if they do not make use of their CSSF authorisation or cease the activity for which they have been authorised within a certain period of time (or if they contravene applicable laws and regulations), the CSSF will then have the possibility (generally as a last resort sanction) to withdraw their authorisation/licence. Such withdrawal will then, according to the UCI Law and AIFM Law, mandatorily lead to the seizure of the Luxembourg District Court that will pronounce the relevant UCITS ManCo’s/AIFM’s dissolution and judicial liquidation.

There would still be the possibility, however, for non-supervised/regulated IFMs to fall within the scope of the Administrative Dissolution Procedure (this could be the case, e.g., for so-called sub-threshold AIFMs provided that they are not authorised as management companies by the CSSF as well as general partners of non-regulated SCS¹ /SCSp² -AIFs, provided that such general partners are not combining the roles of general partner and authorised AIFMs).